07/16/2006
Hoboken Reporter

A foray into the hospital business
Gov. signs law; City Council introduces 'Hospital Authority' ordinance

Hoboken is now only weeks away from officially acquiring St. Mary Hospital.   Earlier this week, Gov. Jon Corzine signed legislation that will allow Hoboken to form a quasi-governmental "Hospital Authority" to manage the 250-bed medical facility. Sen. Bernard Kenny and Assemblyman Albio Sires sponsored the legislation.

Additionally, the Hoboken City Council, on Wednesday, unanimously introduced an ordinance to create that authority, which will be governed by an 11-member board.

That ordinance still has to be approved at the Aug. 9 council meeting, after a public hearing.
 
"This is truly a historic moment," Assemblywoman Joan Quigley told the Hoboken City Council Wednesday night. Quigley works full-time as a spokeswoman for Bon Secours Health System, the hospital's current owner, and has been one of the most vocal supporters of the city's plans to acquire the hospital. "Through your courage and vision, you have not only saved the hospital, but you are going to make a medical center that you are going to be proud of."

St. Mary's current owner, Bon Secours Health System, Inc. (BSHI), a private Catholic health care company based in Marriotsville, Md., is currently negotiating to transfer ownership to Hoboken, a move that is strongly supported by Mayor David Roberts, Kenny, and most of the hospital's current staff.

At the state level

Special legislation from the state was needed to make the transaction legal. Every year municipalities are allowed to increase spending only by a certain percentage. By taking on the expense of running a hospital, the city would easily cross that threshold.

The creation of a semi-autonomous hospital authority whose budget is separate from the city's allows the city to acquire the hospital without going over its budget cap.

Corzine said that he is committed to saving St. Mary Hospital as long as the city and staff can develop a business plan that will lead the medical facility into solvency.

The hospital board

To gain the public's trust in this process, the city must prove to the taxpayers that the new St. Mary Hospital will not be a patronage machine or a drain on taxpayer dollars.

In an attempt to allay some of those fears, the City Council and Roberts said that the City Council and administration will have little influence on the day-to-day operations.

According to the state law, the Hospital Authority will function as the hospital's "governing body responsible for establishing hospital-wide policy, establishing and enforcing rules, ...maintaining quality of care, and providing institutional management and planning."

The authority also will have the power to issue bonds.

The board that will oversee the authority will be divided among four groups, and the mayor will appoint one designee. Two members of the board must hospital employees, and will be appointed by the medical staff executive committee of the hospital.

The third group will be comprised of six members of the public, at least four of which must be residents of the city. None of these board members can be employees of the city or the hospital.

Of these six appointees, one must have extensive expertise in the finances of private or non-profit organizations, and one must have extensive expertise in non-profit organizational management.

Rounding out the board will be the hospital's chief executive officer, as well as an appointee by the state Commissioner of Community Affairs, both of whom will be non-voting members.

Not a patronage mill

George Crimmins, who consults the city on budgetary and financial matters, said that the state has put in safeguards to protect the hospital from becoming a job mill.

"This is a real professional hospital board and not a political board," said Crimmins, who served as the city's business administrator under Mayor Anthony Russo.

The board, as per the state law, must enter into a contract with a "not-for-profit" corporation, which the board will create to run the daily operations. It will be headed by Harvey Holzberg, the new president and CEO of St. Mary.

Councilman A. Nino Giacchi said that the City Council is fully aware that skeptics that question the city's ability to run the hospital.

"I want [the public to know] that your concerns are not being overlooked," Giacchi said. "We will make sure that there are professionals on the board and there will be oversight from the state."

On the city level

Now it is up to the city to make the hospital a success and return it to profitability.

Roberts said that as a public institution, St. Mary would be eligible for additional federal matching funds. This fiscal year, the city expects to receive $22 million in "disproportionate share" funding, money that is set aside for hospitals that treat charity care patients. Also, the state budget earmarked $4 million in grants for St. Mary Hospital.

The stability provided through this initial funding infusion plus the much need capital improvements will allow St. Mary to stand on its own financially, said Roberts.

Crimmins added that another benefit is that city will take ownership of the property.

"This is a very valuable piece of property, where the title is clear and there is no mortgage, or tax liens," Crimmins said. "If we see that it isn't turning around, we can sell it to another party or begin to dismantle the hospital."

But Crimmins added that he does not believe that will be necessary.

"I think that [the City Council] has a mandate from the public, and I think that we have a business plan that will work," Crimmins said. "We will not be content with a hospital that is losing money."

Improvements on the way

A major aspect of the turnaround will be $65 million in a capital improvements.

According to Harvey Holzberg, the improvements will equip the hospital with more "hotel-type amenities."

He said that he will work on turning all of the beds in the hospital into private rooms, with private showers, as well as in-room Internet access, DVD players, and expanded in-room dining menus.

Another major improvement will be a new state-of-the-art Emergency Room.

Roberts said the improvements will attract new patients who before might have left town for their medical treatment.

Roberts said, "And thanks to Bon Secours, the city will assume ownership for St. Mary's property and its assets at no cost and debt free."

What if...

While there is overwhelming support to save the hospital, there are still disbelievers who worry that the city isn't equipped to oversee a hospital with nearly 1,000 employees.

"I understand your euphoria and your desire that [St. Mary] stays in Hoboken," said resident Helen Hirsch at the City Council meeting. But Hirsch said that if Bon Secours, a company that is used to running hospitals, couldn't turn a profit, how would Hoboken?

"What happens when we can't stay in black ink?" she said. "The push [to save the hospital] has been so overreaching that nobody has thought about the other side of the coin."

Councilman Peter Cammarano said Wednesday night that it is a risk worth taking.

"Yes, there is potential exposure, but this exposure is going to be capitalized by this property," Cammarano said.

"We have made a policy decision that we need to keep the hospital open, and that warrants the risk."