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Firm wants to put $80M into Pascack
Sunday, August 17, 2008
Last updated: Sunday August 17, 2008, EDT 10:42 AM
BY LINDY WASHBURN
STAFF WRITER
A private equity firm wants to invest $80 million to reopen Pascack Valley Hospital in Westwood as a 128-bed community hospital in partnership with Hackensack University Medical Center.
Legacy Hospital Partners Inc. of Plano, Texas, would provide the capital to reopen a full-service hospital by the end of next year, its chief executive said. As a for-profit hospital – known as Hackensack University Medical Center North at Pascack Valley – it would pay real-estate and sales taxes.
The state must still approve the plan.
“We’re not asking the state for any money,” said John Ferguson, Hackensack’s chief executive officer, explaining why he anticipates state support. “We want to open up a facility that the communities up there want to see reopened. We know how to run the business. I see it as a no-brainer.”
Action by the state Health Department must come within seven months, once Hackensack’s application is considered complete. That clock has not yet started running.
The state Health Planning Board will hold a public hearing before recommending approval or denial to the state Health Commissioner, who makes the final decision.
The Westwood hospital, whose 280 beds were more than half-empty in its last years, closed Nov. 21 under the weight of $100 million in debt. Since then, ambulances in northeastern Bergen County have transported patients longer distances to the county’s other hospitals.
“We don’t simply want a hospital, we need a hospital,” said Westwood Mayor John Birkner. He said he will ask the mayors of 21 towns in the Pascack and Northern Valleys, as well as southern Rockland County, to join in endorsing the application.
Nearby hospitals?
If a new hospital opens at Pascack Valley, it will weaken the others in the county, executives from nearby hospitals said.
The closest private hospitals – The Valley Hospital in Ridgewood and Englewood Hospital and Medical Center – each were able to treat the influx of patients when Pascack Valley closed, their executives said. They added staff and opened more beds. As a result, each became financially stronger.
Reopening Pascack Valley now would “weaken the financial stability of the existing not-for-profit hospitals in Bergen County,” said Audrey Meyers, Valley’s president and chief executive. As a for-profit, the Westwood hospital would be accountable to shareholders and not the community, she said.
The proposal would “disrupt and damage the operations of surrounding hospitals, which are already challenged by drastic cutbacks in New Jersey’s charity-care funding and the intensely competitive marketplace,” said Douglas Duchak, Englewood’s president and chief executive.
He called it a “direct contradiction to rational health planning.”
The proposed investment of $80 million in private capital runs counter to recent trends in New Jersey, where hospitals are in worse financial shape than in any other state. Eight have closed in the last 18 months, including Barnert in Paterson and PBI Regional Medical Center in Passaic.
A commission appointed by Governor Corzine to analyze the problem noted earlier this year that the state’s oversupply of hospital beds is “particularly noticeable in the Hackensack, Ridgewood and Paterson areas.” The Bergen-Passaic area, along with Newark and Jersey City, has more financially weak hospitals than anywhere else in the state, it found.
The commission also recommended that hospital board members be vetted to avoid possible conflicts of interest.
The commission was led by Uwe Reinhardt, an internationally known professor of health economics at Princeton University. Reinhardt is on the 14-member board of directors of Legacy Hospital Partners, the company that intends to invest with Hackensack in Pascack Valley.
Reached after a board meeting in Texas, Reinhardt said he saw no conflict in his dual roles.
“I know very little about this,” he said of Legacy’s plans for Westwood. “I have recused myself from that particular discussion.” As chairman of the New Jersey Commission on Rationalizing Health Care Resources, he said, “we never had details on any particular hospitals.”
‘A good opportunity’
Daniel Moen, Legacy’s president and chief executive officer, said the company saw “a good opportunity to work with a quality partner like Hackensack. … We think Bergen County is a good area to operate a hospital.” Pointing to the other hospitals in the region, Moen said, “Except for Pascack, which appears to have been under-managed, everybody around is doing well, if not very well.”
This is the third project for the company after others in Idaho and New Mexico. It was founded in January by former executives of a national for-profit hospital chain, and focuses on acquiring hospitals through joint ventures with non-profit hospital companies, Moen said. Its backing comes from the Canada Pension Plan Investment Board, among others investors.
The two sides expect the Westwood venture to become profitable in three to five years.
Although Hackensack’s financial stake is much smaller, the structure of the joint venture “gives us a strong element of control,” said Hackensack’s chief financial officer, Robert Glenning. Half of the new hospital’s board would be appointed by each partner, and a majority of each side’s members would be needed to approve any measure. Hackensack would appoint the board chairman and could terminate the chief executive at any time.
Hackensack would be responsible for all medical policies. “The same way we treat patients here, they’ll be treated up there,” said Ferguson.
He acknowledged that the project would increase competition with other hospitals, “but I look at it from a patient perspective,” Ferguson said. “I would not want one car dealership in town. The more competition you have for quality care, you get better prices and better service.”
The new facility would allow Hackensack to ease some of its overcrowding without adding any debt, he said.
Hackensack and Touro University College of Medicine bought the hospital and its 20-acre campus at a bankruptcy auction in March. TouroMed is seeking accreditation to open a medical school at the site in 2010.
The emergency department at Pascack Valley is to reopen as a satellite of Hackensack on Oct. 1, under a separate license already approved by the state.
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