page 1 minutes of the state health planning board … · page 2 motion summary 1. approval of...

MINUTES OF THE

STATE HEALTH PLANNING BOARD MEETING Tuesday, January 8, 2008

Members Present: Judy Donlen, RN, DNSc., Chairperson Henry Kane Susan Olszewski Dr. Sharol A. Lewis, (Represents the Public Health Council) Michael Baker, Esq., (Represents the Health Care Administration Board) Matthew D’Oria (Representing Commissioner Jacobs, Department of Health & Senior Services) Eileen Stokley (Representing Commissioner Jennifer Velez, Department of Human Services) Excused Absent: Catherine Ainora, Vice Chairperson Connie Bentley-McGhee, Esq. Dr. Joseph Barone Dr. Jorge Verea Staff: John Calabria Ruth Charbonneau Jamie Hernandez Melissa A. Raksa, DAG CALL TO ORDER Dr. Judy Donlen, Chairperson opened the meeting at the Department of Health and Senior Services, 25 Scotch Road, Suburban Square Shopping Center, Ewing, New Jersey on Thursday, January 8, 2008 at 10:00 am.

MOTION SUMMARY

1. Approval of December 6, 2007 minutes with changes Motion – Ms. Olszewski, Second – Dr. Lewis

2. Approval of Certificate of Need Application for the Transfer of Ownership of Bayonne Medical Center Motion – Dr. Donlen, Second – Mr. Baker

3. Approval of Motion for Adjournment Motion – Dr. Donlen, Second – Ms. Olszewski

November 1, 2007 VOTING RECORD

VOTING BOARD MEMBER ROLL 1 2 3 Dr. Donlen X Y Y Y Ms. Ainora - - - - Mr. Kane X A Y Y Ms. Olszewski X Y Y Y Ms. Bentley-McGhee - - - - Dr. Barone - - - - Mr. Baker X Y Y Y Dr. Lewis X Y N Y Dr. Verea - - - - Mr. D’Oria – non voting member X - - - Ms. Stokley – non voting member X - - - Total Total Absent

5 4

4-Y 0-N 1-A 0-R

4-Y 1-N 0-A 0-R

5-Y 0-N 0-A 0-R

KEY: Y=YES N=NO A=ABSTAIN R=RESCUE

1 STATE OF NEW JERSEY

2 STATE HEALTH PLANNING BOARD

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6 FORMAL MEETING

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TRANSCRIPT OF PROCEEDINGS

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11 AT: Suburban Square Shopping Center

12 25 Scotch Road

13 Ewing, New Jersey

14 DATE: Tuesday, January 8, 2008

15 TIME: 10:00 a.m. to 12:30 p.m.

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20 GUY J. RENZI & ASSOCIATES

21 Golden Crest Corporate Center

22 2277 State Highway #33, Suite 410

23 Trenton, New Jersey 08690

24 (609) 989-9199 - (800) 368-7652 (TOLL FREE)

25 www.renziassociates.com

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2 B O A R D M E M B E R S:

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4 JUDY DONLEN, RN, DNSC, Chairperson

5 MICHAEL BAKER, ESQ.

6 MATTHEW D'ORIA

7 HENRY S. KANE, Pharm.D. FCCP

8 SHAROL A. LEWIS, M.D.

9 SUSAN E. OLSZEWSKI

10 EILEEN C. STOKLEY

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14 B O A R D P R O F E S S I O N A L S:

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16 MELISSA H. RAKSA, D.A.G.

17 JAMIE HERNANDEZ, Board Secretary

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1 I N D E X

2 SPEAKER PAGE

3 JOHN CALABRIA............................... 11

4 JEAN OTERSEN................................ 36

5 DANIEL KANE................................. 40

6 EDWARD A. CIENKI............................ 43

7 JAMES LAWLER................................ 52

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1 DR. DONLEN: Good morning.

2 MS. HERNANDEZ: This is a formal

3 meeting of the State Health Planning Board.

4 Adequate notice of this meeting has been published

5 in accordance with the provisions of Chapter 231,

6 Public Law 1975, C-10:4.10 of the State of New

7 Jersey entitled, "Open Public Meetings Act."

8 Notice was sent to the Secretary of

9 State, who posted the notice in a public place.

10 Notices were forwarded to 17 New Jersey

11 newspapers, 2 New York newspapers, 2 wire

12 services, 2 Philadelphia newspapers, and the New

13 Jersey Public Broadcasting Television Station.

14 Madam Chair, is it okay to take

15 roll?

16 DR. DONLEN: Yes.

17 MS. HERNANDEZ: Ms. Ainora.

18 (No response.)

19 MS. HERNANDEZ: Mr. Kane.

20 MR. KANE: Yes.

21 MS. HERNANDEZ: Ms. Olszewski.

22 MS. OLSZEWSKI: Yes.

23 MS. HERNANDEZ: Ms. Bentley-McGhee.

24 (No response.)

25 MS. HERNANDEZ: Dr. Barone.

1 (No response.) 2 MS. HERNANDEZ: Dr. Lewis. 3 DR. LEWIS: Here. 4 MS. HERNANDEZ: Mr. Baker. 5 MR. BAKER: Here. 6 MS. HERNANDEZ: Dr. Verea. 7 (No response.) 8 MS. HERNANDEZ: Dr. Donlen. 9 DR. DONLEN: Here. 10 MS. HERNANDEZ: We have five members 11 of the Board present which does constitute a 12 quorum. 13 DR. DONLEN: Good morning. I'm 14 going to ask for the approval of the December 6, 15 2007 minutes that you received. 16 MS. OLSZEWSKI: I so move. 17 DR. DONLEN: A second? 18 DR. LEWIS: Second. 19 DR. DONLEN: Any discussions or 20 changes or additions? 21 MR. KANE: I'll abstain. I wasn't 22 present. 23 MS. HERNANDEZ: Mr. Kane. 24 MR. KANE: Abstain. 25 MS. HERNANDEZ: Ms. Olszewski.

1 MS. OLSZEWSKI: Yes. 2 MS. HERNANDEZ: Dr. Lewis. 3 DR. LEWIS: Yes. 4 MS. HERNANDEZ: Mr. Baker. 5 MR. BAKER: Yes. 6 MS. HERNANDEZ: Dr. Donlen. 7 DR. DONLEN: Yes. 8 MS. HERNANDEZ: Four yeses. Motion 9 is moved. 10 DR. DONLEN: I don't have anything 11 to report today but will ask Matt, do you have 12 anything? 13 MR. D'ORIA: Yes. Very quickly. 14 Heather Howard was sworn in last night 15 officially as the Commissioner of the Department 16 of Health and Senior Services. We're very happy 17 to have her. She's been incredibly energetic, has 18 promised to continue Dr. Jacobs initiatives as 19 well as some of her on regarding prenatal care. 20 DR. DONLEN: I'm very pleased to 21 hear that. 22 MR. D'ORIA: I know the Board has 23 been curious about the release of the Reinhart 24 report. It is now scheduled for the week of 25 January 21st. That seems very firm right now.

1 Things are being set up in terms of scheduling at 2 the Governor's office and at the Department, so 3 that date is pretty much locked in. 4 MS. OLSZEWSKI: Is it possible once 5 that's out to do something for this Board, 6 basically. 7 MR. D'ORIA: That's a very good 8 question. What Dr. Reinhardt was hoping to do was 9 have a symposium at the Woodrow Wilson School in 10 Princeton where all members of the health care 11 community would attend. There would be break-out 12 sessions, Q and A. He's hoping that to be the 13 first of maybe some others. That could be 14 something that you would be invited to. It would 15 be a press briefing and there may be a briefing 16 for the Hospital Association and CEOs, but at this 17 point even that hasn't been formalized. 18 DR. DONLEN: I think given the 19 subcommittee that we participated in that really 20 dealt with what we're dealing with today and what 21 seems to have been the focus of the press releases 22 related to the press coverage leaking a document, 23 you know, the issue of how State health planning 24 should roll out as it relates to hospitals that 25 are in jeopardy and what are the kinds of

1 fortitudes that we put in place to help identify 2 the ones that should be subsidized or, you know, 3 help to keep afloat versus the way things should 4 be certainly looked at develop -- develop an early 5 warning system. I think it would be very helpful 6 for this Board to hear what's been done. We're at 7 the bottom of the hill at this point. And the 8 idea that there might be some fences being put up 9 at the top of the hill would be very helpful to 10 hear that. 11 MR. D'ORIA: Am I hearing you ask 12 then for a report by the -- the Commission members 13 themselves, it's hard for me to commit, but 14 certainly department staff. 15 DR. DONLEN: Yes, some 16 representative of what's in and how it relates to 17 the future of planning. The only thing I’ve seen so 18 far is related to the committee I participated in, 19 which had more to do with the potential for 20 closures and the regulatory leads around that. 21 Obviously, some of the ambulatory surgery stuff 22 came up in that and the implications. If there 23 are other pieces as it comes out and that 24 also have to do with regulatory changes or things 25 that might thought about that will have an impact

1 on Board, I think it would be helpful to hear 2 about it directly rather than trying to figure out 3 from press reports. 4 MR. D'ORIA: Heather's asked us -- 5 she's asked whether or not she formally has to 6 meet with these boards, et cetera. We've given 7 her guidance I will see some of the people in 8 different venues and introduce yourself there. 9 But what I could do is schedule a meeting where 10 you guys can then meet her and also that's a good 11 time to talk about the report. Okay? 12 DR. DONLEN: Right. 13 MS. OLSZEWSKI: Can we also have an 14 update of Greenville? 15 MR. D'ORIA: Greenville is scheduled 16 for next month. The Liberty Board and their 17 management has turned down the offer for 18 $1.5 million which was structured as a loan that 19 would default into a grant if the hospital 20 couldn't pay it back. It's their right to do so. 21 DR. DONLEN: We'll hear from them 22 about the decision and how they made that. 23 MR. D'ORIA: They have a new CEO, by 24 the way, and a new Board Chair. The CEO's name is 25 Joe Scott from, I believe, Miami, Dade County,

1 Florida. 2 MR. KANE: Do we know what the date 3 of that meeting is going to be? 4 MR. D'ORIA: February -- 5 MS. HERNANDEZ: I don't have it with 6 me. I can send it to you. It's the first 7 Thursday. 8 MR. KANE: That's what I figured. It 9 will be the 7th. 10 DR. DONLEN: So what's our agenda 11 today, the Certificate of Need application for 12 transfer of ownership of Bayonne Medical Center. 13 We'll start with the Department's presentation, 14 followed by public comment. 15 I believe everybody signed in for 16 public comment? 17 MS. HERNANDEZ: Yes, we do. 18 DR. DONLEN: The public comment 19 section will be for anybody that is not associated 20 with the applicant. And those people will get to 21 speak for three minutes each for a maximum of one 22 hour. If we have more people come in that are 23 signed up now, we'll revisit that before we have 24 our discussion. 25 Following all the people who are

1 present who want to speak from the public, we'll 2 have the applicant's presentation, which is 3 slotted for at least 10 minutes for the applicant 4 to present. Less is more than welcome. And then 5 we'll ask questions which will probably take over 6 10 minutes. And then there will be a board 7 discussion and vote. 8 Any questions? 9 John, are you doing the 10 presentation? 11 MR. CALABRIA: Yes, I am. 12 Thank you, Dr. Donlen. 13 Good morning to members Of the 14 Board. 15 I am here today to present the staff 16 recommendation on the transfer of ownership of 17 Bayonne Medical Center. I'd like to note at the 18 very beginning that the applicant, IJKG Opco, was 19 selected by the Bankruptcy Court to be the entity 20 to acquire Bayonne Medical Center. The Court put 21 a stringent time frame for the review of this 22 application. Therefore, staff did not have the 23 same time frames available for dialog with the 24 applicant to clarify some of the details of the 25 application. That's one of the reasons why we

1 have a fair number of conditions put on. 2 As I noted, the application is for 3 the transfer of ownership of Bayonne Medical 4 Center to IJKG Opco. They would operate and 5 maintain the services at Bayonne as an acute 6 general hospital along with the hospital based 7 long term care subacute facility for a minimum 8 period of seven years at their current service 9 level with about the same level of employees. The 10 operating structure for this transaction was 11 approved by the Board of Directors of the hospital 12 and by order of the United States Bankruptcy Court 13 on November 9, 2007. 14 Opco would operate the same license 15 bed complement and service component previously at 16 Bayonne Medical Center, 261 beds and a service 17 complement of 6 operating rooms, 2 cysto rooms, a 18 full service cardiac cath lab, 12 chronic hemo 19 stations, 1 full service emergency angioplasty 20 services. They're part of the C-Port-E Elective 21 Angioplasty Demonstration Project, 2 hyperbaric 22 chambers and an MRI and the 17 hospital BASED 23 subacute beds, which are of course licensed as 24 long-term care beds. 25 All of the existing hospital-based

1 clinic programs offered at the hospital will 2 continue to operate at the same service level 3 complementing their inpatient specialty services. 4 Justification of need by the 5 applicant: In 2003, Bayonne began to experience 6 substantial net losses on their operations that 7 continued to worsen over time. The applicant 8 estimates these losses at present to be over 9 $85 million. These financial problems resulted in 10 filing for bankruptcy in 2007. The underlying 11 factors adversely impacting the hospital's 12 performance over the past five years can be 13 attributed, according to the application, to a 14 sharp decline in reimbursement from all payers, a 15 major shift in-patient basis to outpatient 16 settings, intense competition from neighboring 17 hospitals, increase percentage of uninsured, low 18 reimbursement rates by Medicare and Medicaid, and 19 decrease in admissions. 20 I believe we have seen this for 21 other facilities coming before us in the recent 22 past. 23 The Bankruptcy Court's decision in 24 this case identified Opco as the most favorable 25 bidder approving the sale of assets to Opco. The

