Mablenborg Regional Medical Center “An altines of Solaris Heath Stor Genta of Need Aapication + Adequacy of financial resources As documented in the project narrative, the closure of MRMC as an acute care hospital is necessitated by sustained operating losses. Solaris lacks the financial resources to subsidize operating losses of such a magnitude without jeopardizing the viability of the system and its remaining affiliates. The result of subsidizing multi-million dollar operating losses for ten years has severely depleted Solaris cash reserves. In order to finance the costa associated with closure and create sufficient capacity to service MRMC patients at the remaining Solaris affiliates, the organization has requested the ability to borrow $70 million through the Hospital Asset Transformation Program (HATP). Without State assistance to access capital to fund closing costs, Solaris could face insolvency within 12-18 months and would be unable to finance the establishment of programs to serve the needs of former MRMC patients. Specifically, Solaris has requested borrowing up to $70 million for the following purposes: * $48 million to cover the direct cost of closing Muhlenberg Regional Medical Conter, including’ - $18.5 million to retire outstanding tax exempt debt currently owed on Muhlenberg Regional Medical Center: ~ $15 million to fund pension obligations for MRMC employees to ensure that employees do not lose their retirement benefits as a result of the closure; ~ $8 million to fund severance for displaced MRMC employees to provide ‘employees with the necessary resources to transition into new jobs in the face of a weakening national economy; and - $6.6 million to fund stranded and closing costs. + $22 million to fund capital costs associated with services to be provided locally in Plainfield and expansion of services in Edison to meet needs of Plainfield community. Current plans, still under development, include the following. We would seek to work with the Department, our elected officials and the local community to finalize the plan. - Establishment of a satellite emergency department to be located on the MRMC campusi ~ Provision of imaging, lab and other related ancillary services necessary to support the satellite emergency department; - Enhance capacity and maintain efficient patient flow and care quality in the JFK Emergoney Department to accommodate the expected additional patient volume following the closure of MRMC. As a health system in financial crisis, Solaris Health System is naturally sensitive to the implications of taking on new debt to facilitate the closure of MRMC. To avoid worsening our existing financial condition by borrowing beyond our capacity, Solaris has conducted an internal debt capacity study to ensure that the health system can afford to take on this new debt and maintain its mission to the greater Edison and Plainfield communities. Based on current bond agreements and profitability, liquidity and leverage modeling prepared by management and validated by outside consultants, we have concluded that Solaris has the available capacity to assume this new debt. - The availability of sufficient manpower in the several professional disciplines ‘The closure of a hospital does not require additional manpower. a2i2008 28‘Muhlenberg Rogional Modical Center ‘Aa alllisce of Solaris Health Spstom Catifcate of Need Application - Other factors established under the Certifieate of Need Application and Review Process The application complies with all factors specified in the CN Application and Review process. 12. Attach a map of your patient service area including the location of your institution. Identify major service areas based on patient origin studies for inpatients and/or outpatients. See Attachment 4 for map of patient service area, which includes patient origin of primary service area based on inpatient volume. 18. Provide a breakdown of total project costs into costs associated with each programmatic or functional component: i.e., by service, department, medical specialty, licensed bed category, or other logical category; and by floor or unit if possible (See Schedule A). ‘There are no capital costs associated with the closure of acute care services at Muhlenberg Regional Medical Center. However, we anticipate increased operational expenses associated with assuring care coverage for and transitioning staff, as well as. consolidating services. 14. The certificate of need criteria identified in N.J.A.C, 8:33-4.9 and N.J.A.C. 8:33-4.10 must be addressed. NJAC. 8:33-4.9 General Criteria for Review a. No certificate of need shall be issued unless the action proposed in the application for such certificate is necessary to provide required health care in the area to be served, can be financially accomplished and licensed in accordance with applicable licensure regulations, will not have an adverse impact on access to health care services in the region or Statewide, and shall contribute to the orderly development of adequate and effective health care services. In making such determinations there shall be taken into consideration? 491, The availability of facilities or services which may serve as alternatives or substitutes; As discussed at length in question 5, there are nine acute care hospitals within Mublenberg’s service area located, 8 of which are located within 5 to 13 miles from the Muhlenberg campus. These institutions operate with an occupancy rate from 39.0% to 87.0% of maintained beds and demonstrate capacity to absorb additional acute care volume (as shown in Tables 6.1 and 11.1). In addition to acute care hospitals, there is a dense concentration of freestanding ambulatory care facilities within a 5 to 10 mile radius of Muhlenberg Regional Medical Center. There is also a Federally Qualified Health Center that has several satellite locations in Plainfield as well as an adequate supply of physician practices. As noted previously, despite a significant rate of poverty srerz008 23Mublenborg Regional Medical Center ‘An altliata of Solaris Hoalth Syoters i a in the City of Plainfield and its MUA designation, there is no population group HPSA. designation based on an adequate supply of physicians, ‘As the combined service area of JFK and Muhlenberg contains significant overlap -- including the City of Plainfield ~- we believe that JFK Medical Center can safely serve as an alternative care site for Muhlenberg patients and area residents (see Table 5.2). Solaris remains committed to its mission of serving the healthcare needs of our diverse communities. While there will no longer be acute care hospital services provided at the Plainfield campus, we are committed to operating a satellite emergency department and supportive ancillary services, maintaining the provision of hemodialysis through a lease with DaVita, and housing the offices of a three county home health agency, as well as keeping the Muhlenberg School of Nursing open. Furthermore, existing area hospitals will meet the need for acute healtheare and emergency services for the region's residents. This is fully discussed in the narrative response to Question 5 — present and anticipated need for project. 4.9-2, The need for special equipment and services in the areas Not applicable as the application does not propose the introduction of a new service or technology. 4.93. The adequacy of financial resources and sources of present and future revenues; As documented in the project narrative, the closure of Muhlenberg Regional Medical Center as an acute care hospital is necessitated by sustained operating losses. Solaris lacks the financial resources to subsidize operating losses of such a magnitude without jeopardizing the viability of the system and ite remaining affiliates. The closure of Muhlenberg Regional Medical Center will eliminate a loss of $16-18 million per year. ‘The result of subsidizing multi-million dollar operating losses for ten years has severely depleted Solaris cash reserves. In order to finance the costs associated with closure and create sufficient capacity to service MRMC patients at the remaining Solaris affiliates, the organization has requested the ability to borrow $70 million through the Hospital Asset Transformation Program (HATP). Without State assistance to access capital to fund closing costs, Solaris could face insolveney within 12-18 months and would be unable to finance the establishment of programs to serve the needs of former Muhlenberg patients. Specifically, Solaris has requested borrowing up to $70 million for the following purpose: ‘* $48 million to cover the direct cost of closing Muhlenberg Regional Medical Center, including: - $18.5 million to retire outstanding tax exempt debt currently owed on Muhlenberg Regional Medical Centers - 315 million to fund pension obligations for Muhlenberg employees to ensure that employees do not lose their retirement benefits as a result of the closure; ~ $8 million to fund severance for displaced Muhlenberg employees and provide employees with the necessary resources to transition into new jobs in the face of a weakening national economy; and - $6.5 million to fund stranded and closing costs,