Fines weren't enough to keep Jersey City hospital open, so lawmakers aim to get tougher

This month’s shuttering of Heights University Hospital left New Jersey’s second-largest city with just one emergency room, sparking community outcry as local leaders weigh their legal options.

As Jersey City grapples with the loss of the hospital, the fallout from its sudden closure may spur new laws in Trenton.

State Sen. Raj Mukherji, one of the Democrats representing Jersey City, told Gothamist he is drafting a new bill to increase fines against hospital operators that close facilities without getting the state’s approval.

He also said he wants a new legal mechanism that would allow state authorities to take over hospital operations through receivership if the operator is found to be breaking the law.

“[Hudson Regional Health] decided to disregard existing rules, and basically the fines are cheaper than continuing to maintain hospital services or emergency department services until they could abide the closure process that's already in place,” Mukherji said. “So if the existing penalties are not enough to get folks to comply with the law. We're going to work with the administration to add tools to their toolkit.”

Mukherji said he’s working with Gov. Mikie Sherrill’s office to write the bill. Steve Sigmund, a spokesperson for Sherrill, said in a statement after Heights University Hospital’s closure that “the governor will be pursuing legislation to give the state more tools to hold health care facilities accountable to the patients and communities they serve.”

The bill likely wouldn’t directly affect the closure of Hudson Regional Hospital, which was recently known as Christ Hospital and a fixture in the community for more than 150 years. Local leaders pledged to use every legal avenue at their disposal to prevent the closure, but ultimately failed to get a last-minute injunction to head it off.

The hospital wound down services last year and shut its ER on March 14. City leaders are now exploring the use of eminent domain to reopen it.

Current state law requires a hospital operator to obtain a certificate of need from the state before closing a hospital — demonstrating that the surrounding community can still be adequately served by other health facilities — with a $7,500 application fee to the state Department of Health.

Once the application is complete, the State Health Planning Board holds a public hearing to gain community feedback. The health department sends a recommendation whether to approve the certificate to the board, which in turn makes a recommendation to the state health commissioner, who has the final say.

Even if a closure is approved, the commissioner can include conditions like a requirement for services to be offered at a location nearby.

Hudson Regional Health submitted its application last year for a certificate of need to close Heights University Hospital. That application still had not been deemed complete as of March 6, when the state health department asked the operator to provide more information.

The health department did not respond to a request for comment. State leaders have said Hudson Regional Health is facing tens of thousands of dollars in fines for being out of compliance with state law, but the exact amount is unclear. The Jersey City Times reported the health department levied a $128,000 fine in January.

Hudson Regional Health has said Heights University Hospital, which it acquired last fall, lost $74 million last year and was projected to lose $30 million this year. The company has also said it sought financial aid from the state and city to keep the hospital open, but that help was never offered.

Vijay Chaudhuri, a spokesperson for Hudson Regional Health, said the company has invested hundreds of millions of dollars into its health system, which also includes hospitals in Bayonne, Hoboken and Secaucus. He said the financial challenges of keeping Heights University Hospital open were insurmountable.

“The State would be far better served focusing its efforts on allocating and providing long-term healthcare funding to hospitals that serve underserved populations — funding that HRH had been requesting for many months but that never materialized,” Chaudhuri said.

New Jersey’s certificate of need process has been scrutinized before. Former Gov. Jon Corzine convened the New Jersey Commission on Rationalizing Health Care Resources, which in 2008 published a report on the state of New Jersey’s health care system and made policy recommendations to improve it.

Part of that effort included recommendations for reforming the certificate of need process, improving state monitoring of hospital finances, and new policies to help hospitals make ends meet while serving communities with the most need.

Corzine established that commission at a time when a number of hospitals around the state faced dire financial troubles and sought state bailouts. But none of those hospitals were simply closed without going through the certificate of need process.

Joel Cantor, the founding director of the Center for State Health Policy at Rutgers, was a member of that commission. He said at the time, they never imagined an operator would simply ignore the certificate of need process the way Hudson Regional Health has.

“The idea was to monitor more closely,” Cantor said. “I don't recall that we had discussions of imposing penalties, but just to have the state poised to be better positioned to predict when hospitals were getting into trouble.”

The new push to more harshly penalize operators for illegal closures drew praise from Jersey City’s administration and HPAE, the state’s largest nurses union.

“The situation at Christ Hospital in Jersey City has highlighted the need to strengthen the ability of our regulatory agencies to intervene and hold unlawful operators accountable. It is egregious that as the federal government makes healthcare less accessible to our citizens, Hudson Regional Health has taken illegal action to do the same in Jersey City without intervention,” said Debbie White, the union president. “[Hudson Regional Health] has repeatedly violated laws, and New Jersey Department of Health fines have failed to stop them.”

Nathaniel Styer, a spokesperson for Jersey City, said Hudson Regional Health was able to close the hospital “because the penalties built into state law are laughable — to them it’s just the cost of doing business.”

“It shouldn’t be easy to quickly shut down a vital source of health care for an entire community, and we support all efforts to strengthen these laws and protect communities from bad actors like [Hudson Regional Health],” he said.

The trade group that advocates on behalf of hospital operators offered a more measured response to the possible reforms.

"We share the Sherrill administration’s commitment to ensuring New Jersey communities have access to quality healthcare. We welcome a policy conversation on this important topic,” said Cathy Bennett, the president of the New Jersey Hospital Association. “Our continued focus is on making sure patients are safe and informed during this transition."

This story has been updated with additional information.