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East Orange General signs non-binding agreement with for-profit hospital

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Another for-profit hospital system may be coming to New Jersey.

The nonprofit East Orange General Hospital and the for-profit Prospect Medical Holdings announced Tuesday that they have signed a non-binding agreement to pursue a strategic partnership. The groups said the arrangement “will preserve and enhance essential health care services for the residents of East Orange and its surrounding communities.”

The non-binding letter of intent includes a commitment by the Santa Ana, Calif.-based Prospect to make a “substantial capital investment” in the hospital over five years, maintain East Orange General as an acute-care facility, and retain the employee and physician base.

Prospect will assume the hospital’s debt and provide several million dollars in new resources to enable the hospital’s Foundation to work directly with patients, families, physicians and community leaders to promote and improve wellness.

The development of a definitive agreement is ongoing and will require a review and approval process by the state.

“This strategic partnership with Prospect provides East Orange General Hospital with the very best opportunity to preserve and strengthen the public health safety-net we have maintained in this community for over a century,” East Orange General President Kevin J. Slavin said in a statement. “Prospect shares our core values, believes strongly in our mission, and will deliver the substantial capital investment we need to remain an essential part of our region’s economy and health care system well into the future.”

New Jersey has seen the acquisition of a number of struggling urban hospitals by for-profit hospitals companies in recent years. CarePoint in Bayonne, for instance, acquired three such hospitals in Hudson County: Bayonne Medical Center, Hoboken University Medical Center and Christ Hospital in Jersey City.

Critics say for-profit hospitals are all about profits – which often come at the expense of the community. Proponents say for-profit hospitals are the only ones willing to serve these communities, keeping services available.

Prospect Chief Executive Samuel Lee said in the statement that his group is eager to make a difference.

“We are excited at this opportunity to build upon East Orange General Hospital’s strong presence in and commitment to its local community,” he said. “We are committed not just to helping preserve East Orange General Hospital as an essential community health care provider, but also to making sure it realizes its significant potential for growth.

“In this challenging health care climate and for the long term, Prospect offers a truly unique model of health care delivery that emphasizes cooperation and collaboration among hospitals, physicians, health plans and other providers, with one simple goal – ensuring that our patients receive the right care, in the right place, at the right time and at the right cost.”

The selection of Prospect follows an extensive review process facilitated by a request for proposal issued to more than two dozen hospitals and health systems by East Orange General in early 2013.  

“The unique health care transformation fostered by the Affordable Care Act has led many hospitals to explore new, innovative partnerships,” Slavin said. “Our goal here was simple from day one; to identify the right strategic partner that will not only ensure financial viability for our hospital both today and tomorrow, but also embrace and improve our essential services, such as acute care, primary care, and behavior health.  We have found that partner in Prospect.”

East Orange board chair Leonard Murray II agreed.

“Throughout our intensive process and open discussions with Prospect, it became clear that they were the ideal fit to join us in providing the best care possible for the populations we serve, both now and well into the future,” he said. “Their unquestioned record of strengthening urban, safety-net, mission-driven hospitals resonated greatly with us.” 

East Orange General Hospital has served the community for more than a century, and recently expanded its services. Specialty areas include: same day surgery, physical and cardiac rehabilitation, behavioral health, family health and emergency medicine.

Prospect owns and operates eight hospitals, with a total of approximately 1,056 licensed beds, as well as clinics and outpatient centers. Prospect also manages the provision of health care services for over 210,000 patients enrolled in its networks of over 3,300 primary care physicians.

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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