1 applicant's committed to restoring Bayonne to its 2 prior financial health through astute management 3 practices and quality services. It has pledged at 4 least $6 million in working capital to make the 5 needed improvements in both areas of clinical 6 service and medical technology to rebuild their 7 market share and hopefully to ensure a solid 8 future in the community. 9 The applicant strongly believes this 10 is a significant opportunity to achieve a 11 formidable restoration of these acute care 12 services in the City of Bayonne and to reestablish 13 the financial viability of a hospital. They are 14 confident that their strategy will result in 15 greater operational savings and more efficient 16 health care services. 17 They believe that a new management 18 of existing resources would significantly 19 contribute to more desirable patient outcomes. It 20 would result in a hospital that has a greater 21 sense of the community's needs and the ability to 22 provide more diversified health care services to 23 address those needs. The applicant's decision to 24 retain the same license bed capacity with almost 25 the same number of employees reinforces their

1 commitment to the community. They project 2 increases in patient volume and occupancy rates 3 for all bed categories. They made a strong 4 commitment to the community and its employees to 5 regain their confidence in the hospital and its 6 ability to be a statewide and community leader in 7 the delivery of health care services. 8 Term of the applicant's statement of 9 compliance with statutory and regulatory 10 requirements: The first one is the availability 11 of facilities or services which may serve as 12 alternatives or substitutes. According to the 13 applicant, the City of Bayonne is geographically 14 part of a peninsula and no other hospitals are 15 easily accessible. The applicant believes that 16 this transfer of ownership is the only viable 17 option to preserving the current level of health 18 care services for city residents. The applicant 19 does not intend to downsize services or reduce 20 availability to any service previously provided at 21 Bayonne. The applicant acknowledges that there 22 are other hospitals in the county, however, they 23 are not as accessible as Bayonne Medical Center 24 for the residents of Bayonne. 25 The second criterion, the need for

1 special equipment and services in the area. 2 Current services and clinical levels would be 3 maintained, according to the applicant, as well as 4 medical technology enhanced to improve efficient 5 care. With services remaining intact, the need 6 for additional special equipment would be minimal. 7 In terms of adequacy of financial 8 resources and sources of present and future 9 revenues, the applicant indicates that it has 10 adequate financial resources to accomplish this 11 proposed project. 12 The availability of sufficient 13 manpower in the several professional disciplines, 14 according to the applicant, the applicant will 15 hire almost all current employees except as set 16 forth in certain agreements incorporated into the 17 Asset Purchase Agreement. 18 The final criterion, will not have 19 adverse economic or financial impact on the 20 delivery of health care services in the region or 21 statewide and will contribute to the orderly 22 development of adequate and effective health care 23 services. 24 The applicant notes that they are 25 committed to maintaining the same level of

1 services previously at the hospital, which means 2 that this will not disrupt the provision of 3 services nor have an adverse impact on other area 4 health care providers. They assert that their 5 focus is to strengthen services and access to the 6 available health care for the residents of City of 7 Bayonne. 8 In terms of Department staff 9 analysis, we have concluded that the applicant has 10 adequately documented compliance with all 11 applicable CN rules and the general statutory 12 criteria. 13 We have reviewed and concluded that 14 the applicant's transfer of ownership is in the 15 best interest of the community's residents. With 16 the decline in service capacity at Bayonne in the 17 past and their fiscal instability, a gap in health 18 services delivery is inevitable. The action taken 19 by the applicant would fill the service gap before 20 further damage occurs to the health care delivery 21 system in Bayonne. The steps taken by the 22 applicant to restore and preserve the existing 23 health care services at Bayonne show a genuine 24 commitment working with the community. 25 We agree that this transfer of

1 ownership allows an opportunity for Bayonne to 2 reposition itself in the marketplace and to become 3 a more financially viable and competitive 4 institution. The applicant has expressed their 5 plans to rebuild and strengthen the inner core of 6 health care services at Bayonne to reestablish 7 their character and regenerate consumer 8 confidence. The applicant has also committed 9 itself to the formation of implementation of a 10 community advisory board to ensure the needs of 11 the community are properly assessed and responded 12 to promote a sense of community. Community 13 intervention at the early planning stages of 14 Bayonne's would help the applicant direct and 15 redirect its resources to providing the needed 16 inpatient and outpatient care for the population 17 it serves. The applicant's objective is to 18 restore health care services to an acceptable 19 level for greater community use, enhance quality, 20 and promote more cost effective health care 21 services for patients. And I believe we can all 22 support that. 23 We did examine, as you see in one of 24 the attachments, the existing bed capacity and its 25 decline in occupancy. I won't read that, but in

1 virtually all areas between 2005 and the present, 2 they have a decrease in utilization. And as you 3 see a 0 in OB/GYN because the department approved 4 back in November of 2006 a temporary suspension of 5 inpatient OB services due to financial problems, 6 in fact, that the OB physicians all left the 7 hospital. 8 With respect to Bayonne continuing 9 to provide available and accessible services to 10 medically indigent patients, the applicant stated 11 that it would not be altering any of the existing 12 policies for providing such care instituted by the 13 prior administration post transfer. The new 14 ownership has also committed to continuing the 15 existing outreach efforts to promote access for 16 this population without changing the approach 17 implemented by the previous administration. 18 Department staff is convinced that 19 this transfer is in the best interest of the City 20 of Bayonne, given the financial problems and the 21 imminent threat of closure, the sale of the 22 hospital seems to be the only way of maintaining 23 hospital services in a city. The applicant's 24 continued employment of most of the hospital's 25 existing staff demonstrates an earnest effort

1 towards working within the existing structure to 2 improve and revitalize services. The Department 3 staff also believes the applicant is resolved to 4 increasing utilization at Bayonne and 5 strengthening their services to, once again, 6 becoming a well diversified community health care 7 provider. Staff is satisfied that the actions 8 proposed by the applicant will assure and improve 9 comprehensive health care services for the 10 residents of Bayonne. We believe that the 11 applicant's plan is the least disruptive to the 12 patient population and will ultimately improve the 13 quality, accessibility, availability, and 14 continuity of care. 15 However, although we believe the 16 applicant is well intentioned, we are concerned 17 with the applicant's ability to achieve all 18 utilization projections and to navigate the 19 rapidly changing health care environment, given 20 some of their responses to the staff's 21 completeness questions and the stability of 22 ownership when considering the change in corporate 23 principals made by the applicant after their 24 filling of the Certificate of Need. I've asked 25 the applicant to address that ownership material

1 with you in their presentation. And again, much 2 of this should be go to the fact that the time 3 frame the Bankruptcy Court didn't allow the same 4 kind of dialog, as I noted in the beginning. 5 Nevertheless, the Department staff 6 weighed these shortcomings against the importance 7 of Bayonne continuing to operate, the order issued 8 by the Bankruptcy Court, and the rigid time frame 9 for reviewing the application and determined that 10 continuing these services is paramount to the 11 community. Given these circumstances, the 12 Department intends to carefully review the 13 applicant's character and competence prior to 14 issuing a license and monitor its performance to 15 assure patient quality and safety. 16 In terms of staff recommendations, 17 based on this documentation of compliance with 18 regulatory and statutory criteria, Department 19 staff recommends approving the proposal for the 20 transfer of ownership with a number of conditions. 21 And as I noted before, there are couple more here 22 than some other cases. Although many of them are 23 similar -- not similar, but virtually the same as 24 the Board discussed with the transfer of ownership 25 of Salem and Mountainside to for-profit entities.

1 My understanding that the applicant 2 will address a couple of these conditions and 3 would like some consideration from you to lessen 4 some of their impact. 5 The first condition, a license to 6 operate Bayonne Medical Center will not be issued 7 to Opco until the transaction is approved by the 8 Attorney General under the Community Health Assets 9 Protection Act, and a notarized letter indicating 10 the actual date of the transfer has been submitted 11 to the Certificate of Need Health Care Facility 12 Licensing Program. Opco shall apply for a new 13 license and surrender the existing license within 14 at least 10 days of CHAPA approval. 15 Second condition, as noted in the 16 application, Opco shall hire substantially all 17 Bayonne Medical Center employees who are employed 18 at the time of the sale. 19 Third condition, in accordance with 20 the provisions of N.J.S.A. 26:2H-18.59h, Opco 21 shall offer to its employees who were affected by 22 the transfer, health insurance coverage at 23 substantially equivalent levels, terms and 24 conditions to those that were offered to the 25 employees prior to the transfer.

1 Fourth condition, as noted in the 2 application, Opco shall operate Bayonne as a 3 general hospital for at least seven years. This 4 condition shall be imposed as a contractual 5 condition of any subsequent sale or transfer, 6 subject to appropriate regulatory or legal review, 7 of Bayonne by Opco within the seven-year period. 8 What we mean by this is that this is for a 9 total of seven years, either Opco operates it for 10 seven years or if they should have a transfer of 11 ownership approved by the Board to sell to some 12 entity, that other entity must operate it for at 13 least the remaining period of that seven years. 14 Fifth condition, Opco shall continue 15 all clinical services and community health 16 programs currently offered at Bayonne by the 17 previous ownership. Any changes in this 18 commitment involving either reduction or 19 elimination of clinical services or community 20 health programs offered by Bayonne's former 21 ownership shall require prior written approval 22 from the Department and shall be subject to all 23 applicable statutory and regulatory requirements. 24 The sixth condition, Opco shall 25 submit the Department a quarterly progress report

1 on their efforts to reinstate inpatient OB and 2 OB/GYN services with the reporting period 3 commencing on the date upon which the Certificate 4 of Need is approved. Within one year of the date 5 of this approval, Opco shall have either 6 reinstated these services or filed appropriate 7 applications to the Department for their permanent 8 removal. 9 Those, of course, applications will 10 be reviewed in our normal licensing process in 11 terms of how access would be maintained. 12 Seventh condition, Opco shall 13 continue compliance with N.J.A.C. 8:43G-5.21(a), 14 which requires that all hospitals provide on a 15 regular and continuing basis outpatient and 16 preventative services, including clinical services 17 for medical indigent patients basis, for those 18 services provided on an inpatient basis. 19 Documentation of a compliance shall be submitted 20 within 30 days of the issuance of the license and 21 quarterly thereafter for the seven-year period. 22 The eighth condition, in accordance 23 with N.J.S.A. 26:2H-18:64 and N.J.A.C. 24 8:43G-5.2(c), Opco shall not only comply with 25 federal EMTALA requirements but also provide care

1 for all patients who present themselves Bayonne 2 Medical Center without regard to their ability to 3 pay or payment source. 4 Ninth condition, the value of 5 indigent care provided by Bayonne shall be 6 determined by dollar value of documented charity 7 care, calculated at the prevailing Medicaid rate, 8 and shall not be limited to the amount of charity 9 care provided historically by Bayonne. 10 Condition no. 10, Opco shall submit 11 a report to the Department on an annual basis for 12 the seven years following the transfer of 13 ownership, detailing: A, the investments it has 14 made during the previous year at the hospital. 15 Such report shall also include a detail annual 16 accounting of any long or short term debt or other 17 liabilities incurred on the hospital's behalf and 18 reflected on the Bayonne Medical Center's balance 19 sheet. 20 B, transfer of funds from the 21 hospital to any parent, subsidiary corporation, or 22 corporate affiliate and shall indicate the amount 23 of funds transferred and the reason for the 24 transfer. Transfer funds shall include, but not 25 be limited to, assessments for corporate services,

1 transfers of cash and investment balances to 2 centrally controlled accounts, management fees, 3 capital assessment, and/or special one-time 4 assessments for any purpose. 5 The 11th condition, Opco shall 6 appoint a board of trustees, governing board, of 7 the hospital consisting of local community members, 8 hospital management, and not less than three 9 physicians who are not employees of any parent, 10 subsidiary corporation, or corporate affiliate. 11 This Board shall maintain suitable representation 12 of the residing population or Bayonne's service 13 area who are neither themselves employees of, nor 14 related to employees of any parent, subsidiary 15 corporation, or corporate affiliate. Annual 16 notice shall be made to the Department of this 17 board's roster, along with any policy governing 18 board composition, governance authority and board 19 appointments. 20 The 12th condition, within three 21 months of approval of this application, Opco shall 22 develop and participate in a community advisory 23 group to provide ongoing community input to the 24 hospital's CEO and the hospital's board of 25 trustees on ways that Bayonne Medical Center can

1 meet the primary, preventive, reproductive health 2 services needs and emergency health needs of all 3 residents in its service area. 4 Paragraph A, subject to the 5 provisions below, Opco shall determine the 6 membership, structure, governance, rules, goals, 7 time frames, and the role of the community advisor 8 group in accordance with the primary objectives 9 set forth above and shall provide a written report 10 setting forth same to the hospital's board of 11 trustees, with a copy to the Department and 12 subject to the Department's approval within 60 13 days from the date of formation of the group. 14 Paragraph B, Opco shall minimally 15 seek participation from each town in the service 16 area of Bayonne Medical Center by offering a seat 17 on the group to each town's mayor or his or her 18 designee. Membership on this group shall include 19 patient advocates, including patient advocates 20 whose mission is to ensure that New Jersey 21 residents are provided fully integrated and 22 comprehensive reproductive services, local health 23 officials, clinical practitioners, including but 24 not limited to obstetricians, internists, and 25 other heath care providers, such as hospitals and

