New Jersey Health Commissioner Mary E. O'Dowd and Attorney General John J. Hoffman have approved the sale of St. Mary's Hospital in Passaic, N.J., to Ontario, Calif.-based Prime Healthcare Services, under certain conditions, according to a report from The Record.
Ms. O'Dowd has specified that Prime will be required to continue operating St. Mary's as a full-service hospital, with any service cuts approved by the state, for at least five years. Additionally, Mr. Hoffman's office has indicated it supports the sale as long as Prime provides quarterly reports on an ongoing federal investigation of allegations that the hospital operator improperly billed Medicare, according to the report. The attorney general also requires that the state approve all compensation agreements between Prime and any former St. Mary's board members, senior managers or officers for at least two years. Senior managers would also be prohibited from investing in Prime or its subsidiaries for three years.
Luis Leon, Prime's president of operations, told The Record his company will work with state officials in "a totally transparent and effective manner." Following Ms. O'Dowd's and Mr. Hoffman's approval, the next step is final approval of the transaction by a Superior Court judge, according to the report.
In February, the New Jersey Department of Health recommended that Ms. O'Dowd approve the sale of the hospital to Prime. After reviewing the proposed transaction, health department staff concluded the sale is crucial to the hospital's survival. St. Mary's has been struggling financially for a number of years and has received $34.3 million in stabilization grants from the health department and $5.6 million from the treasury department to cover debt service payments since 2009. As of February, the hospital had about $39 million in long-term outstanding debt and $5.1 million in a working capital line of credit.
The hospital signed a letter of intent to sell to private, for-profit Prime in November 2012 and finalized a binding asset purchase agreement in January 2013. Prime will pay a total of $30 million for St. Mary's, according to the report.
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