Union County finalizes sale of Runnells Hospital

File Photo The county freeholders approved the sale of Runnells Specialized Hospital to Center Management Group for $26 million.
File Photo
The county freeholders approved the sale of Runnells Specialized Hospital to Center Management Group for $26 million.

UNION COUNTY  — Late last week the Union County Board of Chosen Freeholders moved ahead with completing the sale of Runnells Specialized Hospital to a private management company for $26 million.

In March the freeholder board decided to sell the hospital to one of four bidders who responded to a request for proposals earlier this year.
The sale to Center Management Group of Flushing, NY, is expected to save the county $50 million over the next five years, but the biggest boon will be to taxpayers because the 45-acres of property will return to the tax rolls.

This is expected to generate an estimated half-million in new property taxes to Berkeley Heights and the county.
Center Management is a national healthcare management company that specializes in long-term care. It’s skilled nursing operations include short-term rehabilitation, sub-acute care, long-term care and ventilator care. It also offers independent and assisted living as well as homecare.

As part of the sale process there will be public hearings held in Elizabeth and Berkeley Heights prior to the deal closing sometime before the end of the year. Dates for these hearings, though, have not yet been set.

Meanwhile, Center Management Group will be applying for two state licenses – both are required to operate a long-term care facility and psychiatric hospital.

Although the vote on May 15 to pass the two resolutions authorizing the county manager to enter into an agreement with Center Management Group as part of the sale agreement was unanimous by the board, Freeholder Angel Estrada was not at the meeting.
In the past year Estrada made it known he was against the sale of the facility, and that he strongly felt the county should continue to finance Runnells because of the care patients received there.

Freeholder Board Chairman Chris Hudak, however, explained why it was important to the board that the private company they chose was willing to work with them in seeing this facility continue as it has for 100-plus years, noting this has been their main concern from the start of the sale process.

“The primary concern of the board has been and will always be that Union County residents have access to high quality health care services for nursing care and other specialized needs,” the freeholder chairman said, adding that “the bottom line is that Runnells will continue to serve the community.”

Center Management Group agreed to six mandates as part of the sale, including a 99-year deed restriction requiring the hospital to remain a healthcare facility for long-term care patients and a certain number of beds at the hospital remain available for county residents and indigent patients.

Other stipulations the private management company agreed to included that they would not pay less than $26 million to the county; current patients would have the right to stay at Runnells; and emp\loyees in good standing would be given the “right of first refusal” for their jobs or the opportunity to work at one of Center Management’s other long-term care facilities.

There also was a suggestion by a union representative for Runnells employees that an oversight board be set up to protect patient care.
According to Hudak, the freeholder board asked County Manager Al Faella to look into the possibility of setting up such a board and return to them with the particulars.

The 102-year-old facility, which has 300 beds for long-term care patients and 44 beds for adult psychiatric care, has been the subject of much dissention over the years because it continued to run at a serious financial deficit.

Last year alone the county had to subsidize Runnells by $13.5 million, but that was only the tip of the iceberg. Over the last two years the county had to subsidize the long-term care facility by $30 million just to keep it afloat.

Previous consultants hired by the county indicated this scenario was not going to change either. In fact, they said the financial picture would continue to get worse.

Approval of the sale to Center Management Groups was a long process that began in 2012 when the county hired Complete HealthCare Resources-Eastern, Inc. to look into how to get Runnells on sustainable financial footing.

Their report gave a bleak financial picture of the future of Runnells, noting, among other things, that rising employee and operational costs, coupled with decreasing occupancy rates left few alternatives for the county other than to subsidize the facility.

Based on the conclusions of the CHR report the county decided to at least explore transferring hospital operations to the Union County Improvement Authority for possible transfer to a third-party, while simultaneously evaluating methods of revenue enhancement and expense reduction.

This plan, however, was short lived.

Part of the problem had to do with declining Medicare and Medicaid reimbursements. Due to reductions in state and federal aid the county only received $222 per patient instead of the $300-plus needed to operate without subsidies.

In part this had to do with the fact that in 2006 federal and state governments began to move funding from nursing homes to community-based agencies and homecare options, which resulted in a steep decline in Medicare and Medicaid reimbursements.

It quickly became apparent to the freeholder board that despite wanting to keep the facility within the county auspices there was no other choice but to explore selling the property because of the continued financial burden on taxpayers.

The prospect of selling Runnells, though, did not come without controversy. Both employees and residents expressed concern about the type of care patients would receive if it became privately owned, but Faella said all efforts would be focused on ensuring Runnells continued to operate as a long-term care facility.

In October 2013 a Pennsylvania consulting company reported that a study they did for the county proved Runnells could be sold for between $22.4 million and $25.6 million.

Shortly after the freeholder board put out a Request for Proposals and five serious buyers submitted proposals.
Union County was not the only county taking this route. Several other county operated hospitals already have been sold to private management companies, including Camden in 2013, Burlington in 2012, Cumberland in 2011, Salem in 2009, Mercer in 2010, Hudson, 2002 and Essex in 1996.