1 clinics. 2 Paragraph C, Opco shall designate 3 co-chairs of the group, one of whom shall be a 4 member of the hospital board of trustees and one 5 of whom shall be a community member who is neither 6 employed nor related to anyone employed by the 7 parent, corporate, subsidiaries, or corporate 8 affiliates. 9 Paragraph D, the co-chair, community 10 member as defined above, of the group, the 11 president of HPAE, and the Mayor of Bayonne or his 12 or her designee shall each be given a seat 13 ex-officio, on the hospital's board of trustees. 14 Paragraph 12E the co-chairs of the 15 group shall jointly submit to the hospital board 16 of trustees a copy of the Department a semiannual 17 report of the progress toward the goals of the 18 group. 19 12F, the co-chairs of the group 20 shall jointly transmit to the hospital's board of 21 trustees with a copy to the Department quarterly 22 and any special report relative to the 23 implementation of these conditions. 24 12G, Opco may petition the 25 department to disband the group not earlier than

1 three years from the date of CN approval and on 2 showing that all the above conditions have been 3 satisfied for at least one year. 4 Condition 13, for seven years after 5 initial licensure of Bayonne under Opco ownership, 6 the hospital's board chairman, president and CEO, 7 and other senior hospital management shall meet 8 with the Commissioner of the Department of Health 9 and Senior Services at regular intervals on a 10 schedule to be determined by the commissioners to 11 discuss the hospital's condition and compliance 12 with the terms of this certificate of need. 13 The 14th condition, Opco shall 14 develop a patient transportation plan after 15 performing an assessment to determine 16 transportation needs. This plan shall be 17 submitted to the Department within three months of 18 the date of CN approval. This plan shall remain 19 in effect for seven years after licensure. Any 20 change in this plan require Department approval 21 and shall require 120-day prior notice. A 22 self-evaluation of the implementation of the plan 23 shall also be conducted on a yearly basis for 24 seven years after licensure to measure 25 effectiveness of this initiative and shall be

1 submitted to the Department for review and 2 comment. 3 Condition 15, an outreach effort 4 shall be placed into effect to ensure all 5 residents of hospital service area, especially the 6 medically indigent, have access to the available 7 services at the location. A self-evaluation of 8 this effort shall be conducted on a yearly basis 9 for seven years after licensure to measure its 10 effectiveness and shall be submitted to the 11 Department for review and comment. 12 Number 16, Opco shall notify the 13 Department prior to change of ownership or 14 investment structure of IJKG Propco, LLC, trading 15 as Bayonne Hospital Center Real Estate Holdings. 16 This is the group that's going to own the real 17 estate. 18 And the final condition, all the 19 above conditions shall also apply to any successor 20 organization to Opco who requires BMC within seven 21 years from the date of CN approval. 22 So in summary, we believe that the 23 applicant ought to be given a chance. They were 24 selected by the Bankruptcy Court who believe it's 25 in the best interest of residents of Bayonne to

1 maintain this hospital. Again, we had certain 2 reservations which is why, again, we have a large 3 number of conditions on the application. 4 I'll try to answer any questions 5 anyone has. 6 DR. DONLEN: I'll like to start, and 7 then if anybody else has any questions. 8 We don't have the -- and I 9 understand, given the way it's usually 10 constructed, we don't have any of the data prior 11 to 2004, and it clearly says that by 2003 they 12 were experiencing losses. When we look at the 13 things that have been provided, a lot of it looks 14 fairly stable. So I'm wondering when you look 15 back on it, was there a big drop-off between 2003 16 and 2004? Was it a steady decline? 17 MR. CALABRIA: It looked like a 18 somewhat steady decline. 19 DR. DONLEN: My question is this: 20 Before the problem started to be critical, what 21 percentage -- when you looked at the market share 22 of the other hospitals in Hudson County, what 23 percentage of the residents of Bayonne -- I mean, 24 how is the market share divided and what happened 25 subsequent to that?

1 MR. CALABRIA: We didn't -- we 2 weren't able to look at that. 3 DR. DONLEN: My concern is -- my 4 question is this: The patient days are low and 5 they've decreased a lot in most of the areas with 6 the exception the ER visits and the admissions to 7 the ICU. So the question comes down to, even the 8 inpatient surgery was fairly stable through the 9 period we're looking at. So it looks as if a lot 10 of doctors walked away in terms of the admissions 11 they were making. You said that as it related to 12 obstetrics. 13 MR. CALABRIA: And it is our 14 understanding it happened in other areas. 15 DR. DONLEN: It happened in other 16 areas. 17 And was this something that 18 precipitated the loss, or was this something that 19 was a result of the -- I mean, in your analysis, I 20 mean, that really has a lot to do with where it's 21 going from there. 22 MR. CALABRIA: It was unclear to us. 23 The chicken/egg thing, which one was the result of 24 the other. Something you might want to ask the 25 applicant.

1 DR. DONLEN: Obviously, considering 2 that they need to look at that. 3 When you looked at the way in which 4 the conditions are now, you know, there are pretty 5 much close to the same, a little bit drop-off in 6 the emergency room visits and therefore the 7 admissions. But do you have any concerns about 8 how the hospital's been operating through this 9 period of bankruptcy? 10 MR. CALABRIA: We had, actually, 11 inspectors over periods of time, and their quality 12 of care is stable. 13 DR. DONLEN: And as far as your 14 concerns, they had more to do with the lack of 15 knowledge of the applicant and the plans for what 16 they were doing? Or did you see anything in the 17 application that gave you concerns or set up -- 18 MR. CALABRIA: Again, I think in 19 most of the other -- in all the other applicants 20 we had a little bit more time and we did ask some 21 follow-ups with this question. We had a little 22 bit more opportunity for dialog with the applicant 23 about certain details. I don't think there's 24 anything critical here, but there are -- 25 DR. DONLEN: You didn't have any

1 concerns about ability for them to work with you? 2 MR. CALABRIA: No. 3 DR. DONLEN: This is a fairly 4 regulated state. 5 MR. CALABRIA: Yes. I have no 6 concerns in that regard. 7 DR. DONLEN: Okay. 8 The question about transportation, 9 14, develop a transportation plan, outside the 10 fact that we have put that in a lot of others, did 11 you have a particular reason for that, given that 12 it is on a peninsula, given that it is the 13 provider, the primary provider there, is there an 14 issue related to transportation? 15 MR. CALABRIA: I think part of that 16 came from the fact that in the previous 17 administration they were doing things that we had 18 some complaints about access to clinic service, 19 outpatient clinic services. And we were also in 20 the previous administration was some concern about 21 asking patients to go to Staten Island. So we 22 just wanted to make sure that the new board at 23 least look at this issue to make sure that -- 24 because they made a lot of commitments serving the 25 indigent and serving this committee really well.

1 We wanted to make sure that they're aware of any 2 transportation need there. It may not be a great 3 deal of transportation needs. That's we're asking 4 them to do the plan. 5 DR. DONLEN: Okay. I couldn't find 6 that as being self-evident in anything that I saw 7 as to why you were doing that. All right. 8 Anybody else have any questions? 9 MS. OLSZEWSKI: John, I have one on 10 Page 6, end of Page 5 to Page 6. It was something 11 was sort of extraordinary in your presentation, 12 which is that you intend to carefully review the 13 applicant's character and competence prior to 14 issuing the license. What do you mean by that? 15 MR. CALABRIA: I think all we mean 16 by that is that we're going to be looking at how 17 they -- with the CN approved, how they move 18 forward with closing the deal, working with us to 19 implement these conditions. 20 DR. DONLEN: Do you have track 21 record information? 22 MR. CALABRIA: There's no track 23 record information required for this phase. If 24 you look at CN rules, Bayonne doesn't operate or 25 manage any of those kinds of things that require

1 track records. 2 DR. DONLEN: Anything else? 3 I have three people that are signed 4 up here. 5 Jean Otersen. When you come up, say 6 your name, spell your last name for the court 7 reporter. 8 MR. BAKER: And clip on the 9 microphone. 10 MS OTERSEN: My name is Jean 11 Otersen. It's O-T-E-R-S-E-N. And I'm actually 12 here for Ann Twomey who is President of the Health 13 Professions and Allied Employees. She could not 14 be here, partly because there are other meetings 15 regarding this, including some Bankruptcy Court 16 conversations. 17 We represent 12,000 nurses and 18 health care workers around the State, including 19 what used to be about a thousand employees of 20 Bayonne. I think maybe we're about 950. And we 21 here today to support the application. 22 I'm not going to read this. I think 23 it has some background. I'll be happy to answer 24 questions. But there are really three reasons 25 that we're here to support the application. And

1 one is what's already been said by Mr. Calabria, 2 that this is a peninsula community, that we spent 3 years driving the Department crazy over saying 4 this is an essential hospital. This is a 5 community, and as you raised, I think, the issue 6 of transportation, it relies pretty much on public 7 transportation. It's an older community. It's a 8 working class community. It doesn't have easy 9 access. And it's also a community surrounded by 10 chemical factors, by potential dangers. We saw 11 from 9/11 not a lot of egress out of the 12 community. So this is hospital that not only 13 needs the community, but if you watched what went 14 on in Bayonne over the last few years, this is a 15 community very attached to its hospital. And 16 we're very appreciative of the conditions the 17 Department is establishing because unlike many 18 other places where we see hospitals fail, this 19 community was not up and arms over the future of 20 its hospital but very much involved. The 21 employees that we represent, almost all of them 22 live in the community. They take care of each 23 other. They're families and neighbors. These 24 people are invested in the future and very 25 committed to working with this new owner.

1 We also are supportive of this 2 because we watched before 2003. And again, your 3 questions were right on the mark. And we saw the 4 reasons that this hospital was starting to go 5 downhill. And we think, in fact, for another time 6 as part of the Commission that you were asking 7 about before, this a horrible case study of we 8 should not be here today, that if there were 9 proper management, proper relationships with the 10 physicians and community involvement and this 11 Board, frankly, and the Department's ability to 12 involve, as you said, at the top of the hill not 13 at the bottom, I don't think we'd be here. I 14 think we'd have a thriving community hospital. We 15 started yelling back in 2003, 2004 that we saw the 16 financial reports not meshing with what was really 17 going on in the hospital. So we could have -- I 18 hate to say it -- but predicted this and, in fact, 19 I think, did. But I only say that not to go back 20 and history -- I'm always happy to do that -- but 21 it's really because I think we saw all the 22 different attempts to change things. And we see 23 that IJKG is really the group that came forward 24 with the commitment that all the things the 25 Department outlined, you'll see in my testimony,

1 we had a series of meeting with IJKG. We worked 2 out a new contractual arrangement for the 3 employees that protected their jobs, protected the 4 services, yet provided them the financial assistance 5 they needed. So if you look through the testimony 6 along with what the department has already said, 7 we have a number of things in our collective 8 bargaining agreement, a number of things based 9 your APA that all spoke to their commitment to the 10 seven year. So we had already asked for a number 11 of the things the Department laid out in the 12 conditions, so we're here really to support the 13 application with those primary conditions. 14 DR. DONLEN: Thank you. It's nice 15 to have the bargaining unit be on Board. 16 Both of the other people that are 17 signed on the list are associated with the 18 applicant, so we'll move into that stage unless 19 somebody else has come in who has an interest in 20 commenting on the application? 21 And I'll ask again at the end of 22 applicant's presentation. 23 Who wants to speak on behalf of the 24 applicant? 25 Is that okay with you that both

1 Daniel Kane and Edward Cienki or both? 2 MR. CIENKI: Yes, that's fine. Mr. 3 Kane is welcome to comment on behalf of the 4 applicant. I'd like then to address concerns. 5 DR. DONLEN: It's part of the 10 6 minutes, so the two of you can split it up and 7 then we'll ask you questions, okay? 8 MR. DANIEL KANE: Thank you. I'm 9 Daniel Kane, President and CEO Bayonne Medical 10 Center. Just in the avoidance of a conflict, Mr. 11 Kane and I are not -- 12 MR. KANE: Never met you before, 13 sir. Thank you. 14 MR. DANIEL KANE: I'd like to 15 express my appreciation to the Department and to 16 the Board for the expedited manner in which the 17 application is being considered. 18 I joined Bayonne Medical Center in 19 February of last year and, unfortunately, very 20 quickly came to the conclusion that a bankruptcy 21 filing was the only alternative to keep the 22 hospital going. And we did file for bankruptcy on 23 April 16th of '07. From that date going forward, 24 the Board of Trustees was pursuing a two-prong 25 strategy. One was to try to restructure the

1 hospital and make it financially viable; and the 2 second was to find a buyer if we were unable to do 3 that. FTI was brought in as the restructuring 4 advisors and issued a report that clearly 5 demonstrated that if there was sufficient time and 6 sufficient liquidity that the hospital was 7 financially viable and could be operated as a 8 successful acute care hospital. Unfortunately, 9 there was neither the time nor the liquidity 10 within the structure of the bankruptcy 11 proceedings. From early on Kane Brothers was 12 retained as the investment banker to meet the sale 13 process, and an extensive effort was made by Kane 14 Brothers working with the Board to find interested 15 buyers. At the same time, as you've heard, there 16 was a tremendous outpouring of community support 17 to maintain an acute care hospital in Bayonne. At 18 one point, over 40,000 signatures were obtained 19 from residents in Bayonne in a community with 62 20 to 65,000 people. I think it's unheard of to get 21 that large portion of the citizens to come forward 22 on behalf of their hospital. And over these many 23 months, there's been a really concerted effort on 24 behalf of the HPAE, of all of our employees of our 25 medical staff, of the Mayor and municipal Council

