Pascack Valley Hospital Decides to Close Its Doors

NJBIZ, Oct 1, 2007 by Daks, Martin C

WESTWOOD

The health care facility is the third in two months to fall prey to financial troubles

FACING A RIVER OF RED INK, the owner of Pascack Valley Hospital last week filed a Chapter 11 bankruptcy petition in federal Bankruptcy Court in Newark as the first step in shutting down the 280-bed facility by the end of the year.

Pascack Executive Vice President John Corcoran says the Westwood hospital filed for Chapter 11, which lets businesses stay open while they seek to reorganize their finances, to buy time for an "orderly closure" to be coordinated with the New Jersey Department of Health.

Pascack, which says it has racked up more than $50 million of total losses and has failed to find a buyer or investor, is the third New Jersey hospital in two months to fall victim to financial woes. In August, the Nathan and Miriam Barnert Memorial Hospital Association in Paters on, which operates the 236-bed Barnert Hospital, filed for Chapter 11 bankruptcy protection in Newark's federal Bankruptcy Court.

Also in August, directors of Union Hospital in Union voted to close the 174-bed facility and lease space to Overlook Hospital, which plans to operate a 24-hour satellite emergency department in part of the building.

According to a June report from the state Commission on Rationalizing Health Care Resources, many New Jersey hospitals face an "outright fiscal crisis."

That was certainly the case at the 48year-old Pascack, which is owned by the Pascack Valley Hospital Association. The hospital posted a $21.9 million operating loss in 2006 and expects a full-year loss of more than $16 million for 2007. Results like that meant it "was no longer financially viable" to continue operations, Donald Genaro, chairman of Pascack's board of trustees, said in a statement.

Corcoran says the hospital succumbed to a litany of ills that have downed other health care institutions, including reduced federal Medicare and charity-care reimbursement and growing competition from doctors who set up their own clinics for reconstructive surgery and other specialties that attract wealthy patients.

"We had hoped to find a buyer for the hospital," says Corcoran, referring to failed talks with Hackensack University Medical Center. "But when we were unable to do so, the decision was made to file for bankruptcy and close the hospital."

The decision came despite state legislation this summer that was designed to encourage hospital mergers and buyouts. The new law enables the state treasurer to provide loans to nonprofit health care organizations to help them acquire financially troubled hospitals.

For Pascack, the writing appeared to be on the wall last March when Fitch Ratings downgraded $82 million of the hospital's debt to "CCC" or junk status. Fitch blamed the downgrade on "a continuation of operating losses and extremely limited liquidity and financial flexibility" at the hospital.

E-mail to mdaks@njbiz.com