NY company expected to buy Runnells from Union County

UNION COUNTY  — If all goes as planned, by July Runnells Specialized Hospital will be in the hands of a private owner and as a result, five years down the road the county will have saved $58 million and generated an estimated $500,000 in new property taxes a year.

Last week the Union County Freeholder Board took a giant step towards the sale of the 102-year-old Berkeley Heights county-owned facility, voting 7 to 1 in favor of finalizing negotiations with Center Management, a private company from Flushing, New York, that specializes in privately-owned nursing facilities.

Freeholder Angel Estrada was the only declining vote following a comprehensive presentation about the sale and benefit to the county and taxpayers, however, his mother is a patient at Runnells and he has a vested interest in her care.
The consenting members of the freeholder board were adamant about the decision to move forward with the sale, with Freeholder Chris Hudak pointing out “this was not an easy decision to make, and one that has been two years in the making.”

“Every angle was analyzed and every option put on the table,” the board chairman said, mentioning that during this time the board held a number of intense discussions on the matter “After careful weighing of the facts, options and scenarios, we believe the resolution we voted on tonight is the best decision,” Hudak said, explaining that with Runnells facing declining Medicare and Medicaid reimbursements, the county faces an uncertain financial future given the constant evolution of the healthcare industry.
“We believe this decision had to be made to ensure its viability,” he added.

Hudak also pointed out the Union County Improvement Authority will be working toward an arrangement that will allow Runnells to remain a hospital and patients to continue to receive “the high level of care they are now receiving.”
Employees, though, might have to fight for their jobs, according to what the board indicated in their statement.

“As a final piece, we’re working to achieve an agreement that would give employees, who are in good standing, the first right of refusal to any employment opportunities,” said the board chairman.

“A decision of this magnitude is never an easy one,” said Hudak. “But in the end, we believe we have made a decision that will establish a firm fiscal path for the continuity of service at Runnells Hospital.”

A number of speakers also stepped to the podium, some to implore the county to reconsider the sale and others to applaud the freeholders for being fiscally responsible.

Berkeley Heights Mayor Joseph Bruno was very pleased about the sale of Runnells moving forward, pointing out his town had been extremely unhappy with the county budget and was seriously considering secession from the county. However, the sale of Runnels appeared to throw a wrench in that move.

“I applaud you for this move, because government shouldn’t be in the medical practice business,” he told the freeholder board, adding that the sale would go a long way towards restoring faith in the county’s ability to manage their finances.

Other speakers, including Betsy Thorton, a nurse at Runnells, told freeholders her main concern was that private facilities can hide many flows and shortcomings because they are only inspected five days out of the year. She said ownership by the county “ensures high quality of care.”

Judy Harris, of Cranford, said she was “very confused and perplexed” about the sale, noting Runnells, from her perspective, is a good facility.

“I know that because my husband has been a patient at Runnells for the last five years,” she said, adding that “we must keep Runnells as the facility it is. We can’t sell it.”

Runnells has been a financial thorn in the side of the county for years because of continued decline in medical reimbursements from the federal government.

Last year alone the county lost $13.5 million with the loss this year expected to be around the same number. Because of this continued loss in reimbursements, the county had to subsidize the facility, which has been a considerable drain on taxpayer dollars. Over the course of two years, the county has shelled out $23 million to keep it afloat.

According to Union County Human Services Director Frank Guzzo, in 2006 both state and federal government began to move funding from nursing homes to community-based agencies and home care options. One of the most significant impacts of this was the continued reduction in Medicare and Medicaid rates which have made it difficult for the county to pull the financial reigns on operating costs.

The human services director explained at the March 13 freeholder meeting that county subsidies for Runnells have continued to increase because 75 percent of the residents are Medicaid eligible and also because the county must operate within the state-mandated cap laws.

The county estimated that revenue from healthcare reimbursement cannot support Runnells operations and the projection is that it will only get worse once managed care for Medicaid is implemented in mid-2014.

According to figures obtained from the county, currently the county only receives $222 per patient per day, but that number is expected to fall another 10 percent to $190. In order for Runnells to break even, the county would have to realize reimbursements of more than $300 a day for each patient using Medicaid and Medicare.

Nursing home trends and Runnells created a “perfect storm” for the county, Guzzo explained, specifically citing that nursing homes in general have been impacted by major changes.

Included among these changes were the increased cost of healthcare and pensions; decreasing Medicaid while Medicaid- eligible residents are increasing; the number of “bed days” decreasing, which has made it difficult for the county to reduce staff quickly as needed; and the focus shifting to community-based services as an alternative to nursing home care.

Guzzo pointed out that many other counties have responded to these changes within the medical industry by selling their nursing homes to private operators. Among the examples included Camden in 2013, with a 450-bed facility sold for $37.1 million; Burlington, which had a 200-bed facility that was sold for $15 million in 2012; and Cumberland County, which sold their 196-bed facility in 2012 for $14 million.

Guzzo said the Requests for Proposals, or RFP’s, the county put out in December for potential Runnels buyers generated five responses but one was disqualified because there were inherent flaws in the application.

“In the end we believe we have made a decision that will establish a firm fiscal path for the continuity of service at Runnells Hospital,” the statement said.

As a result of the Freeholder Board voting to finalize negotiations with Center Management, the board approved a measure granting the Union County Improvement Authority permission to complete the sale with Center Management Group.

However, there were a number of conditions attached, including that the sale not be less than $26 million, which is the appraised value; give current hospital patients the right to remain at the hospital; protection of employees in good standing by giving them the first right of refusal; a guarantee Center Management Group will have a five-year capital improvement plan; commit to sharing revenue with the county for any new healthcare facility involving long-term care patients; and that a certain number of beds at Runnells will remain available for Union County residents and indigent patients.