1 with Bayonne, with our state elected officials from 2 the Bayonne Hudson County area to save Bayonne 3 Medical Center. And again, you've heard that 4 Bayonne is, I think, may likely be the only large 5 urban city in the State of New Jersey that's 6 geographically isolated. And on any day, because 7 of the traffic on the turnpike extension or on the 8 roads connecting to Jersey City, it can take an 9 hour or two to get off the peninsula. And during 10 9/11 all access in and out of Bayonne was shut 11 down. And if there was not an acute care hospital 12 in Bayonne, it could have been a disaster for the 13 residents. 14 So we were very pleased. 15 Unfortunately, the buyers for Bayonne Medical 16 Center were not lining up on Avenue E and given 17 the fact that the hospital has been losing a 18 million and a half to $2 million a month, one can 19 understand why. But I believe from my involvement 20 that the hospital, if properly managed and if 21 properly developed in terms of a strong collegial 22 relationship between the medical staff and the 23 community and the hospital's Board, it can be 24 successful. At the end of day, we had one serious 25 buyer on deck, if you will, and that was IJKG,

1 LLC. And it's absolutely clear that if this sale 2 is not approved by the Court on -- if this sale is 3 not closed as is planned around January 22nd and 4 if this Certificate of Need transfer does not 5 taken place, that Bayonne Medical Center will 6 close. So I urge your support and approval of the 7 certificate of need. And I'd be pleased to answer 8 any questions that you might have. 9 DR. DONLEN: There's five minutes 10 remaining. 11 MR. CIENKI: My name is Edward 12 Cienki. I'm the regulatory attorney for IJKG. 13 I'd like to address the Board relating to two 14 specific issues. One is the ownership of IJKG, 15 and I'll do that hopefully in a minute. 16 IJKG has always only ever been owned 17 by Mr. Mandor and Mr. Garapoli. Unfortunately, 18 there was a misperception relating to that 19 ownership from the Kane Brothers presentation to 20 the Board of Directors of Bayonne Hospital in 21 September of 2007, which stated that there are 22 other parties involved. Those parties were 23 advisory. 24 On or about October 1 James Lawler 25 who was the consultant to the HPAE who is an

1 experience chief financial officer joined forces 2 and became a member of IJKG. There has been no 3 change of ownership despite what the presentation 4 from Kane Brothers stated. It has always been the 5 three individuals as of the date of the 6 application. There have been no changes to that 7 ownership. So I'd like to state that going 8 forward and we'll welcome your questions after my 9 presentation. 10 We also wish to thank the Department 11 for their hard work in expediting this 12 application. It was a lot of work in a very short 13 amount of time. We asked the Board to take into 14 account and asked them to modify two particular 15 provisions of the staff recommendations. 16 Item 2 is noted in the application, 17 Opco shall hire substantially all BMC employees 18 who are employed at the time of the sale. We 19 would make that, of course, subject to as it was 20 stated in the earlier part of the presentation by 21 the Board that it is subject to the asset purchase 22 agreement and the proposed and contemplated staff 23 reductions as IJKG implements their restructuring 24 plan. 25 The second is on staff

1 recommendation No. 4, that Opco shall operate BMC 2 as a general hospital for at least seven years. 3 We would just like that to include that that seven 4 years, if for any reason the hospital is 5 transferred to another entity that it is for the 6 balance of that seven-year period that the 7 successor would be bound to it. So those are two 8 points of clarification. 9 Unfortunately, I have three points 10 or four points that we wish to address to the 11 Board which we deem is unacceptable to IJKG. And 12 I'll list them BY topic and I'll deal with them 13 pretty much together. Items 10, 11, which relate 14 to the Board, which report to the -- detailed 15 reporting regarding ownership and transfer of 16 assets, intercompany activities; Item 12, the 17 composition of the community advisory group; and 18 Item 16 as to any prior changes of ownership 19 regarding the structure of IJKG Propco. 20 Collectively, I'll discuss them as 21 there are certain regulatory standards that are in 22 effect, whether it is cost reporting to Medicare 23 or Medicaid or annual reporting to the Department. 24 IJKG is a private enterprise, and to allow other 25 parties to either affect, participate, and

1 interfere with or otherwise modify the business 2 plan of those individuals who are at risk as owner 3 undue burden and an unreasonable overarching 4 requirement for the Board and for the Department. 5 IJKG is taking the risk, as they have both from a 6 due diligence standpoint up to this point, 7 as well as assuming the operation, but financially 8 as well as professionally. 9 We have Mr. Kane and Mr. Lawler who 10 are two professionals that have longstanding in 11 this state as operators of health care facilities. 12 Their credentials are impeccable. They're without 13 any reproach in terms of their credibility in this 14 marketplace, both as chief executives and as chief 15 financial officers. The reporting requirements 16 that are provided by regulation should be 17 sufficient, and IJKG has the option, candidly, if 18 these conditions are imposed on them to terminate 19 the APA and they are willing to consider that 20 option. 21 As far as the community advisory 22 board, we feel that the APA addresses those issues 23 specifically and sufficiently and to impose a 24 specific membership's governance and reporting 25 those, we feel is overarching and overreaching.

1 And lastly, in terms of Item 16, 2 notify the Department prior to any change of 3 ownership or investment structure of Propco 4 trading as the real estate holding. The community 5 wishes to invest in that hospital. The investment 6 in IJKG Propco through a valid real estate 7 syndicate is something that allows them to be 8 involved in the organization and would comply with 9 Stark and anti-self referral law such as Cody. To 10 provide notice prior to any change would be unduly 11 burdensome as well as overreaching. 12 And my time is up. I thank you. 13 DR. DONLEN: You can stay. I'm 14 going to talk to you a little bit about 10, 11, 15 and 12. I assume that your objection to 10 -- I 16 think what you said was 10B, the transfer of 17 funds. 18 MR. CIENKI: Well, the transfer of 19 funds, correct, but also the detailed annual 20 accounting beyond what is provided in GAAP and 21 which would be reported in terms of annual audits 22 and reports to the State and to the federal 23 government. 24 DR. DONLEN: So you're also 25 objecting to A, the investments made in the

1 hospital's long-term or short-term debt? 2 MR. CIENKI: Correct. 3 DR. DONLEN: My guess is that given 4 what came out of -- my feeling about it is -- and 5 we can have a bigger discussion, but the report 6 that's going to come out on the 21st and 7 regulatory requirements that are going to be 8 requested of that is going to make that point 9 moot. I do believe that in terms of things that 10 have been recommended, not for you per se, but the 11 idea of the Department being able to monitor the 12 financial condition of all hospitals, these kind 13 of things relative to the short term debt. The 14 liabilities incurred, et cetera, that's on the 15 balance sheet are definitely going to be included 16 in that. And I would also guess that to some 17 extent the transfer of funds from the hospital to 18 a parent subsidiary because that has come before 19 us in many situations as to having led to 20 problems. And nobody has -- when you're sitting 21 here on this side, it's very hard to assess of 22 validity of those complaints. But I think that we 23 did recommend that the department and the health 24 care financing authority can begin to look at 25 those issues. So I think that you may be seeing

1 conditions that anticipate those kind of future 2 monitoring because they have been issued. And I'm 3 not sure that -- I don't know how other people on 4 the Board feel, but I'm not sure that we're going 5 to be in a position to say, "Oh, that's a good 6 idea to drop that," because my sense of it is that 7 that's been an ongoing observation by people who 8 have come to us, saying "This hospital should have 9 never closed." That if the transfers of money 10 that went on in corporations to other subsidiaries 11 or if the short-term debt and some of the other 12 things have been identified better, the investment 13 of capital and new buildings, et cetera, had been 14 looked at in terms of what the operating capacity 15 really was, those things wouldn't have been 16 undertaken we wouldn't be here at this time with 17 other institutions. So I'm not inclined to be 18 moving away from that one. 19 MR. CIENKI: I understand the 20 Board's position in this matter. I'm here to 21 represent my client's position. The Bayonne 22 Hospital currently has, I believe, a $2.5 million 23 facility with the Health Care Financing 24 Authority -- Facility Financing Authority. So 25 there are reports that are being provided as part

1 of that so that there is no breaches of those 2 agreement. That would be occurring or simply 3 stating that we're already doing that. To still 4 pose an additional one -- 5 DR. DONLEN: I don't know that -- I 6 mean, either it is or isn't additional. Either 7 you are providing it to another group, in which 8 case this shouldn't be a big issue. Or this is 9 additional, and I'm saying from what we're looking 10 at, the way this is defined, whether it's 11 additional or not it does address a lot of the 12 issues that have lead to other groups coming 13 before us and saying, "Had these things been 14 monitored, we wouldn't be where we are." 15 John, is this recommendation coming 16 solely from the Department, or is this been in 17 conjunction with Health Care Financing Authority? 18 MR. CALABRIA: This has been a 19 condition -- this condition 10 has been put on and 20 it's been developed amongst all of us over the 21 years in terms of the Salem and the Mountainside, 22 for the reasons that you have noted. 23 DR. DONLEN: Any other questions 24 about that one before I go on? 25 MR. BAKER: I agree with that. I

1 appreciate that you're a private for-profit entity 2 and you'd like to keep your business private, but 3 you're entering into a highly regulated field. 4 We're not restricting your transfers. That would 5 be left up to the Health Care Financing Authority 6 and any comments they have, but certainly I don't 7 have an issue with having to report them, 8 particularly since the department and the members 9 here concerned not just you, but past practices in 10 other hospitals involving transfers that have led 11 to problems. So as to reporting it, and as Judy 12 said, if it's redundant, so be it. If it's not, 13 then I guess the Department has a reason for 14 asking for it. 15 DR. DONLEN: Number 11, the issue 16 about -- I didn't quite get -- I understood some 17 of what you were saying about 12 and 10. What was 18 your concern about 11? 19 MR. CIENKI: Under 11 when you speak 20 to the appointment of the board of trustees 21 including individuals other than equity owners, 22 specifically three position -- suitable 23 representation from the residing population. We 24 discussed strategic plans at that board in terms 25 of the operation, both finance and otherwise, and

1 to include individuals who at this point I'm 2 assuming would have some sort of voting right is 3 inconsistent with an operation of a for-profit 4 entity. IJKG should be at its leisure to appoint 5 board members, whether they are community members, 6 business people from other areas and industry to 7 assist them in the operation of that facility. 8 And, therefore, we feel that -- and we an open 9 policy. The organization has an open policy in 10 discussions with the medical staff, including them 11 and providing certain information. And Mr. Lawler 12 is informing me that the APA fully discusses the 13 involvement of the medical staff and otherwise. 14 And we just believe that a formal requirement to 15 have them appointed to the board of trustees above 16 beyond what is set forth in the APA is 17 overreaching. 18 DR. DONLEN: What is in the APA? 19 MR. LAWLER: Jim Lawler. Thank you 20 for this opportunity to appear here. 21 In the APA, we saw a lot of the 22 things that happened in the past and we were very 23 aware of the lack of transparency and other issues 24 that Jean Otersen spoke about. So the APA, we put 25 in specific ex-officio board membership with the

1 president of the medical staff, with the President 2 of HPAE, and we also put in the APA that we would 3 establish a community advisory board and -- 4 DR. DONLEN: Let's hold community 5 advisory board, so you have representation -- 6 MR. LAWLER: So we address all these 7 needs -- 8 DR. DONLEN: So they get their 9 ex-officio by virtue of the position that you 10 hold in those other areas. 11 MR. LAWLER: Correct. 12 DR. DONLEN: Is it ex-officio with a 13 vote? 14 MR. LAWLER: I think it can be 15 ex-officio with the vote, but I don't think it got 16 that specific. 17 DR. DONLEN: Well, I think that's an 18 important issue in terms of you can be ex-officio 19 but not necessarily in the -- you're talking about 20 equity partners. I get a little concerned in 21 terms of what you mean by ex-officio. 22 MR. LAWLER: I obviously meant by 23 virtue of your official's position in those 24 entities, not as a personal representation. 25 DR. DONLEN: I get that. But will

1 there be a distinction between them and equity 2 holders in terms of who has a vote on the board? 3 MR. LAWLER: That was not my 4 anticipation. Ed can address that. But I guess 5 the point is this goes beyond what was in the APA. 6 DR. DONLEN: It may not be 7 inconsistent. I guess that's what I'm trying to 8 get at, is you only have one physician, the 9 chairman of the medical group and the 10 representation from the employees comes through 11 the -- or the union representative. And then 12 you've got only one member coming from the 13 community advisory board. 14 MR. LAWLER: Correct. And in terms 15 of position representation, we had it on line so 16 we might increase that beyond one or might not. 17 And that would be at our discretion and that we 18 could, in fact, choose some physicians who 19 obviously also invested in Propco. We haven't 20 really gotten that specific, but, you know, the 21 problem with 11, it seems to be limiting in terms 22 of how we do those appointments. It goes beyond 23 what was in the APA. 24 DR. DONLEN: I don't know that it's 25 limiting. You can look at it as inclusive. You

1 can do what you wanted plus these additional ones. 2 And I think my interpretation of it, and we've 3 worked with the Department before about this, is 4 directly related to what you heard the 5 representative of HPAE talk about is that the 6 community was able to identify what was going 7 wrong but they had no ability to influence what 8 was happening at the governing level, both from 9 the standpoint of the community advisory board and 10 the representation of community members and the 11 medical staff more broadly than medical staff who 12 is perceived as part of the administration. It is 13 often, you know, very helpful to making sure that 14 there's another voice at the board level. 15 MR. LAWLER: At Bayonne, the 16 President of the medical staff is elected by the 17 physicians as a whole. So that appointment 18 wouldn't be under our control, it would really be 19 under the control of physicians. 20 DR. DONLEN: Their election is under 21 their control, but they're generally often 22 perceived as someone who is working with 23 management. So when things become difficult, that 24 representation on the board may or may not be 25 enough for the medical staff to feel as if their

1 concerns are represented at the board level and 2 that their communication that they're getting back 3 related to that is helpful. 4 MR. DANIEL KANE: To address your 5 question directly as far as whether those 6 ex-officio members of the board are voting or 7 non-voting, they would be non-voting in our minds. 8 DR. DONLEN: That's the problem. I 9 mean, just from where we're looking at it, that 10 makes a different. I mean, what this is 11 presenting is the equity holders are in the 12 position of making all the decision, which I 13 clearly understand from the standpoint of how you 14 look at this. But it also raises the issues of 15 how decision-making will go and how the needs of 16 the community will be met, not just the -- there 17 could be questions about whose purposes are being 18 served in that situation. 19 MR. CIENKI: Well, thinking quite 20 candidly that since there are a number of 21 non-profit boards that have had volunteer boards 22 that have failed in the State and looking at the 23 financial health of hospitals, bringing a 24 for-profit operator into New Jersey is not a bad 25 thing.

