N.J. Finance Board Approves $6.2M Bond Plan to Save Bayonne Hospital

The day before it was to be sold in a public auction, the bankrupt Bayonne Medical Center in New Jersey got just what the doctor ordered when the State Local Finance Board unanimously approved a $6.2 million bond resolution yesterday at a special hearing to help the ailing hospital remain open until the end of the year. The proceeds of the upcoming sale of general obligation bonds by the city of Bayonne will give the cash-strapped hospital enough funds to remain open between now and the time the hospital is sold out bankruptcy. The city expects to repay the debt without any revenue from the hospital. The bonds also qualify under the state aid intercept program.According to Bayonne Mayor Terrence Malloy, the sale of the hospital will begin once its fate is decided by a judge in U.S. Bankruptcy Court in Newark sometime today.The mayor said he is pleased that the resolution was passed with so much support from the state and said the hospital’s financial recovery and physical presence is critical to the Bayonne community at large.“We are very appreciative of the Local Finance Board’s efforts on our behalf,” Malloy said in an interview after the state’s vote. “Their support goes a long way toward our efforts in keeping the hospital open and ensuring that the health and safety concerns of the residents are met.”The hospital was recently appraised at $45 million, according to Malloy.The state’s approval of the resolution came a few hours before the Bayonne City Council was also to meet last night to approve a bond ordinance required in order to issue the bonds, Malloy said, adding that he anticipated that the council would give its full approval to the ordinance.The 278-bed acute-care community hospital — first opened in 1888 — has been involved in a court-supervised reorganization under Chapter 11 since April when it filed for bankruptcy protection in U.S. Bankruptcy Court in Newark.It recently suffered from serious cash-flow problems faced by many health care providers in the state and the country stemming from reduced reimbursements and increased costs for supplies and equipment, to fewer patients overall, and more without insurance, according to published reports by the New Jersey bureau of the Associated Press.The bond resolution, which was first introduced on Oct. 11, will lead to the issuance of $6.2 million of fixed-rate debt that will be issued as temporary notes in mid-November, according to Malloy.Once the hospital determines the exact dollar amount it will need to draw upon until the closing are expected to be finalized by year end. The city will subsequently issue fixed-rate, long-term bonds and will refund the note issue, he explained.One of the potential bidders in today’s auction will be IJKG LLC, a New Jersey-based corporation that proposed to convert the non-profit Bayonne facility to a for-profit private entity, while keeping it as an acute-care hospital.The hospital’s 13-member board, led by Ruth Dugan, voted unanimously in a September meeting to designate IJKG as the preferred “asset purchaser” since it had proper funding prepared, agreed to let the hospital remain an acute-care facility, and had an interest in working with the existing physician staff, according to a news report published in the Jersey Journal newspaper.Besides the proceeds of the bond resolution, the New Jersey State Health Care Facilities Financing Authority has also agreed to loan the bankrupt Bayonne Medical Center $2.5 million to help keep it up and running until a new owner takes the helm.That bridge loan and the city bonding combined would likely be used to accommodate payroll, vendors, and other operating costs required to keep the hospital until a new owner comes on board, according to the news report.On Monday, the City Council passed the bond resolution by a vote of 4-0 in a preliminary meeting that was required by state law to take place prior to yesterday’s state finance board hearing.Other officials agreed that the hospital’s future recovery is crucial to the city and its residents.“The bond is a lifeline to help the hospital be acquired by the appropriate bidder,” said Bayonne City Councilman Anthony Chiappone, who attended the state board meeting with the mayor.