A group including former New York City Council member Alan J. Gerson is attempting to block the sale of the former St. Vincent's Hospital campus to a developer, saying they have a deal in the works to establish a full-service hospital at the site.

The group, which also includes attorney Dudley Gaffin and Dr. Robert Adelman, is protesting the closed hospital's proposed $260 million sale of its main Manhattan campus out of bankruptcy to a company controlled by members of the Rudin family because the deal would not bring a designated trauma center back to the area.

"The residents and workers of the west side of Manhattan are desperately in need of a full-service hospital," the protesting group said in papers filed Wednesday with the U.S. Bankruptcy Court in Manhattan.

The objecting contingent, which calls itself the alternative purchaser group, said it will offer a rival bid for the hospital campus unless the would-be buyers commit to opening a hospital at or near the St. Vincent's site.

A large New York City real-estate developer and a local hospital operator and medical school are preparing a deal that would match the Rudin offer but guarantees to build a hospital, the alternative purchaser group said in court papers.

The group did not give specifics of its deal. It only said that it is " presently raising financing" and will submit a written proposal to the bankruptcy court prior to an April 7 hearing to consider approving the Rudin deal.

A spokeswoman for St. Vincent's declined to comment Thursday.

Earlier this month, William Rudin and St. Vincent's Chief Restructuring Officer Mark Toney announced a deal for Rudin's RSV LLC to buy the site and turn much of it into a housing development.

As part of the sale, North Shore-Long Island Jewish Health Care System has agreed to take over the former hospital's O'Toole Building and invest $110 million to create a health-care center that will include a freestanding emergency department.

Toney, a managing principal at turnaround firm Grant Thornton, lauded the deal as "restoring critical health-care services to the west side of Manhattan" while generating substantial funds with which to repay St. Vincent's creditors.

The alternative purchaser group and others, including Coalition for a New Village Hospital, panned the proposal and said it won't address the problem of overcrowded emergency rooms on the city's west side.

The proposed North Shore medical center at the St. Vincent's site would not have the ability to admit overnight patients, so those with serious conditions must be transferred to a larger hospital.

"There is a shortage of emergency room beds in existing hospitals," the protesting group said. "Waits of five to seven hours are not unheard of."

The proposed Rudin deal must be approved by a judge, but it won't be subject to a court-supervised auction as is often the case with bankruptcy sales.

Toney said St. Vincent's did have a rival offer for the site but is seeking approval for the Rudin deal because it can close more quickly and provides a greater return for creditors.

Gaining approval for the Rudin deal also avoid the possibility of a lawsuit connected to Rudin's since-scuttled 2007 deal to redevelop the campus, court papers said.

St. Vincent's, founded more than 160 years ago, filed for bankruptcy last year after failing to find a buyer that would keep its health-care operations open. Since then, it has been selling off its remaining assets to pay back its creditors.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Eric Morath, Dow Jones Daily Bankruptcy Review; 202-862-9279; eric.morath@dowjones.com

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  03-24-11 1502ET
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