1 DR. DONLEN: It's not the first one. 2 And we don't feel that way. I mean, that's not -- 3 nothing I said should indicate that to you. What 4 we're trying to look at is the balance so that the 5 -- quite honestly, so that the perception that a 6 for-profit would come in and not be -- be looking 7 out more for the owners than for the community 8 that can be avoided. I mean, it's more the 9 perception of it than any accusation that it would 10 be true. 11 THE WITNESS: Candidly without the 12 medical staff and without the community, there is 13 no hospital. My clients are specifically and have 14 gone to great lengths to involve both the Mayor's 15 office, the Union, and the medical staff. 16 DR. DONLEN: I commend you. I mean, 17 clearly, you got to this point. And I said when 18 the union comes forward, we're very pleased about 19 that. 20 But we've had this arrangement with 21 Salem. How has it worked out? 22 MR. CALABRIA: It seems to have 23 worked out fine. We haven't had any complaints. 24 DR. DONLEN: Is there a separate 25 structure in terms of the operation of the

1 hospital versus the operation of the corporation 2 in some way? 3 MR. CALABRIA: Not that I'm aware 4 of. 5 MR. KANE: Is there any difference 6 the requirements we put on them that we're asking 7 for here? 8 MR. CALABRIA: These are the ones -- 9 as I mentioned before, we had such short time 10 frames on this. We did look back on the 11 Mountainside one, which was just a few months 12 back. This is a condition that was placed on 13 Mountainside also. And looking at the application 14 in terms of the applicant saying how they want to 15 work with the community, we didn't really think 16 this would be a big issue, but obviously they have 17 a different point of view. 18 MR. BAKER: How large is your board? 19 Is there any upward limitation on the size of it? 20 It seems to me this only imposes four people. 21 MR. CIENKI: Currently there are 22 three equity owners, it's the three equity owners. 23 MR. BAKER: You don't have a 24 limitation on the size? If they have spouses, 25 they can put their spouses on, if you bring

1 another investor, you could have 12, 13, 14 2 people. If your concern is being out voted by 3 these four members that this might the require, I 4 don't see that. I understand them wanting to with 5 run a tight ship. 6 MR. CIENKI: In control of the 7 organization. But again, that is their decision. 8 If they wish to have individuals imposed upon them 9 or members of whether for-profit companies, 10 publicly traded companies, members of the 11 community to be involved, they wish that to be at 12 their discretion and not imposed. 13 DR. DONLEN: How do they have the 14 other groups that they do -- you've given us here 15 the structure of the other three holdings that 16 they have. Are they the sole -- is it the same 17 board that is the governance of those -- 18 MR. CIENKI: Would you turn that 19 around so I can see what you're referring to? 20 DR. DONLEN: I'm trying to 21 differentiate the ones that are not the real 22 estate ones, but your wholly owned subsidiaries. 23 But the limited liability company that you just 24 formed will have International Sleep Jewish 25 Renaissance Center, Kingly Institute and GSO

1 Capital Partners, but particular for first two -- 2 MR. KANE: I think you said that 3 they weren't -- 4 MR. CIENKI: They are advisors. 5 They are not equity owners. I can represent that 6 at this time it has not been discussed whether 7 there would or wouldn't be a continuing 8 relationship with those organizations going 9 forward or that they would be entitled or offered 10 board seats at this time. I don't have an answer; 11 not because I'm trying to be evasive, but I don't 12 know. 13 MR. KANE: Wasn't the intention of 14 the State to just be put on notice before there 15 was any change in ownership of the original three 16 of IJKG or the other subsidiaries? I guess there 17 was a real estate subsidiary? 18 MR. CIENKI: The way it is 19 structured, IJKG, LLC, is a holding company. It 20 has two wholly-owned subsidiaries at this time. 21 We call them IJKG Opco, which will be Bayonne 22 Hospital Center; and IJKG Propco, which will own 23 the real estate and be the real estate syndicate 24 for which physicians in the community can invest. 25 Had there been regulatory provisions

1 in the State that would have allowed a single 2 entity owning it, we might be having a very 3 different conversation. But because of the law, 4 commonly known as Codey, that was a necessity in 5 order to have physicians financially invest in the 6 institution. It is anticipated that IJKG Opco 7 will be wholly owned and continue to be wholly 8 owned. At this time I can represent related to 9 IJKG Propco that they did a private placement 10 memorandum and a real estate syndicate that 11 complies with the securities laws. It will be 12 prepared and will be offered shortly. I don't 13 have the final versions of it. I do not have who 14 the investors are or in that entity, but there 15 will be a sale of equity in Propco. 16 MR. KANE: In the physical asset. 17 MR. CIENKI: In the real estate 18 physical asset, not the plant property. Or I 19 should say, not the major movable equipment, not 20 the equipment that operates the hospital. That 21 would be a Opco asset. 22 MR. KANE: And John, was it the 23 State's intention to be put on notice in advance 24 of changes of ownership of IJKG and Opco, or were 25 they also concerned with the Opco syndication as

1 well? 2 MR. CALABRIA: I think 16 is the 3 Opco, condition 16 as being note required by any 4 change of ownership of the real estate. It was 5 unclear to us and we didn't have an opportunity 6 to -- between this review because of the time 7 frame. It was unclear to us exactly what was 8 happening there. And candidly, we've had -- not 9 in the hospital field so much, but in the nursing 10 home field, we've had some problems when the 11 licensee, the operator is different than the 12 property owner. We've had so conflicts 13 occasionally on that, so we were just looking here 14 so we would have the complete record of what's 15 happening to the whole structure. 16 MR. KANE: Because if there was any 17 change in IJKG, would it have to come back before 18 this Board anyway? 19 MR. CIENKI: There is requirements 20 by rule and regulation -- 21 MR. CALABRIA: Yes, if there would 22 be a chance for new ownership coming in that 23 represented more than 10 percent, there might be 24 issues with that. 25 MR. KANE: That's what I thought.

1 MR. CIENKI: We don't dispute that 2 regulatory requirement. 3 DR. DONLEN: So then it's sort of 4 moot that as far identifying for them whether or 5 not there's going to be a change in ownership 6 because -- 7 MR. CIENKI: Well Popco, the 8 hospital, which is IJKG Opco, has the reporting 9 requirement of 10 percent or greater change of 10 ownership. IJKG Propco does not have that 11 regulatory requirement placed upon it. 12 MR. KANE: Is the concern having to 13 disclose the investors? 14 MR. CIENKI: A combination of it is 15 a private real estate syndicate and we do not want 16 to violate any of the securities law. We don't 17 want to make it public. And the investors do 18 whatever in private. And anything submitted to 19 the board becomes -- or to the Department becomes 20 public record. 21 DR. DONLEN: If there isn't any 22 requirement for Propco, I guess I'm not really 23 clear if the investments are flowing back to the 24 hospital. Is it that distinct that there wouldn't 25 be regulatory requirement?

1 MR. CALABRIA: Not really. Again, 2 our concern is this, is perhaps it's only on the 3 level of it was not clear in the application 4 exactly what all this meant. And as I mentioned 5 at the beginning of my thing, there were small 6 details of the application we couldn't -- just 7 didn't have the chance in order to get this 8 material to will Board in time to clarify with the 9 applicant. So this was one of them. 10 DR. DONLEN: Could we put it to the 11 extent that -- I mean, I think that I'm not 12 comfortable saying that we definitely recommend it 13 as a condition unless it does relate to that the 14 transfer in ownership and the change in ownership 15 but for the difference in this corporate 16 structure, otherwise it would have been included. 17 I mean, this is a way to avoid it, you know, being 18 seen as an investment in the operations but still 19 comes under the intent of the regulation, I think 20 that's for somebody else to decide, not us. 21 MR. BAKER: John, was the concern 22 about transfer of funds reporting the transfer of 23 funds from operating the property company? 24 MR. CALABRIA: Again -- 25 MR. BAKER: Is there a particular

1 concern? 2 MR. CALABRIA: It wasn't any 3 particular concern, it was the degree of 4 maintenance that was seen in the application and 5 exactly what they would be doing. 6 MR. D'ORIA: But clearly, that 7 was -- 8 DR. DONLEN: We got a little 9 diverted. We dealt with 16 a bit, but back to 11. 10 I think what Mr. Baker was talking about in terms 11 of you have the potential for the addition of more 12 seats for the board. I understand that right now 13 they've been looking at a certain board structure. 14 But as you go forward, I think the idea that at 15 the board level, at the governance level, having 16 community members and physicians who are part of 17 the operations who work with the hospital has been 18 something that we've never had any objection to in 19 this Board. Never. And I'm not clear in terms 20 even of where the recommendations are going around 21 governance, whether or not that's -- I'm not sure 22 why you've never had any problem before, never had 23 any issues. 24 MR. D'ORIA: I think it would be 25 consistent with these recommendations from the

1 Commission. It's clearly a matter of proper 2 oversight and community involvement and governance 3 of a community hospital. 4 MR. BAKER: It is a community asset, 5 and you are purchasing it. You can maintain 6 control of your board by just increasing the 7 numbers and having your investors' people on it. 8 I understand how you'd like it to be, a nice small 9 board, but I don't thing it impairs their ability 10 to operate and make the decisions that they want 11 to make other than we'll have some folks in the 12 room who might have a different opinion, but 13 they'll get out-voted. 14 DR. DONLEN: They'd be heard. At 15 least the other opinions are heard. 16 MR. CIENKI: I came out ultimately 17 to represent what my clients will agree to or not 18 agree to. I understand -- 19 DR. DONLEN: I understand. I mean, 20 we're just explaining for the record why we are -- 21 I think as we go forward, what my reasoning would 22 be for endorsing this condition. So I think that 23 you don't have to -- we're putting it in there and 24 then it will go forward. We only make a 25 recommendation to the Commissioner. So the

1 Commissioner's decision follows ours. 2 MR. CIENKI: Please pardon me for 3 one moment. 4 DR. DONLEN: We're going to take a 5 break for about five minutes. 6 (Whereupon, a brief recess was 7 taken.) 8 DR. DONLEN: We're reconvening. Mr. 9 Kane has a statement he'd like to make. 10 MR. KANE: For the record, I 11 consulted with Melissa in the Attorney General's 12 Office. I just found out at the break for full 13 disclosure that I actually am the insurance agent 14 for Mr. Garapoli's parents. I have no 15 relationship with Mr. Garapoli. I've never met 16 Mr. Garapoli in the room before. I don't think it 17 will affect my judgment in this hearing. I 18 checked with Melissa. She checked with the 19 Attorney General. She told me that I didn't even 20 need to disclose that, but I felt more comfortable 21 disclosing it on the public record. 22 Anything else I should add to that, 23 Melissa? 24 MS. RAKSA: Well, just that you 25 don't any kind of business or other personal

1 relationship with Mr. Garapoli. 2 MR. KANE: None whatsoever that I'm 3 aware of. 4 MS. RAKSA: You don't have a 5 conflict which would preclude your participation 6 in today's hearing. 7 MR. KANE: Thank you. 8 DR. DONLEN: We saw you having some 9 discussions. You want to tell where you're at 10 with some of these things and we'll reconvene the 11 discussion. 12 MR. CIENKI: That's fine. And thank 13 you for the ability to confer with my clients 14 collectively. 15 I'd like to seek clarification on 16 one other item. Thank goodness the Blackberry and 17 otherwise. We've been informed by Kimco, who is 18 the debtor in possession lender who has a 19 significant facility that is to be assumed by IJKG 20 post-closing that they seek clarification as part 21 of this approval related to the seven-year 22 commitment as operating as an acute care general 23 hospital, that if for some reason there's a 24 default on that facility that they won't be bound 25 to the seven year facility because it would be an

1 action in foreclosure, a Superior Court action in 2 foreclosure. I just ask that the Board clarify 3 that for the purposes of the approval. 4 MS. STOKLEY: Are we talking about 5 No. 4? 6 MR. CIENKI: Yes. You are correct, 7 it is No. 4. We're looking as far as the 8 applicability to a foreclosure action if it were 9 to ever occur. Candidly, Kimco has objected that 10 they would be unwilling to continue their 11 $17.5 million debt facility post closing if that 12 is not clarified. 13 MS. STOKLEY: To read what? 14 MR. CIENKI: That it would not apply 15 to actions in foreclosure by any -- 16 MR. D'ORIA: It's their building. I 17 don't know that the Board or the State can impose 18 something against the owner of the building. 19 MR. CIENKI: Or a lender that seeks 20 an action of foreclosure for some reason. I just 21 would ask that that be clarified. 22 MR. BAKER: I'm just wondering 23 whether or not that erases the whole seven-year 24 time period because an intentional default could 25 result in the seven year time period going away

