Saint Michael's Medical Center in Newark accepted a $62.2 million bid from Prime Healthcare Services of California that will allow the national hospital chain to acquire the troubled facility in bankruptcy court later this week, hospital CEO David Ricci announced Monday.
TRENTON -- Saint Michael's Medical Center in Newark accepted a $62.2 million bid from Prime Healthcare Services of California that will allow the national hospital chain to acquire the troubled facility in bankruptcy court later this week, hospital CEO David Ricci announced Monday.
Prime announced its intention to buy the struggling city hospital nearly three years ago, but the required review by the state Department of Health and the Attorney General's Office remains unfinished. Hemorrhaging cash and employees, frustrated officials from the Catholic hospital filed for bankruptcy in August to expedite the sale.
Prospect Medical Holdings, another large hospital chain from California, offered a competing bid of $63 million to buy Saint Michael's, but the hospital's board of directors determined Prime's deal was better, Ricci said. Prime has committed to spending $50 million in capital improvements over five years -- double its initial offer, he said.
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"Saint Michael's is essential to the Greater Newark community, and the enthusiasm and commitment demonstrated by these quality bidders is testament to the necessity for this community institution," said David Ricci, president and CEO. "We look forward to a bright future under Prime's leadership and thank Prospect Medical Holdings for its valued bid."
Prime upped its pre-auction bid of $49 million by $13 million to recognize that Saint Michael's owes the state $228 million in bonds form when it was purchased by Catholic Health East in 1998. The bank that holds the bonds, Bank of New York Mellon, filed an objection to the sale that said any bid less than $60 million would be unacceptable, said Michael Sirota, Saint Michael's attorney.
The remaining $170 million will be borne by taxpayers via the N.J. Health Care Facilities Financing Authority, which loaned the money.
Regardless of what happens in bankruptcy court on Thursday, the Christie administration must still approve the non-profit hospital's transfer to Prime, determining the sale is in the best interest of residents in the region and that its services to the community will continue.
A health care consultant hired by the the N.J. Health Care Facilities Financing Authority released a report earlier this year saying there were too many hospital beds in the city, but outpatient services were in demand. Navigant Consulting of Chicago recommended Saint Michael's and East Orange General Hospital be turned into outpatient care centers.
Ricci told reporters Monday night he was optimistic the state would approve the sale to Prime because state officials had recently approved the sale of East Orange General Hospital to Prospect Medical Holdings, despite the Navigant report's recommendations.
"I remain optimistic that we can serve this community without any institution having to close. but i can't know the state's thinking," Ricci said.
"There has been discussions the Attorney General and the Department of Health," Sirota added. "Although we have to go through regulatory process, we believe that process will move forward fairly quickly. We are addressing all outstanding questions. Prime has been in the approval process so we are not starting from scratch."
Prime also has agreed to pursue contracts with all insurers in the state, keep "substantially all 1,400 employees" and add more, and maintain St. Michael's as an acute-care hospital for a minimum of five years, Ricci said.
Prime's latest offer is still less than the $65 million it offered to spend to acquire Saint Michael's three years ago, but later reduced to $50 million, than $43 million when it got a chance to review its financial records.
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.
