Saint Michael's Becomes Hub for the City
Saint Michael's Medical Center Inc.-the newly established affiliate of Catholic Health East-will work with Newark officials in addressing healthcare needs of the city's Ironbound and North Ward residents following the phase-out of acute care at Saint James Hospital and closure of Columbus Hospital. Primary care and pre-natal services, as well as walk-in family care centers, are among the services being evaluated to serve the needs of area residents.
Although this move signals a strong new sponsorship and expansion for Saint Michael's Medical Center, the comprehensive hospital transition plan, which was unveiled on Jan. 10, includes the phasing out of acute-care services at Columbus Hospital and establishing a new healthcare mission for Saint James Hospital-the two smaller hospitals in the Cathedral Healthcare System.
In addition, CHE, which is based in Newtown Square, PA, will work with city officials in conducting a needs assessment to determine what health services are needed in neighborhoods citywide, particularly the North Ward and the Ironbound.
Cathedral Chairman and Chief Executive Officer, Rev. Msgr. Ronald J. Rozniak, said that the Cathedral hospitals' chronically poor financial performance, inability to access capital and stagnant utilization prompted the development of the hospital transition plan.
Msgr. Rozniak explained that the regulatory portion of the plan involves filing a Certificate of Need (CN) application for the transfer of Saint Michael's Medical Center to CHE, as well as CN applications for the closure of acute-care services at Columbus Hospital and Saint James Hospital.
"Financial projections show that, without implementation of the plan, all three of our hospitals will fail by mid-March," Msgr. Rozniak stated. "Cathedral simply cannot overcome the tremendous financial hurdles it now faces. Our operating model, which values the availability of 'neighborhood-level' acute care, served the community well for most of the past 140 years, but a variety of changes in recent decades now make the model fundamentally unsupportable.
"The financial condition of Cathedral is critical. Our hospital transition plan embraces the reality that small urban hospitals, with overlapping service areas, simply cannot survive in today's market," Msgr. Rozniak continued.
Columbus Hospital posted losses of almost $68 million for the period 1999 to year-end 2007. Saint James Hospital's losses total $38.9 million over the past five years, with its losses in 2008 projected to reach $14 million. Combined losses at the three hospitals-now growing at the rate of $6 million per month-are expected to exceed $134.6 million for the period 2004 through yearend 2007.
Having explored a number of opportunities for potential partnerships with other providers in recent years, Cathedral approached CHE, which sponsors Lourdes Health System in Camden and Willingboro and St. Francis Medical Center in Trenton. CHE proffered a letter of intent in June 2007, and the due-diligence process that followed revealed a poor and deteriorating financial picture of the three-hospital system. Following these legal moves, the Cathedral hospital transition plan began to develop.
"To ensure the survival of Saint Michael's Medical Center, CHE will borrow approximately $250 million through a bond sale," CHE Chief Transition Officer Alexander Hatala said. "Approximately $130 million of the borrowed funds will be devoted to capital and information technology improvements. The balance would be used to refinance existing Cathedral hospital debt and provide working capital."
"From the start, we have known that any agreement would need to address the community's needs and be consistent with the state's healthcare rationalization goals," Hatala explained. "Months of discussions with state officials and other stakeholders led to the understanding that closure of acute-care services at the two community hospitals would be necessary if we were going to take advantage of the New Jersey Health Care Facilities Financing Authority's Hospital Asset Transformation Program (HATP) to complete the transaction. We are now poised to take decisive steps to bring new life to New Jersey's oldest Catholic hospital."
The bond financing will be issued through HATP. This permits the Health Care Facilities Financing Authority to offer the bonds at a lower interest rate than would normally be available to a borrower with the financial track record of Saint Michael's Medical Center and also makes it possible for some principal and interest payments to be forgiven under certain limited circumstances.
In exchange for the use of HATPbond financing-without which this transaction could not happen-the enabling statute requires the borrower to advance healthcare rationalization goals of the state-the closure of acute-care hospitals to reduce excess bed capacity. In this case, the statute requires the continued operation of Saint Michael's Medical Center and the closure of acute-care services at Saint James Hospital and Columbus Hospital.
"Using the essentiality measurement tool included in the Reinhardt Commission's interim report, we believe Saint Michael's Medical Center to be an essential safety-net hospital that must be maintained. The preservation of Catholic healthcare in Greater Newark remains our top priority," Msgr. Rozniak said. "We are very pleased that Saint Michael's Medical Center and its rich tradition of top-quality, compassionate care will continue under the sponsorship of Catholic Health East-a robust organization with a proven record of commitment to urban Catholic hospitals. Despite the imminent closure of acute-care services at Saint James Hospital and Columbus Hospital, CHE has also agreed to assume responsibility for all three hospitals' liabilities-important news for employees, vendors and bondholders. Funding will be sought through the Hospital Asset Transformation Program for the servicing of the system's bond debts, vendor debts and certain employee expenses that will be incurred during the transition process."