1 this could be reconstituted as another entity if 2 there was some collusion. I'm not accusing anyone 3 of that. 4 The other thought -- and I don't 5 know the answer -- that is, would this be cut off 6 in a foreclosure anyway? By operation of law in 7 the foreclosure action, it would cut this 8 requirement off, then we don't have to say 9 anything. 10 MS. RAKSA: That's something that I 11 would have to research. I'm not a transactional 12 expert. I'm not an expert on foreclosures. 13 MR. BAKER: One of my suggestions is 14 rather than us giving that up or making that 15 clarification now that we make that issue known to 16 the Commissioner so the Attorney General's Office 17 can review that. 18 DR. DONLEN: Our intention would be 19 that this not stand in the way of you being able 20 to get the financing. However, the condition can 21 be reworded to assure that the operating company 22 or their successors continue it as a hospital but 23 it doesn't in any way impede the lender's rights, 24 would be our intention. 25 MR. CIENKI: That would be fine

1 then. We find that acceptable. 2 Having conferred with my clients on 3 other matters, I'd like to go back into our 4 re-approach. 5 DR. DONLEN: Why don't you tell us 6 where you are on each of those, and then we'll 7 respond, okay? 8 MR. CIENKI: Going back to 10, I 9 don't know with all the Department and other 10 vested parties having had a discussion, we stand 11 firm that it's not the spirit of IJKG to not 12 conform or to other report, whether regulatory 13 statutory or a state or federal, it's just that we 14 just seek to not have any additional imposition 15 other than those requirements. Also, because of 16 the form of information, we wouldn't specifically 17 not want to be disclosing pretty much the 18 information that is being requested to third 19 parties that may have less than honorable desires 20 with that information. So we ask that the Board 21 reconsider that. 22 DR. DONLEN: We'll talk about that. 23 Tell me the others, then we'll consider it all. 24 MR. CIENKI: And on Item 11 in 25 conversation with my clients, they would agree to

1 four total ex-officio seats voting. Those 2 ex-officio seats being the Mayor or their 3 designee, the HPAE Union President or their 4 designee, the President of the medical staff, and 5 a non-employee chair of the community advisory 6 group. 7 DR. DONLEN: And then the community 8 advisory group, we never got to discuss that, but 9 I got the sense that you felt that it was pretty 10 well described in the APA? 11 MR. CIENKI: It is. Specifically, 12 it is described. The thing we must strenuously 13 object to is Item B, appointing participation from 14 each town, each Mayor. It's pretty cumbersome 15 and, of course, the adjoining municipalities who 16 have hospitals, if they're strategic issues or 17 plans that are being suggested, we're not 18 interesting in having, candidly, a mole or dealing 19 with that, especially if it imposed upon us. 20 MR. BAKER: The other ones in the 21 second sentence would be patient advocates. Are 22 those acceptable? 23 MR. CIENKI: Yes. Otherwise than 24 then, yes. 25 DR. DONLEN: Do you have any idea --

1 I mean, I was asking this a little while ago and 2 we got off on the conditions and I did want to 3 talk to you a lit bit about your forecasting in 4 terms of operations. But in operating it and 5 getting it back to being profitable venture, do 6 you see yourselves drawing much of the area 7 outside of Bayonne. We heard about it being an 8 essential hospital to the Bayonne area. And 9 certainly, with the continued utilization of the 10 ER, that would sort of support that. Do you see 11 that you're going to have a large market share? 12 MR. CIENKI: Mr. Lawler -- 13 DR. DONLEN: It gets a little bit 14 ahead, but it just supports this issue. 15 MR. LAWLER: Thank you. On the 16 operating plan, there's, I guess, three major 17 elements to it and then a whole bunch of little 18 ones. But the one thing that we have determined 19 is that the revenue cycle was really 20 under performing quite a bit, just a lot of revenue 21 opportunities that were being missed, and that had 22 gone back several years. And that's one of your 23 earlier questions, has it disguised in past the 24 certain one-time revenues. So we think we've 25 identified a lot of those areas for improvement

1 and have already started working on them. 2 The hospital traditionally has been, 3 not unlike many hospitals in New Jersey and in 4 particular Hudson County, very high on length of 5 stay. I guess I'd rather use the term resource 6 utilization. It's not just how long the patient's 7 there, but, you know, patients who come for one 8 diagnosis and end up being treated for a condition 9 they've had for 20 years and could be treated in a 10 ambulatory basis and things like that. And the 11 hospital has already made improvements on that 12 area, and we hope for continued improvements 13 there. 14 And then third, we would like to 15 increase the overall service provision to the 16 Bayonne community and to some extent surrounding 17 communities. And I know that the Greenville 18 closure is on the agenda. Greenville is right on 19 the northern border of Bayonne. Bayonne currently 20 does draw some of its market share from the 21 Greenville zip code, and I anticipate that they'll 22 continue to draw additional patients. 23 And to the extent that some 24 physicians -- I think most of the physicians have 25 been pretty loyal over the past. Some have left

1 for series of reasons. OB is, of course, 2 temporarily closed. We would like to look at -- 3 you know, try to see if we can invigorate that 4 program, among other things, try to draw some of 5 the surgeons back to the hospital from ambulatory 6 surgery centers on their own outside the 7 community. So we see a lot of those aspects, 8 revenue cycle, resource utilization, and 9 additional volume. That's sort of the key to 10 our -- 11 DR. DONLEN: That sort of leads me 12 to the issue about dropping the requirement 13 surrounding communities and not necessarily the 14 Mayor, but would you consider -- and I'm going to 15 talk about what's in the APA around that, but 16 would there be a consideration of, at least, 17 looking at the composition of the CAG that it 18 would be representative of, at least, those areas 19 where you were getting market share that was, you 20 know, 30 percent or more. 21 MR. LAWLER: Absolutely. We would 22 be happy to serve the Greenville community more 23 than we would now. 24 DR. DONLEN: And I thing you'd be -- 25 that they are definitely feeling the potential

1 loss of that, and the idea of including them in 2 that, I think, would be important just even to 3 keep up the health -- their access to the clinics, 4 to the ambulatory stuff, in addition to the acute 5 care beds would be what I'd be more concerned 6 about. 7 MR. LAWLER: And we would be looking 8 to representatives of community rather than 9 necessarily representatives of the political 10 entity in those areas. I mean, it was voiced 11 before, you know, whether the city decides to 12 support Greenville or not support Greenville. 13 It's a whole lot of proprietary stuff -- 14 DR. DONLEN: We're not talking about 15 the place to play on political issues, we're 16 talking about using the group to be able to really 17 hear what the community needs and to give 18 information as much to the community about what's 19 available. 20 MR. LAWLER: Absolutely. We would 21 very much like to work with the physicians and the 22 community in the Greenville area because we know 23 that they will potentially be an underserved 24 community if we don't pick up that slack. 25 DR. DONLEN: All right. We may have

1 some more about the operations, but that helps 2 related to the CAG. 3 MR. CIENKI: And I have an 4 additional request regarding the CAG. Since there 5 would be a requirement to report to the State, 6 we'd ask that the State treat it as a trade 7 secret. If we have community members that are 8 going to be offering, have relationships, want 9 to -- and this goes back to the strategic planning 10 issues. If we're utilizing the community advisory 11 group as what I will call a focus group in terms 12 of improvement, increased services, diverse 13 services that aren't currently provided, that is, 14 in essence, a strategic -- becomes a strategic 15 planning group. And we would just request that 16 that would for need-to-know and it be treated as a 17 trade secret, proprietary and as a trade secret. 18 MR. D'ORIA: I wanted to talk about 19 proprietary in general because financial 20 reporting, it's proprietary. And so your issue 21 with it, I think, in terms of third-party 22 disclosure, is moot. 23 MR. CIENKI: The CAG is not 24 considered part of the financial part. 25 MR. D'ORIA: No, but if we deem it

1 proprietary, it would be. 2 MR. CIENKI: We would appreciate it 3 being deemed proprietary. 4 MS. RAKSA: You would identify what 5 you believe are proprietary. 6 MR. CIENKI: We would mark it 7 confidential; if that's acceptable, mark it for 8 Department. 9 DR. DONLEN: Let's take them in 10 order. 11 MR. BAKER: Would it be helpful to 12 you in creating a record if the Board indicated as 13 part of its recommendations that we believe that 14 information is? 15 MR. D'ORIA: Yes. 16 DR. DONLEN: You're right 16. 17 MS. RAKSA: Also that the 18 understanding has to be that because the 19 Department does not create the label proprietary, 20 it's created by the person who submits the 21 documents. If there were a question, somebody 22 filed a complaint with the Government Records 23 Council or in Superior Court that you would come 24 in defend the fact that, you know, why these 25 documents are proprietary or why they were

1 identified because that's not something that -- 2 that's not a designation we give. 3 MR. CIENKI: I understand. You 4 would provide us that is required by statute. 5 MR. D'ORIA: Proprietary; it doesn't 6 need to be marked confidential. 7 MR. CIENKI: And as far as 16, we 8 maintain our position regarding Propco, as you 9 would expect. 10 DR. DONLEN: Okay. That's why I 11 jumped over it. 12 MR. CIENKI: That was the short one. 13 DR. DONLEN: Back to 10. We're not 14 in a position to, you know, basically, I don't 15 think, suspend this completely. As we talk about 16 it, what I'm going to be suggesting is that since 17 you have -- and I'm just saying this now for the 18 Board's purpose, too, and see if it sounds 19 agreeable to you, that the purposes of the things 20 that you're saying are in the APA? 21 MR. CIENKI: Yes. Or the APA or 22 general reporting requirements required by 23 regulation or statute. 24 DR. DONLEN: Right. But for the APA 25 particularly, I think that what I've learned in

1 this break is that it's not necessarily that the 2 Department of Health has access to that or has the 3 ability to enforce that. So when we're talking 4 about these, my thought would be that to the 5 extent that we can that we identify for our 6 recommendation to the Commissioner that this is 7 the sense of what the recommendation is about and 8 any negotiation related to either these 9 particulars of you being a for-profit as it 10 relates to the release of some of this 11 information, the composition the board or what's 12 in the CAG be part of what the Commissioner takes 13 into consideration in discussion with the 14 applicant as he forms his final conditions. From 15 my standpoint, we know the reasons for this. And 16 if there's another way of getting at it or if it's 17 absolutely precluded because there is no authority 18 to require it, I don't think we can make that 19 determination. 20 MR. D'ORIA: No, but perhaps just 21 incorporate some of the same language. 22 DR. DONLEN: I'm just saying that 23 generally. I'm not suspended the discussion. I'm 24 saying that that's where I'm coming from at this 25 time.

1 MR. CIENKI: So are you 2 suggesting -- 3 DR. DONLEN: Let me finish. So on 4 10, if you were required to submit audited 5 financial statements, a lot of what is here would 6 be covered, with the exception with the reasons 7 for transfers, et cetera. So the idea of what 8 would be included in an audited financial 9 statement would be submitted to the Department. 10 And if they had any questions relative to the 11 reasons for it, they could open a discussion with 12 the applicant. 13 MR. LAWLER: Yes. 14 MR. CIENKI: That's correct. 15 DR. DONLEN: So for us to say that 16 at the very least what we're looking for is the 17 information that's in the audited financial 18 statement, would that be something that would be 19 acceptable? 20 MR. LAWLER: That's fine. 21 DR. DONLEN: Does that stick with 22 the requirement of what the Department is looking 23 for, you think? 24 MR. D'ORIA: Yes. 25 DR. DONLEN: Is the Board agreeable

1 with that as a change to No. 10? 2 MR. BAKER: The only concern would 3 be that the timing of the transfers, the audited 4 financial statements that are done in month 15 or 5 so and the transfer could have been done in month 6 1 or 2 so you'd be behind the curve in tracking 7 the transfer, so I'd still -- in terms of, A, 8 Judy, I think it perfectly addresses it. In terms 9 of B, I'm a little concerned about timing. 10 DR. DONLEN: We're already saying on 11 an annual basis, so I mean, we're still going to 12 be 12 months out. 13 MR. FILLEBROWN: But the hospital 14 would still be required to submit the quarterly 15 financial statements that aren't audited, and that 16 would provide a -- 17 MR. BAKER: That would give the 18 indication, okay. 19 DR. DONLEN: And then the changes 20 that the applicant has talked about for the board 21 of trustees, I think they've come a long way in 22 terms of where they were and where we were. I 23 think we can accept that, that they agreed to it. 24 I mean, obviously, it goes from here to the 25 Commissioner that there is any other discussions

1 the Commissioner wants to have, but at least to 2 this amount so we would change that, that it would 3 consist of -- we would change the line starting 4 "with of local community members" all the way 5 through "not less than three physicians who are 6 not employees of the hospital subsidiary." Strike 7 all of that and say that they will include in 8 addition they will add four additional positions 9 or they will include four positions, that would 10 include the Mayor of Bayonne, the President of 11 HPA, the President of the medical staff, and the 12 non-employee member of the CAG. 13 MR. BAKER: Ex-officio. 14 MR. CIENKI: Ex-officio with voting 15 rights. 16 MS. OLSZEWSKI: I think it was 17 non-employee chair. 18 MR. CIENKI: Not employee Chair of 19 the CAG. 20 DR. DONLEN: And basically then you 21 believe that there isn't really any big need nor 22 changing 12 with the exception of A, including it 23 as taking out the part that includes the 24 participation of each town's mayor or his designee 25 but rather include representatives, including

1 towns from the service area that comprise a 2 significant portion of the market of the service 3 area that you serve. 4 MR. CIENKI: That's agreeable, 5 again, with the provision that because strategic 6 reasons that we could mark proprietary. 7 DR. DONLEN: Confidential. 8 MR. CIENKI: Proprietary. 9 DR. DONLEN: Is confidential enough, 10 or it has to be marked -- 11 MR. D'ORIA: Just proprietary. 12 DR. DONLEN: I misunderstood what 13 was going on with that, so I just wanted to make 14 sure. 15 And you're not agreeing to 16 at 16 all? 17 MR. CIENKI: Correct. 18 DR. DONLEN: Does anybody -- is it 19 the Department's position that that's a deal 20 breaker? 21 MR. D'ORIA: No. Given that the 22 transfer of the ownership of the hospital would 23 have to come back to the Board and go through the 24 same process, no. 25 DR. DONLEN: Gone.

