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Christ Hospital CN# FR 111101-09-01 Anthony Kobylarz / Jeff Kasko (609) 292-6552
Your projections on page 11 of 19 indicate admissions for medical/surgical, pediatrics, acute psychiatric, obstetrics, the intensive care unit and newborn nursery would not change in 2012 and 2013 from the reported admissions in 2011. Explain how in light of the fact that admissions have declined for a number of these services for the last two years and without any additional growth that the new ownership would successfully stabilize the hospital’s operation. The application indicates that you are committed to operating Christ Hospital for the next five years. Do you propose to continue operating the same number of licensed as well as maintained beds during this time period? If not, provide your explanation for any reductions or increases in the respective bed categories currently identified on the hospital’s license, which you plan to implement. Under the Maintenance of Services section on page 4 of the Proposal to Purchase Assets of Christ Hospital letter, you do not identify pediatric beds as an essential service to be offered for no less than five years. Explain whether you are committed to providing these services at the present bed level once the ownership of the hospital is transferred to Prime Healthcare. On page 9 of 19 of the application, you indicate that Christ Hospital has been designated by the New Jersey Department of Health and Senior Services as a critical access/safety net hospital. Please provide a copy of the documentation received from the Department. As requested in Schedule B, please submit the track record reports for all of the listed facilities owned by Prime Healthcare for the preceding 12 months. These should come from the California state agencies responsible for licensing those facilities and indicate the degree of compliance with all state and federal requirements. You reference on page 6 that your plans to work collaboratively with other area hospitals (Jersey City Medical Center and Hoboken University Medical Center) to explore long-term patient service consolidation opportunities. Identify the potential service opportunities that you are considering, status of any discussions with other area hospitals, and how you determined the consolidation of these services would best serve the area.
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What measures does Prime Healthcare intend to implement to enhance Christ Hospital’s ability to recruit and sustain the appropriate complement of physicians, clinical staff and support personnel, thus ensuring the long-term viability of the hospital? Explain your response in detail. You state that Prime Healthcare has committed to hire substantially all of Christ Hospital’s employees. Please provide the date to which this statement applies. Please also identify the current total number of employees and what number would be maintained by the new owners. In addition; a. What efforts will Prime Healthcare undertake to assist employees who will not be maintained to find other suitable employment? b. Would the transfer of ownership result in any changes in the current contracts with any professional staff? If so, please explain.
You indicate that Medicaid and uninsured patients made up 40% of Christ Hospital’s payer mix in 2010 – an increase of 17% over the prior two years. With this population’s continued growth or even its stabilization over the next two years, how do you propose to dedicate hospital resources to treat these patients without increasing your financial deficit?
10. What do you see as the payer mix for Christ Hospital for 2012 and 2013? Report these figures in terms of number of patients and percentage of the total patient population you project for each of these two years. 11. You indicate that Prime Healthcare operates 12 for-profit acute care hospitals and two non-profit hospitals under its affiliated Prime Healthcare Services Foundation in California. For each of those hospitals, individually provide the number and percentage of patients that were admitted through the Emergency Department (ED) over the past two years. Of these patients admitted through the ED, indicate the number and percentage that were out-of-network in terms of insurance status. For both of these items, indicate how they compare to the California average. 12. For these same 14 hospitals, please report the payer mix for each over the past two years, by number and percentage of patients, including charity care, or a similar program, and Medicaid patients. Please also indicate how the percentages for each hospital’s payer category compare with the averages for all California hospitals. 13. According to a published report on 2008 to 2010 diagnosis rates by CaliforniaWatch.com (CW), Prime Healthcare hospitals in California had a significantly higher percentage of Medicare patients diagnosed with acute heart failure than other California hospitals. During this time, Prime Healthcare hospitals had 12.9% of Medicare patients with this diagnosis, compared to 4.8% of these patients in other hospitals. CW data also show that Prime Healthcare hospitals were in the top three, percentage-wise, and were included in five of the top six, and
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eight of the top ten (with ranges of 12.3% to 35.2%) of hospitals diagnosing acute heart failure during these years. Please explain this in more detail. 14. What rationale did you receive from the Office of the California Attorney General or California Department of Health in the denial of a number of Prime Healthcare proposals to convert non-profit to for-profit hospitals? Provide the documentation from these government agencies that spells out this rationale. 15. The Proposal to Purchase Assets of Christ Hospital letter specifies that the continued operation of Christ Hospital would be not less than five years. How did you determine the length of operational time before selling or discontinuing services to be five years instead of a seven or ten year time period? Is Prime Healthcare prepared to commit to operating Christ Hospital for more than five years after initial licensure, if required by certificate of need approval to do so? If not, please explain why? Has Prime Healthcare sold any of the hospitals that they converted from non-profit to for-profit within seven years or less from their state licensure date? If so, please explain the reasons for the sale and whether the facilities continued to operate as hospitals. 