The closure of Columbus Hospital originally had been planned to coincide with the March 15 completion and launch of the new healthcare mission for Saint James Hospital. However, Cathedral has committed to delay closure for at least 30 days beyond that date, but not later than June 1, to allow CHE to work with city officials, such as Councilman Anibal Ramos, and Dr. Bart DeGregorio, in a collaborative effort to ensure the smooth transition of healthcare delivery in the North Ward and to determine what services may remain at the site.
In addition, representatives from CHE, the office of Newark Mayor Cory A. Booker, and the Newark Department of Health will work with Councilman Augusto Amador and Councilman Ramos as members of a healthcare needs-assessment task force for the Garden State's largest city. This task force will solicit public input to help identify what additional health services are needed in neighborhoods citywide, particularly the Ironbound and the North Ward.
"We will be encouraging patients now served by our community hospitals to discover for themselves why Saint Michael's Medical Center has long enjoyed its reputation for patient care and compassionate service," Msgr. Rozniak said. "Doctors associated with Saint James Hospital and Columbus Hospital have been invited to seek expedited privileging at Saint Michael's Medical Center, and employees displaced by the changes at our community hospitals will be given preference in applying for open positions there. Throughout the weeks ahead, we will be keeping all Cathedral employees apprised with respect to the transition schedules and assistance available to affected employees."
Although the Archdiocese of Newark is the religious sponsor of the three Catholic hospitals, Cathedral Healthcare system operates as a separate corporation.
"I am thankful that Cathedral Healthcare and Catholic Health East have been able to make sure that a Catholic hospital remains part of the life of the City of Newark and that the Catholic mission of providing necessary care for the poor will continue," Archbishop John J. Myers said regarding the recent transaction. "I also am grateful that the State of New Jersey and Gov. Jon Corzine have recognized the pivotal role that Saint Michael's plays in this community as a safety net provider of acute care."
CHE (Web site: www.che.org) is a multiinstitutional Catholic health system cosponsored by 12 religious congregations and Hope Ministries. It provides the means to ensure the continuation of the Catholic identity and operational strength of the sponsors' health ministries, which are located in 11 eastern states from Maine to Florida. The system includes 33 acute-care hospitals, four long-term, acute-care hospitals, 36 freestanding and hospital-based long-term care facilities, 12 assisted-living facilities, five continuing- care retirement communities, seven behavioral-health and rehabilitation facilities, 25 home health/ hospice agencies and numerous ambulatory and communitybased health services.
The Franciscan Sisters of the Poor established Saint Michael's Medical Center in 1867. It is a 337-bed regional tertiary care, teaching and research center in the heart of the city's business and educational district and is accredited by the Joint Commission on Accreditation of Healthcare Organizations. It houses state-of-the-art technology, such as the latest diagnostic and therapeutic procedures.
Saint Michael's was the first medical institution in New Jersey to perform open-heart surgery and the first to develop a cardiac catheterization program. It is home to The Heart and Vascular Institute, which offers a comprehensive array of innovative cardiac treatments and procedures. The N.J. Department of Health and Senior Services rates Saint Michael's as one of the leading medical centers in northern New Jersey for open-heart surgery.
The Cathedral Regional Cancer Center, located on the hospital campus, provides patients with world-class cancer treatment. The Connie Dwyer Breast Center at Saint Michael's Medical Center offers innovative diagnostics and procedures for the treatment of breast cancer and other breast diseases. Services include film-screen and digital mammography, high-resolution and screenbreast ultrasounds, CAD (computeraided detection), breast MRI and sterotactic biopsy. It also houses screening services and a host of educational and support programs.
Saint Michael's has long enjoyed an outstanding reputation as a premier teaching and research institution and remains an international leader in the treatment and study of infectious diseases, such as HIV/AIDS and hepatitis. A major teaching affiliate of the Seton Hall University School of Graduate Medical Education, the New England College of Osteopathic Medicine, and Saint George's University School of Medicine in Grenada, the hospital offers residencies and fellowships in anesthesia, cardiology, emergency medicine, gastroenterology, hematology/oncology, infectious diseases, nephrology, pulmonary/critical care medicine and podiatry.