1 MR. CIENKI: Thank you. 2 DR. DONLEN: Is that all right with 3 everybody? 4 MR. CIENKI: And we're okay with the 5 other provisions and the modifications in No. 2 6 and 4. 7 DR. DONLEN: Two we talk about; 8 that's fine, that the subject from staff 9 reductions that were already in the APA. And, 10 yes, I think the intention of No. 4 always was for 11 the balance of seven years. I don't think that's 12 any problem to add that. 13 MR. CIENKI: And to just seek 14 clarification 17, that would be the same, for the 15 balance of the seven-year period. 16 DR. DONLEN: Yes, the balance of the 17 seven-year period. 18 We jumped to those conditions as if 19 we were ready to go with it, but at least when we 20 are ready to go we have the conditions. 21 I do have some questions relative to 22 the plan for operations. And who would be the -- 23 MR. CIENKI: Mr. Lawler would be. 24 DR. DONLEN: Thank you for being 25 here. So you gave a little bit of an overview of

1 some of the things that you believe -- let me ask 2 specifically about my area of interest and then 3 I'll talk more generally. OB, it's been closed 4 since 2006? 5 MR. LAWLER: 2006, I think it 6 closed. 7 DR. DONLEN: The obstetricians went 8 someplace else? 9 MR. LAWLER: Yes. 10 DR. DONLEN: One of the concerns, 11 obviously, in a situation like this is that the 12 public access through the clinics is one of the 13 key, so you're committed to opening that OB 14 clinic? It's firm, too, it's not just a delivery 15 service? 16 MR. LAWLER: Yes. We've had some 17 discussions already towards opening that clinic, 18 which are not yet finalized. I'm not at liberty to 19 answer them, but yes. 20 DR. DONLEN: But you'll be doing it 21 locally, it's not that you're going to be doing 22 off site in conjunction with another entity? 23 MR. LAWLER: It would be locally. 24 DR. DONLEN: It will be on site? 25 MR. LAWLER: Yes.

1 DR. DONLEN: I mean but it will be 2 yours, it's not by contractual agreement with 3 another group? 4 MR. LAWLER: There may be another 5 entity involved, but it would be on site or on our 6 campus and essentially be part of Bayonne. 7 DR. DONLEN: One of the things 8 that's often not necessarily seen right from the 9 beginning, but somebody's who's had a history with 10 that. 11 MR. LAWLER: Excuse me. 12 Depending on the actual -- Mr. Kane 13 is telling me that it may require a license 14 transfer, but then I guess that would be subject 15 to whatever approval process. 16 DR. DONLEN: A license transfer? 17 MR. LAWLER: For the outpatient -- 18 DR. DONLEN: Why don't you come up 19 and talk to us? 20 MR. DANIEL KANE: On the outpatient 21 piece, it could require a -- in terms of the 22 clinic, it might require a new license, but it 23 would still be on site. 24 DR. DONLEN: I mean, they have to be 25 re-licensed because it was closed? Is that what

1 you're saying? 2 MR. DANIEL KANE: Because of the 3 partners. 4 DR. DONLEN: But the requirement on 5 the hospital in terms of providing it is a full 6 range of serves, particularly as it relates a 7 Medicaid reimbursement. So what I'm more 8 concerned about is that it's not expected that a 9 private OB practice is going to see the mothers 10 for prenatal care without some involvement of the 11 hospital in the rest of the support of that 12 package, the nutrition support, et cetera. 13 MR. DANIEL KANE: Right. 14 DR. DONLEN: I mean, we have lots of 15 arrangements where in small areas where the 16 obstetrician might take them on as part of their 17 private practice, but because of the high risk of 18 that group, they are required to have other 19 services that may not be available to the private 20 physician and the hospital would be responsible 21 for providing those wrap-around services. 22 MR. LAWLER: Correct. 23 DR. DONLEN: I don't need to know 24 the specifics of it, as long as you understand the 25 requirements that it can't be subcontracted out.

1 MR. LAWLER: Yes, it would be to 2 meet the intent of what you said, yes. 3 DR. DONLEN: All right. 4 What would you expect to be able to 5 look at in terms of deliveries? Where are you 6 headed for in terms of how many deliveries? 7 MR. LAWLER: Well, we don't have a 8 number yet. And I know there is a critical mass 9 in terms of good patient care being driven by -- 10 there's also financial needs as well because you 11 have to provide on-call services, anesthesia, 12 pediatric, and so forth. So we don't really have 13 a number in mind yet, but that will be part of our 14 process. We still think there's some number of 15 months away. 16 DR. DONLEN: We have a lot of 17 emergency visits. Is part of your planning to 18 look at how to establish more access to primary 19 care in general in the community, either with you 20 or in partnership with another group? 21 MR. LAWLER: A fair number of 22 emergency room visits are actually private 23 patients in the community where the physician may 24 have office hours or maybe after hours and request 25 his patient come to the emergency room. But we

1 also do have a fair number of walk-ins. We've 2 already had discussions about establishing a fast 3 track mechanism to see people outside of the 4 emergency room based on the non-emergent services. 5 DR. DONLEN: What's your percentage 6 of -- in payer group, what's your percentage of 7 private versus Medicare and Medicare. 8 MR. LAWLER: Overall the hospital is 9 about 60 percent Medicare. Relatively small 10 Medicare and charity care. Probably about -- how 11 many? About 10 percent in total, the rest being 12 insured patients. 13 DR. DONLEN: And their primary care 14 physician will be out of the community, they would 15 go to another area care come to you in an 16 emergency or to be seen after hours? 17 MR. LAWLER: We have house staff at 18 the hospital. Again, some of these details -- 19 DR. DONLEN: I'm talking about -- 20 you said that a good number of them. I'm trying 21 to figure that a good number of them come into the 22 emergency room because most of the people who have 23 been insured, their doctors have been sort of 24 incentivised to keep them away from the emergency 25 room, so I'm trying to figure out how these get

1 approved for them to be there with private 2 insurance and private doc. 3 MR. LAWLER: Well, as a patient 4 takes a turn for the worse or whatever and either 5 comes to the emergency room -- 6 DR. DONLEN: You don't have a lot of 7 admissions out of the emergency room. 8 MR. LAWLER: It's about 20 percent, 9 a little bit over 20 percent. 10 DR. DONLEN: Yeah, that's not much. 11 MR. LAWLER: It's not an excessive 12 number. 13 DR. DONLEN: It tracks with your ICU 14 centers being up. So what I'm thinking is that 15 part of what I'm listening for is some attempt 16 to -- because it is a drain on your finances as 17 well is to look at how to get the patients that 18 don't need the emergency room for emergency care 19 but rather need a primary care physician earlier, 20 perhaps; but anyway, better care to try to 21 establish some sort of a better network of primary 22 care in the community that would help you with 23 this. 24 MR. LAWLER: As I said, the one 25 thing for sure we want to do is start the fast

1 track. And part of our discussion with the 2 physicians is -- a lot of discussion with 3 physicians as to what they see the needs the 4 community are, as well as the community advisory 5 group who will fill that in, we hope. We don't 6 have a specific plan yet, I think in terms of 7 whether we establish an on-site clinic, for 8 example. But I think all those options are things 9 that we will explore as we go forward. 10 We, obviously, want to make the 11 hospital a success, financial and also a success 12 in serving the community. So we're going to be 13 exploring all those options. 14 DR. DONLEN: I'm wondering if it's 15 an attractive market for a federally qualified 16 health center to be looking at for that kind of -- 17 MR. LAWLER: That is a possibility. 18 MR. D'ORIA: Based on the payer mix, 19 it may not meet the medical underserved. I don't 20 know. 21 DR. DONLEN: I just thought with the 22 Medicare and Medicaid. I didn't know the number. 23 MR. D'ORIA: But there's a criteria 24 that we use. I don't know it off the top of my 25 head.

1 DR. DONLEN: You have to look at 2 everybody that's leaving the community, too, not 3 just what they have. That's what I'm more 4 interested in is, you know, who's leaving. 5 MR. LAWLER: And that concept -- 6 DR. DONLEN: A look-alike. 7 MR. LAWLER: So, yeah, that's 8 something that we consider as well. 9 DR. LEWIS: I was just going to say 10 of all the paperwork I was reading, I thought 11 there was some implication that there was some way 12 of the clinic presently doing something as a 13 through FQHC. 14 DR. DONLEN: Okay. I think that's 15 mine for the time being. 16 DR. LEWIS: I have one question. 17 DR. DONLEN: Sure. 18 DR. LEWIS: I'm going back to Page 2 19 of our paper here. And it seems to me that major 20 driver to this whole thing happening is because 21 there's a feeling that the hospital is a very 22 essential place because its location on this 23 peninsula. Yet on Page 2 here, it states that 24 part of the reason for the hospital being in the 25 situation it is now is because of intense

1 competition of neighboring hospitals. I didn't know 2 if this was a conflict in thoughts or a 3 discrepancy. What kind of competition are we 4 talking about, because if the hospital were to 5 close, then wouldn't those competing hospitals 6 pick up the slack? 7 MR. DANIEL KANE: I think it's 8 largely an issue of having the services that the 9 patients need. SO when you talk about primary 10 care, the patients are coming to Bayonne in 11 substantial proportions. But when you go to some 12 of the more specialized sub-surgical services and 13 things like that, patients may be going to New 14 York or going to Union County or Essex County 15 because the hospital doesn't have those services. 16 So one of the things that we need to do is to meet 17 our community half way and have the services, all 18 the services that they need. 19 DR. LEWIS: So you're talking about 20 increasing and improving the services that you 21 have to re-attract the patients, the community 22 base back into the hospital? 23 MR. DANIEL KANE: Particularly in 24 the subspecialty areas, yes. 25 MR. CIENKI: And to go along with

1 that is because of the general mistrust between 2 the hospital staff and the prior administration, 3 doctors left. And along with the doctors went 4 patients and their elective admissions. So that 5 in conjunction is really what I would call the 6 flight of patients from Bayonne, at least on an 7 elective basis. That was evident in many ways on 8 the same-day surgeries, even though a lot was 9 maintained. 10 MR. LAWLER: And then, obviously, 11 when you lose some of the same-day surgery, you 12 lose some of the admit surgery as well. So I 13 think it goes back to the surgeons. 14 DR. DONLEN: I mean, that's one of 15 the things we heard through this Commission's 16 hearings is that a large impact on the hospital 17 viability has been the ambulatory surgery movement 18 out of the hospital. 19 MR. LAWLER: And, of course, OB also 20 going down and eventually closing is the other big 21 issue. 22 DR. DONLEN: What kind of specialty 23 services have you looked at in terms of trying to 24 provide for the community? 25 MR. DANIEL KANE: For strategic

1 reasons we would prefer not to -- 2 DR. DONLEN: Give us a general 3 sense. 4 MR. DANIEL KANE: Well, I said 5 surgical subspecialties, so you're experienced 6 enough to know what kinds of things. 7 DR. DONLEN: And we'll see you back, 8 I'm sure, for some of them. 9 Are there any lower tech kind of 10 things? 11 MR. LAWLER: The other thing is some 12 of the decline was associated with, I guess, which 13 of sort a natural transition that many hospitals 14 are observing, in terms of patients who are maybe 15 24-hour patients or short stay patients, not being 16 inpatient admissions but being observation 17 admissions. And in particular, the hospital 18 started that sort of change in definition in early 19 2006. So that accounts for some of the reductions 20 since that time as well. So that's some of the 21 issues as well related to that. 22 And it just sort of reiterate one 23 other point. Our analysis of the revenue cycle is 24 that, frankly, many things that this hospital has 25 not done that other hospitals have done in years.

