Back from the brink: N.J. hospital out of bankruptcy

For many hospitals, bankruptcy is the equivalent of a death knell, but there is fresh evidence that restructuring can work. St. Mary's Hospital, the only remaining acute-care hospital in Passaic, N.J., has emerged from bankruptcy one year after entering Chapter 11 with $100 million in debts, becoming the first New Jersey hospital to escape bankruptcy intact, says attorney Robert Malone, who represented St. Mary's during the reorganization. "A year ago, the cards were clearly stacked against the hospital. Today you're looking at a true success story."

The 292-bed hospital has a $167 million operating budget and projects 2010 revenues of $170 million. That revenue projection is based on an average daily census of 161 patients, but the hospital averaged "in the 170s" in January and February, says William Cusick, chief financial officer.

St. Mary's is already facing a new challenge: A $450,000 reduction in state charity care reimbursements for indigent patients (about 12 percent of its patient population). Improving patient census will be critical, says Cusick.

To that end, the hospital is actively recruiting physicians to bring in new patients. In addition, "we've negotiated new managed care contracts--we'll be getting better per-diem rates--and our Medicare volume is increasing," says Cusick. St. Mary's also has automated its billing system to speed up collections and will do more bulk purchasing to lower costs.

St. Mary's has negotiated new three-year contracts with unionized nurses, technicians and boiler operators. The contracts restore pay cuts taken during the hospital's financial crisis. Workers who were employed at St. Mary's prior to the bankruptcy filing received a 1 percent increase in October. In addition, they will receive a 3 percent increase this month and another 1 percent raise in June.

Over the next 18 months, the hospital will pay roughly $72,000 a month (up to $1.25 million) into a trust for unsecured creditors.

To learn more:
- see The Record's article

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