The anticipated takeover of Passaic Countys three hospitals by the nations first for-profit Catholic health care system fell apart on Friday after the board of trustees representing two of the hospitals rejected a proposal from Ascension Health Care Network.

The vote by St. Josephs Healthcare Systems board, which controls hospitals in Paterson and Wayne, also derailed the sale of St. Marys Hospital in Passaic, raising questions about the future of the sole hospital serving a city of 70,000. Although St. Marys had previously approved its sale, Ascension did not want the Passaic hospital without the Paterson hospital.

The surprising developments, after months of negotiations, left officials in Passaic scrambling and some hoping that St. Josephs board would reconsider its decision.

The finances at St. Marys are precarious, with less than a weeks cash on hand, according to several sources. The hospital emerged from bankruptcy just two years ago, and received $9.5 million in state aid this year. One-third of its patients have no insurance or are underinsured.

State health officials will meet with St. Marys soon to discuss their options as they work to address the health care needs of their community, according to a statement from Dawn Thomas, a spokeswoman for the department.

Assemblyman Gary S. Schaer, a Democrat representing the city of Passaic, who is also its City Council president, said he was concentrating on getting this deal done, and hoped the St. Josephs board would reconsider its unfortunate decision.

I do believe its to St. Josephs benefit, as it is to St. Marys benefit to recognize the advantages of partnership under the Ascension banner, he said. This will be better for everyone. In the long term, this is a necessary step.

Ascension had hoped to create a network of seven for-profit Catholic hospitals in New Jersey, and planned to start with St. Josephs Regional Medical Center in Paterson, St. Josephs Wayne Hospital and St. Marys. It had promised in its presentations to the boards at St. Marys and St. Josephs to pay off the bonds of both institutions, totaling more than $278 million. It had also pledged to fully fund their underfunded pension liabilities and invest hundreds of millions of dollars in their physical plants, sources said.

Tax revenue

The change to for-profit status would have brought millions in new tax revenues to Paterson, Passaic and Wayne, as well as the Passaic County government.

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Future uncertain for St. Mary’s Hospital after deal falls through