EAST ORANGE, NJ – East Orange General Hospital filed a voluntary petition under Chapter 11 on Nov. 11 that will allow the hospital to complete an internal restructuring.
East Orange General said that this filing will ensure that the East Orange and Essex County community retains an essential and valuable healthcare provider that serves the needs of patients, employees, vendors and citizens.
The hospital had been struggling financially for some time, but has grown steadily stronger in the last year, said Martin Bieber, the interim chief executive officer who has led the hospital since November 17, 2014. “The problem is old debt,” Bieber said.
“In 2014, monthly losses before interest, depreciation and amortization averaged 12%. We’ve reduced those losses to 2% in the most recent month,” Bieber said. “Still, meeting old obligations on top of current obligations has contributed to the institution's deteriorating cash position,” he said, adding “This filing will enable the hospital to remain current with its ongoing obligations while we renegotiate some contracts and emerge stronger.”
The nonprofit 211-bed acute care hospital is to be acquired by California-based Prospect Medical Holdings, Inc. The proposed acquisition received regulatory review and approval from the state Department of Health and Human Services, the state Attorney General and Superior Court under the Community Health Care Assets Protection Act (CHAPA).
Superior Court Judge Walter Koprowski, Jr. approved the transaction on Oct. 28, completing a process that began more than a year ago.
Bieber said “The organization's liquid resources have been depleted to a point that it is unable to complete the transaction without having the ability to financially restructure its operations”.
“Although there has been much progress in the preceding year,” said attorney for the hospital Kenneth Rosen of Lowenstein Sandler LLP, “it was determined that the best way to successfully
and rapidly address the financial difficulties of EOGH — and to assure that the hospital would continue to provide uninterrupted critical care for the community — was to commence a reorganization bankruptcy case.”
Hospital officials said the problems that led to the Chapter 11 filing largely related to changes in the healthcare environment and to losses incurred in prior years.
“I am pleased with the support from our staff, our physicians and community leaders who have pulled together to focus on the patients and to ensure that East Orange residents have access to the healthcare services they require” said Bieber.
Rosen said that East Orange General is in negotiations with six independent lenders to provide Debtor in Possession financing.“The financing, combined with the hospital’s cash on hand will enable the hospital to pay its vendors and employees on a timely basis,” said Rosen. “It’s business as usual. And, the new financing builds stability for the future.”
“Throughout the country we have seen other hospitals face similar challenges and emerge from Chapter 11 stronger,” Rosen said. “East Orange General is poised for a great future.”
“East Orange General Hospital is the only independent, fully accredited, acute-care hospital in Essex County,” said Bieber. “It is known in the community as a leader in behavioral health services, renal dialysis, wound care, diagnostic services, emergency services and family health care.” More than 35,000 patients seek urgent medical care in the hospital’s Emergency Department every year, he said.
“Our action today will enable the hospital to continue to provide the community with those crucial services as we reorganize,” said Rosen. “Closing the hospital would be devastating to the community,” he added.