16. Explain how Prime Healthcare will build upon Christ Hospital’s existing commitment to the medically indigent as stated on page 14 of Section B. 17. On Page 9 of Section II of the application, you mention specific deficiencies for Christ Hospital to address in order to continue to provide crucial care to Hudson County residents. Outline your plan to address these deficiencies. 18. Does Prime Healthcare plan to acquire the existing Medicare Provider Number of Christ Hospital or obtain a new one? a. If keeping the existing Medicare provider number, please describe any liabilities pertaining to the Medicare provider number being acquired and how these are accounted for in the financial data presented. b. If acquiring a new Medicare provider number, please describe how the facility will comply with CMS conditions of participation as a new provider, especially required Federal Life Safety Code requirements (most recent code requirements). 19. On page 19 of Section B of the application, you address the criteria of N.J.A.C. 8:33-4.9. The statements provided lack the required specificity needed to demonstrate compliance. In accordance with general criteria for Certificate of Need (CN) approval at N.J.S.A. 26:2H-8 and N.J.A.C. 8:33-4.9(a), please provide detailed responses to the criteria set forth below: a. the availability of facilities or services which may serve as alternatives or substitutes;
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b. the approval will not have an adverse economic or financial impact on the delivery of health care services in the region or statewide and will contribute to the orderly development of adequate and effective health care services. 20. Document that Christ Hospital is presently in compliance with. N.J.A.C. 8:43G5.21, which stipulates that “All hospitals shall provide, on a regular and continuing basis, out-patient and preventive services, including clinic services for medically indigent patients, in those services provided on an in-patient basis.” a. If not provided, does Prime Healthcare plan to provide such clinic services directly through contractual arrangements with other providers? Please indicate the possible indirect service providers and a timeframe to come into compliance with the above noted requirement. 21. You indicate that no less than $35 million would be invested in the aggregate for capital improvements, equipment, information systems upgrades and working capital at the hospital during the first five years after the acquisition. Please explain in detail the actual physical plant improvements, information technology and equipment upgrades planned for the facility. 22. You reference the formation of an advisory board upon transfer of ownership. Describe the composition in more detail, such as the number of members, entire membership by category and how this board would relate to the corporate governance board. In addition, provide the operating bylaws for the advisory board. 23. Using the zip codes presented in Exhibit 2-1, show by zip code whether Christ Hospital has gained or lost market share from 2008 to 2011. 24. Should the transfer of ownership be approved, would it result in any changes in the current contracts that the hospital has with any health insurers? If so, please explain. a. Please identify all existing insurance plans and provide the percentage of inpatient and outpatient revenue for each in 2010; the public notice requirements if these are cancelled; whether or not they are eligible for assignment to Prime Healthcare; and whether or not Prime Healthcare “desires to assume such contacts.” If not, please explain why. b. Separately provide the total amounts of inpatient and outpatient revenues and provide the percentage of each of these amounts from out-of-network payments in 2010. Explain whether you project this percentage to change if this transfer of ownership is approved. c. Please discuss the criteria that Prime Healthcare will use to determine if it “desires to assume such contracts.” d. Please identify the timeframe Prime Healthcare expects necessary to determine (a)–(b) above.
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e. Please identify what steps Prime Healthcare has taken to date regarding decision-making for (a)–(c) above. f. Please identify alternatives should the parties fail to agree to negotiate contracts. g. Please acknowledge that the Department may require, as a condition of any Certificate of Need approval, that Prime Healthcare honor the provisions of insurance contracts (as of the date of CN approval) for elective and nonelective procedures for a period of time to allow for public notice and transparency. 25. As a result of this transfer of ownership, will there be any changes to pension or health insurance benefits for Christ Hospital’s employees? 26. The N.J. Department of Human Services, Division of Medical Assistance and Health Services, requires, for a change in ownership, that new owners apply for a new Medicaid provider number. Confirm that you have applied or will apply for a new Medicaid provider number. If you have not yet applied for this new number and need more detail on the matter, you may contact Mr. Gregory Lovell in Division of Medical Assistance and Health Services, Hospital Reimbursement Unit at (609)588-2668. 27. The project summary describes a provision that “holders of not less than 90% of the outstanding amount of Seller’s debtors execute releases of the remaining balances owed” over $10 million.” Please explain what would happen if you did not secure releases from 90% of remaining debtors and how this might affect the proposed sale. 28. Have corporate governance guidelines been adopted for Christ Hospital’s governing board? If so, please describe the subject matter of the guidelines and intended frequency of review. The guidelines should, at a minimum, include the following provisions: • • • • • • • • Director qualification standards; Director responsibilities; Director access to management: Method of selection of independent advisors; Director compensation; Director orientation and continuing education; Management succession; and, Annual performance evaluation of the Board.
a. Please indicate which of the above provisions are now included. b. Will these guidelines be available for public inspection? c. If guidelines have been established, please provide a copy.
