Community Healthcare Associate’s Purchase of Memorial Hospital of Salem County

merger monitor

CORPORATE STRUCTURE

Memorial Hospital of Salem County (MHSC) is a 126-bed general acute-care hospital located in Salem, New Jersey. MHSC is currently owned and operated by Salem Hospital Corporation, a subsidiary of the for-profit health care system Community Health Systems, Inc. (CHS) based in Franklin, Tennessee. When CHS bought the hospital for $35 million in 2002 after careful review by the NJ Attorney General and NJ Department of the Health under the Community Healthcare Assets Protection Act (CHAPA), MHSC became the first for-profit hospital in New Jersey.

Almost a year to the day that Prime Healthcare Foundation walked away from purchasing Memorial Hospital (May 9, 2017), it was announced that Community Healthcare Associates, LLC (CHA) reached an agreement with CHS to purchase the hospital. CHA currently owns four multi-service for-profit medical arts complexes in New jersey, all of which are former community hospitals (Barnert Medical Arts Complex in Paterson, Greenville Medical Arts Complex in Jersey City, William B. Kessler Medical Arts Complex in Hammonton, and Muhlenberg Medical Arts Complex in Plainfield).

Community Healthcare Associates is a private real estate development company that specializes in buying, renovating, and re-purposing hospitals. Generally, they do not retain any of the services of an acute care facility but rather turn them into “medical malls’ that provide many services including lab testing, diagnostic imaging, dialysis, women’s health care, outpatient addiction treatment, urgent care, surgical centers, as well as other options. The company was founded by William J. Colgan, E. Stephen Kirby, Jeffrey S. Moll, and Michael C. Nudo in 2008.

The deal will include CHA paying $1 million to the current owners as well as returning any cash on hand, rumored to be around $3 million. While CHA has no plans to add any services dropped by Memorial Hospital, it does plan to maintain the acute-care functions of the hospital rather than gutting the whole facility. CHA asserts that it will keep the core operations as a non-profit, while bringing in other provider services that may or may not be for-profit businesses.

CERTIFICATE OF NEED APPLICATION/TRANSFER OF OWNERSHIP AGREEMENT

Because this is the purchase of a for-profit hospital by a for-profit entity, the NJ Department of Health (DOH) Certificate of Need (CN) process must be followed. Under the CN process, the NJ Commissioner of Health can provide a set of recommendations in order to complete the sale.

In order to maintain a non-profit status for Memorial Hospital, CHA created a new non-profit corporation, Salem County Hospital Corp. (SCHC). As part of the CN application the Transfer of Ownership Agreement submitted to the Department of Health states that SCHC “will implement several initiatives that are designed to stabilize and/or grow admissions at the hospital and allow SCHC to meet the healthcare needs of the community for years to come.”

Besides recruiting more physicians, SCHC plans to create “operational efficiencies” to the emergency department (ED) that will create greater access to care and decrease time paramedics and EMTs are required to wait in the ED, which will mean more patients will be seen. The Agreement states that SCHC “will hire substantially all of those individuals who are employed by Salem Hospital as of the closing date.”

Current Charity Care Policies will remain in place and it is assumed there will be no disruption to care provided to the poor and uninsured. Additionally, no services will be eliminated, although some like Med/Surg will be reduced from 114 beds to 65 beds with the flexibility to increase if the need arises. SCHC will assess the needs of the community and may add services. The total number of beds will increase slightly from 126 to 133 beds, with an addition of 26 Adult Acute Psychiatric beds (approved by DOH in November 2017) and 30 Long Term Care beds. Adult ICU/CCU beds will remain at 12.

In addition to maintaining the hospital, SCHC will continue the clinical services offered by doctors affiliated with the hospital.

 

  

 

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