1 And we estimate that the revenue cycle side of 2 this could be as much as $15 million dollars. 3 DR. DONLEN: On billing issues, 4 you're talking about? 5 MR. LAWLER: Yes. Billing issues, 6 charge capture, HMO denials, so forth and so on. 7 DR. LEWIS: Another comment then. 8 How do you plan to change the culture of the 9 hospital? Because that's the key issue you're 10 dealing with here. The practice patterns of the 11 physicians, the conflicts between the staff and 12 administration, how are going to change that in a 13 short period of time? 14 MR. LAWLER: That's a very key 15 aspect of what we're trying to do, is to, as we 16 say, sort of the for-profit side -- and I'm a 17 not-for-profit guy my whole career. So I'll put 18 that in context. But the for-profit side is to 19 align the financial interest of all the parties. 20 And you've heard about some of the plans that 21 we're working with the physicians in terms of 22 using Propco or other than compliance vehicles to 23 have the physicians have an interest in the 24 hospital. But another key point which I don't 25 think we mentioned is as part of the concessions

1 step the union made, which also helps us, 2 obviously, quite a bit in this transition, about 3 $4 million a year worth of concessions, we agreed 4 to establish a profit sharing plan for employees, 5 25 percent profit sharing. So once we reach 6 profitable status, which we, of course, hope to 7 do, all the employees, not just limited to the 8 union employees, but everybody can have a profit 9 share. So we think that will also get the 10 employees -- not that the employees wouldn't 11 normally do the right thing, but if people sort of 12 feel it's their own hospital in more ways than 13 one, in many ways, we think increase customer 14 service and other aspects and actually help maybe 15 identify cost-saving opportunities as well. So 16 that's another key piece of the plan is to sort of 17 get everybody pulling in the same direction. 18 Frankly, we saw that in the Bayonne community. We 19 think it could work in this community. 20 MS. STOKLEY: I wanted to ask about 21 the plans for inpatient and outpatient pediatric 22 services. 23 MR. LAWLER: Right now, I guess 24 pediatrics inpatient is probably averaging about 25 two a day. Obviously, not a financial feasible

1 situation. But the hospital -- we have also 2 concurred that it's not the time to consider 3 closing that service. We'd rather try 4 reinvigorate that, especially since we're going to 5 looking at OB. We'll try and that service work as 6 well, as well as the ambulatory care side. 7 Obviously, the ambulatory care side could be a 8 feed into inpatient side, so... 9 DR. DONLEN: Similar to what you 10 said about in general the change to observation, 11 much of pediatric inpatient has gone away. And 12 capturing it in terms of what's been kept in the 13 ER would give you probably a better indication of 14 how you are serving the pediatric clients. One of 15 the things that we've been talking to the 16 Department about, and they've been very agreeable, 17 is taking units down from 17 to smaller units that 18 are on med/surg units, part of the beds are 19 dedicated on med/surg units -- you have to work 20 with them about that -- but in terms of a whole 21 17-bed unit that has such a small occupancy, 22 acknowledging that five or six beds is probably 23 all you need because two to three is probably all 24 you're going to get, given the structure. 25 MR. LAWLER: We've actually had some

1 internal discussions already on that about tacking 2 on the end of a med/surg unit. And we had just 3 decided to put off that for a little while. You 4 could save some nurse physicians did if you did 5 that, but we just thought our general approach on 6 this transition is, you know, we talk about the 7 possibility of staff reductions. We don't want to 8 go in day one and start making staff reductions 9 because we really want to see -- we don't want to 10 restrict supply going in. We really want to see 11 if the demand can rise to our capacity going in. 12 So basically, in terms of all the units, that's what 13 our plan is. 14 DR. DONLEN: And given the isolation 15 that has been cited as the necessary -- the reason 16 for the necessity of the hospital, your kids 17 going to have these kids show up in the ER 18 regardless, so the idea of closing the beds 19 without assessing what the needs really are. 20 MR. LAWLER: If we come successfully 21 out of bankruptcy and people see that, we may get 22 some return to the hospital just by that fact 23 alone. So that's why we're not -- you know, we 24 won't be making any reductions right now. We're 25 trying to put a plan together for the increase,

1 and we'll monitor it. 2 MS. STOKLEY: There's been news 3 reports about Hoboken adding pediatricians because 4 they've had a big surge in inpatient but also 5 largely in outpatient because in terms of cities 6 reducing its pediatric services so there's a lot 7 of overflow of people taking children especially 8 through emergency and for outpatient services 9 going elsewhere. And so the situation like Jersey 10 City and Greenville -- well, Greenville didn't 11 have pediatrics, but they probably had some 12 outpatient and emergency ER. And with reduction 13 and the elimination of the pediatric residency 14 program at Jersey City, what you may find that as 15 people in the community see your hospital coming 16 back to life, you may experience a bump in 17 pediatric outpatient services, the same as Hoboken 18 is experiencing because people are taking their 19 kids north and south of Jersey City Medical 20 Center. 21 MR. LAWLER: Yes, exactly. 22 DR. DONLEN: Any other questions? 23 DR. LEWIS: Your history, the 24 history of Opco, have you done this at any other 25 hospitals and communities similar to where we are

1 now? And what's your history of success? 2 MR. LAWLER: Well, in terms of our 3 team -- maybe I'll speak about myself first and 4 then my partners here. As I said, I'm basically a 5 hospital person in my career. I'm an accountant 6 by training, a CPA by training. And I've spent 7 the last 30 years in hospital settings. The New 8 York Health and Hospitals Corporation in New York, 9 did a variety of things. I served as the chief 10 financial officer there for a while. I was at 11 Liberty Health Care System in Jersey City for 10 12 years as an Executive VP and CFO, including 13 that -- well, it was a very turbulent period for 14 us in the '90s when we got hit with the change in 15 the whole payment system, the deregulation of the 16 rate setting system, which meant, among other 17 things, a sharp decline in charity care payments, 18 followed by the emergence of the HMOs, in 19 particular, managed Medicare, affecting those 20 hospitals. And then lastly, the third of the big 21 three was Medicaid rate reduction, which was like 22 a 20 percent reduction that came upon us very 23 quickly. So I was on the ground when all that 24 happened, and it was a difficult process but we 25 got our way through it. We didn't default

1 anything. We actually ended up, as you know, 2 getting a new hospital constructed at the end of 3 that period. So that was a lot of practical 4 experience in trying to get budgets balanced and 5 meeting challenges. Then I did a tour at UMDNJ as 6 the CFO as well and started my own consulting 7 practice here a few years back. So one of the 8 areas that I really wanted to focus on in my 9 consulting practice is helping hospitals who are 10 in financial stress. And obviously, that's why I 11 got interested in Bayonne, because it was in 12 stress and I thought, frankly, it could be turned 13 around. 14 My partners have a background -- 15 they might want to speak to this themselves a 16 little bit more, but in working with physician 17 groups setting up ambulatory care centers making 18 them work financially, making sure that physicians 19 and administrations and those venues can work 20 effectively and have some very good ideas as to 21 how you can transport some of the those ideas into 22 the hospital settings or, you know, other 23 ambulatory services around the hospital to make 24 the entire entity successful. 25 So we think we have a combination of

1 skills that we bring to Bayonne and can make this 2 work. I don't if -- I'm sure they can add to that 3 if you want any additional information. 4 DR. DONLEN: Question? 5 MS. OLSZEWSKI: No. Sharol asked 6 mine. 7 DR. DONLEN: All right. We're 8 finished with the applicant. 9 MR. LAWLER: Thank you. Thank you 10 for this opportunity to come here today and for 11 expediting it. Thank you very much. 12 DR. DONLEN: Well, we've discussed 13 the changes for the conditions already. And I 14 think that -- 15 MR. D'ORIA: Judy, can I just ask 16 you to clarify 10? 17 DR. DONLEN: Listen closely. We're 18 clarifying. 19 MR. D'ORIA: A is out? 20 DR. DONLEN: I think we're going to 21 recommend that 10 be that the intention to monitor 22 the financial information such as the investments 23 made in the previous year, the accounting for 24 long-term and short-term debt, as well as the 25 transfer of funds, can be accomplished by the

1 annual submission of the audited financial 2 statements. 3 MR. BAKER: And the quarterly 4 unaudited. 5 DR. DONLEN: Right. 6 MR. D'ORIA: Well, that was your 7 point about B, Mike? 8 MR. BAKER: Right. 9 DR. DONLEN: But they did their, I 10 guess, the routine submission of the already 11 required quarterly and audited financial 12 statements, annual audit. 13 Is that all right? 14 So we would say that the condition 15 is that it is our intention that these things that 16 are listed in here with the exception of the 17 reason for transfer, it is our intention that 18 those things be monitored by the Department and it 19 can be accomplished by the submission of the 20 quarterly financial statements and the annual 21 audited financial statements. That's the wording 22 of that. 23 Everybody's clear on the other 24 changes? 25 We already talked about 11, where

1 it's going to change to the submission of. 2 Going back to No. 2, it's going to 3 be "will hire substantially all of the BMC staff 4 employees who are employed at the time of sale, 5 subject to the description of staff reduction that 6 is contained in the APA." Yes? 7 And No. 4 and the last one, No. 17, 8 will both have the addition of that any subsequent 9 owner will be responsible for the balance of the 10 seven-year commitment. 11 MR. D'ORIA: And 16's out? 12 DR. DONLEN: And 16 is out. 13 MR. BAKER: And 12? 14 DR. DONLEN: And then 12, the only 15 change has been to omit the participation of the 16 mayors of each town or his or her designee. 17 I think that -- I'm not sure that 18 they completely objected to minimally seek 19 participation from each town in the service area. 20 Minimally seek participation from each town was 21 significant. 22 MR. CALABRIA: Define significant. 23 DR. DONLEN: All right. From each 24 town from which the hospital draws at least 30 25 percent of its market share.

1 MR. CIENKI: That is acceptable. 2 MR. BAKER: And then the only other 3 comment was to indicate that in 12 the information 4 from the CAG, we're recommending that it be 5 treated as proprietary to protect the strategic 6 planning. 7 DR. DONLEN: Yes. Any place that 8 there's a report, maybe just add another one under 9 G, that any of the reports required above will 10 be -- you know, there's agreement that the 11 applicant can mark those as -- can identify those 12 things as proprietary. 13 MR. CIENKI: To the extent they are 14 not otherwise made public by operation of the law 15 that we can mark them proprietary. 16 MR. BAKER: And then the last thing 17 was to address the concern of your lender that 18 we're deferring to the AG's Office and the 19 Commissioner a determination as to whether or not 20 the seven-year requirement should or shouldn't 21 apply with regard to the applicant's lender. 22 MS. OLSZEWSKI: And that one will go 23 with which one? 24 DR. DONLEN: We'll put it after 17. 25 It is the intention that the condition applied to

1 operating as an acute care hospital for seven 2 years, it is not the intention that that has 3 any -- that it's construed in any way as to affect 4 the lender's rights. 5 I believe that the case has been 6 made in many ways for the fact that this is a 7 necessary hospital and that the plan that the 8 buyers have put forward in term of how to 9 regenerate both the consumer confidence and the 10 services that will help to make it viable have 11 been well presented to us today. The things that 12 I have not been identified from the application 13 became pretty clear, and I think that they have 14 agreed to conditions that we feel comfortable with 15 in terms of that it will have community input as 16 well as making itself available to Department 17 oversight for the assurance that it will remain 18 viable. Obviously, it's their interest in they 19 wouldn't be -- I don't believe that they would be 20 entering into this if they didn't believe that 21 they could make it a profitable venture. And I 22 think the plan is one that will help to maintain 23 the access to services for communities and an and 24 an orderly transition and maintain it as an 25 employer, which is important to the economic

1 conditions of the city. So based on that, I would 2 like to offer a motion to approve. 3 MR. BAKER: I'll second that and 4 also indicate that I believe the applicant has met 5 the requirements for the transfer. I'd also like 6 to thank the individual investors for being 7 willing to put themselves at risk to preserve this 8 community asset. Obviously, it's an investment 9 for you and you expect to make a return. But it 10 is a fairly risky investment for you all to be 11 involved in. 12 I'm also hoping that you're 13 successful and that this may be a model, although 14 not the only model that we may see in the other 15 areas at stake where we have distressed hospitals 16 and areas in need of services. Good luck. 17 DR. DONLEN: Any discussion before 18 we move the motion? 19 MS. HERNANDEZ: Mr. Kane. 20 MR. KANE: Yes. 21 MS. HERNANDEZ: Ms. Olszewski. 22 MS. OLSZEWSKI: Yes. 23 MS. HERNANDEZ: Dr. Lewis. 24 DR. LEWIS: No. 25 MS. HERNANDEZ: Mr. Baker.

1 MR. BAKER: Yes. 2 MS. HERNANDEZ: Dr. Donlen. 3 DR. DONLEN: Yes. 4 MS. HERNANDEZ: We have four yeses, 5 one no. The motion passed. 6 DR. DONLEN: Thank you all very much 7 for answering all our questions and being 8 agreeable to cooperate and negotiate. 9 Anybody else have any other 10 information? 11 I'll entertain a motion for 12 adjournment. 13 MS. OLSZEWSKI: So moved. 14 DR. DONLEN: And seconded. 15 (Hearing concluded at 12:30 p.m.) 16 17 18 19 20 21 22 23 24 25

1 C E R T I F I C A T E 2 3 I, Lisa C. Bradley, a Certified 4 Court Reporter and Notary Public of the State of 5 New Jersey, do hereby certify that prior to the 6 commencement of the examination, the witness was 7 duly sworn by me to testify to the truth, the 8 whole truth and nothing but the truth. 9 I DO FURTHER CERTIFY that the 10 foregoing is a true and accurate transcript of the 11 testimony as taken stenographically by and before 12 me at the time, place and on the date hereinbefore 13 set forth, to the best of my ability. 14 I DO FURTHER CERTIFY that I am 15 neither a relative nor employee nor attorney nor 16 counsel of any of the parties to this action, and 17 that I am neither a relative nor employee of such 18 attorney or counsel, and that I am not financially 19 interested in the action. 20 21 22 __________________________ 23 LISA C. BRADLEY, CCR, RPR 24 CCR NO. 30XI00228700 25 Date: January 25, 2008

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