Rescue Plan for Bankrupt New Jersey Hospitals Under Threat
A plan to rescue three troubled New Jersey hospitals from bankruptcy is being challenged by their former owners, who claim mismanagement and an unfair land deal have tainted the reorganization.
The bankruptcy-exit plan for CarePoint Health Systems pays too much to the proposed rescuer, Hudson Regional Hospital, said Matthew Harvey, a lawyer for a firm affiliated with the former owners. Hudson would be paid more than $330 million over 10 years and protected from lawsuits that could have been used to repay creditors, he said.
“Nobody wants to see these hospitals fail,” Harvey told the bankruptcy judge overseeing CarePoint’s insolvency case in Wilmington, Delaware. “Our issue is that the plan is fatally flawed. Yes, it’s a hospital case, but there is no ‘hospital exception'” to the bankruptcy code, he said.
The dispute threatens the latest effort to save three hospitals across from Manhattan that help serve 700,000-person Hudson County. Many poor residents rely on the facilities, which have gone through various operators. Last year, a Michigan firm was tapped to run the hospitals, and that role is now being handled by Hudson Regional.
Hospitals across the country are grappling with higher costs for staff and supplies, with even some higher-profile facilities struggling. Systems like CarePoint with large numbers of poorer patients have greater difficulty covering their expenses because government health programs pay less than private insurers.
US Bankruptcy Judge J. Kate Stickles began a four-day hearing Wednesday to decide whether to approve the rescue plan. CarePoint and Hudson Regional will face off against former CarePoint owners that include Vivek Garipalli, the chairman and co-founder of Clover Health Investments Corp., according to court records. The hospitals were donated to CarePoint in 2022, and the nonprofit entity has struggled financially ever since.
One of CarePoint’s former owners alleged in court papers that just before the firm filed for bankruptcy in November, Hudson Regional used confidential information to negotiate a “sweetheart deal” for land used by Christ Hospital.
Hudson Regional paid $67 million for 13 acres worth at least $150 million, the court papers contend, squeezing out former CarePoint owner Strategic Ventures and CarePoint, which held options to buy the property. Those options were wrongly bypassed by Hudson Regional, Strategic claimed.
CarePoint also mismanaged its units by failing to pay a bill-collection agency, causing a loss of revenue, Strategic claimed in court papers. Thousands of medical bills were not submitted to insurance companies because “no one bothered to follow up” or they “got lost in the process,” Strategic alleged.
A lawyer for Hudson Regional said during Wednesday’s hearing that the firm was the only entity willing to put money, as well as management expertise, into CarePoint’s revival.
“I’m here on the good guy’s side,” Vincent Roldan told the court, adding that performance at the hospitals has improved since Hudson Regional took over their management. It has run Bayonne Medical Center, Christ Hospital in Jersey City and Hoboken University Medical Center since CarePoint’s bankruptcy filing and has also been its main lender.
Ahead of last year’s bankruptcy, the New Jersey Department of Health gave CarePoint over $8 million to help it make payroll payments and hire a chief restructuring officer. State officials also appointed a monitor. Last month, they sent letters to CarePoint hospitals ordering them to prepare a disaster plan in the event the facilities suddenly needed to close or stop services.
The case is CarePoint Health Systems, Inc. 24-12534, US Bankruptcy Court, District of Delaware (Wilmington)