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29. You identify on page 10 that a number of elected officials have voiced their support for this transfer of ownership. Provide documentation (i.e. letters) that demonstrates this support. 30. Provide a copy of the asset purchase agreement between Christ Hospital’s current owner and Prime Healthcare Services.
COMPLETENESS REVIEW QUESTIONS NAME OF FACILITY: CERTIFICATE OF NEED NUMBER: NAME OF REVIEWER: TELEPHONE NUMBER OF REVIEWER: Christ Hospital CN# FR 111101-09-01 Valerie Larosiliere (609) 777-0746
1. Currently, the NJ Division of Mental Health and Addiction Services (DMHAS) contracts with Christ Hospital to provide a variety of behavioral health services. Is the applicant willing to provide an attestation of their understanding of and willingness to negotiate with DMHAS around the transfer of DMHAS contracts to the new company? If yes, the applicant is asked to do so in their response. 2. The licenses for the applicable programs that are licensed by the NJ Department of Human Services are not transferable. Is the applicant willing to provide an attestation of their understanding of the need to complete new licensing applications and data sheets for the applicable programs so new licenses can be issued? If yes, the applicant is asked to do so in their response.
COMPLETENESS REVIEW QUESTIONS NAME OF FACILITY: CERTIFICATE OF NEED NUMBER: NAME OF REVIEWER: TELEPHONE NUMBER OF REVIEWER: 1. 2. Christ Hospital CN# FR 111101-09-01 Sandra Schwarz (609) 292-5616
Please identify the days/hours per week of operation for prenatal and pediatric clinic services (page 15 of 19). Include the number of patient visits per week. Bed inventory identifies 13 licensed obstetric beds, while service inventory (page 18 of 19) identifies 0 existing and proposed beds in all perinatal services categories. Please clarify. The shared quarterly inpatient Utilization Report identifies 17 maintained obstetric and OB/GYN beds, while bed inventory identifies 13 licensed obstetric beds. Please clarify. Is it the applicant’s intent to request additional obstetric beds? The shared quarterly inpatient Utilization Report identifies 15 maintained pediatric beds for 2009 and 21 for 2010, while bed inventory identifies 31 licensed pediatric beds. Please clarify. Please provide the average daily census and the average length of stay for the 31 licensed pediatric beds. Please provide information regarding the status of the satellite intermediate care nursery operated by Newark Beth Israel Medical Center.
COMPLETENESS REVIEW QUESTIONS NAME OF FACILITY: CERTIFICATE OF NEED NUMBER: NAME OF REVIEWER: TELEPHONE NUMBER OF REVIEWER: 1. 2. 3. 4. Christ Hospital CN# FR 111101-09-01 Steve Fillebrown (609) 292-8585
Please provide projected balance sheets and cash flow statements for 2011-2014. Please provide total FTEs for 2011-2014. What is Prime Healthcare’s commitment to funding operating shortfalls should the stabilization grant program continue but Christ Hospital receives no funding? The Proposal to Purchased Assets of Christ Hospital letter allows either party to terminate the agreement if closing on the transaction does not take place by December 31, 2011. Given that this application is unlikely to have regulatory approvals by that date, are both parties willing to extend that date? How much are projected decreases in the amount outstanding on the working capital line in 2013 and 2014? If using a “constant dollar” methodology, why do the cost savings per adjusted patient day increase in 2013 and 2014 (from $588 to $603 to $608)? The patient mix percentages for 2013 and 2014 (I.3. on page 14 of 19) total 106.7% and 106.9%, not 100%. In which line item in the projected expenses are taxes included? Please provide documentation that Prime Healthcare will have sufficient funds to complete the transaction (e.g. commitment letter from REIT).
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10. What is the dollar amount of the anticipated sale and lease back with a REIT? Will this be the only source of funds for the project? 11. How is the rent expense calculated? 12. If financing for the project is coming from internal funds of Prime as opposed to a sale leaseback with MPT, please provide documentation that Prime will have sufficient funds to complete the transaction (e.g. financial or bank statement).