Officals agreed to sell the hospital to B. Reddy Dandolu, a cardiovascular surgeon with the University of Pennsylvania Health System. They also secured a $200,000 loan from Hammonton to help cover the $500,000 payroll shortfall.

But to get that money, the Town Council said, the hospital had to find at least 10 people from its board of directors, its foundation's board of directors or the general public willing to help cover the cost of the loan if it defaults. Five people on each board agreed to back the loan.

"It's a way of holding their feet to the fire," said Mayor John DiDonato, who pledged the first $20,000. "And it would be a show of good faith to our taxpayers, that the people responsible for the negotiations are willing to do what it takes to make this thing work."

If the hospital had not found the necessary donors or the purchase had not gone through, the only options left would have been to close the facility completely or strike an agreement with another health care provider to keep just the emergency room open, board member Greg Morano said.

This could have happened as early as Monday.

"We've asked the Department of Health to give us to the end of the business day on Monday to get this done," said Michael Sandnes, the hospital's interim chief restructuring officer, earlier in the day. "If we don't, they would send (representatives) here who will overrun the board with the sole intention of divesting the facility."

The hospital also put a property on Philadelphia Avenue in Egg Harbor City up for collateral, but the council's concern over whether the building would fetch $200,000 in the current real estate market prompted the second stipulation.

Donna Leusner, a spokeswoman for the state Department of Health and Senior Services, said the state was already closely monitoring patient care at the hospital.

"Our primary concern is to ensure that the community has access to health care. The Department of Health and Senior Services sent inspectors to the facility (Friday) to monitor patient care and will continue to do that throughout this process," said Leusner, who added that the hospital's 45 patients would be relocated only if the situation gets extreme.

***

This mess was almost avoided entirely.

The hospital had a signed letter of intent Thursday from the operators of Bayonne Medical Center to take over the facility. It would have saved the hospital and enabled it to cover the payroll and taxes it owed.

But that multi-million dollar offer was taken off the table after one of Kessler's lawyers, Stephen Packman, got into a "heated exchange" with Bayonne's attorney over the agreement, according to hospital officials.

"Our attorney felt that there was no way the agreement would get the approval of the bankruptcy judge," Sandnes said. He would not say what Bayonne offered for the hospital.

Board member Nick Cashan said the deal was also dealt a blow when Bayonne bumped its fees from $500,000 to $3.5 million, prior to the lawyers' argument.

The board was still willing to move forward with the deal against the advice of its attorneys, Morano said, but Bayonne withdrew its offer.

So on Friday morning, employees showed up to collect their paychecks only to be told, according to one nurse: "Sorry. Maybe next week."

"This is a very severe, dire and very unfortunate situation," said Sandnes, who explained this to groups of employees as they arrived for their shifts. "There were a lot of tears in the room and a lot of anguish."

But with the exception of one employee, all the staffers agreed to continue working through the weekend in order to give the board enough time to save the hospital, Sandnes said.

"I really can not say enough about the hard work, professionalism and dedication of this hospital's staff (and board members)," said Sandnes, who was hired Tuesday to take over for former Chief Executive Officer Jim Rossi. "I can't thank them enough."

If the deal had not gone though, Sandnes said, the hospital would have had to turn its focus to vigorously trying to collect enough of the $25 million in receivables it is still owed, just to cover the tardy payroll. But Sandnes said only about $5 million could realistically be collected.

Peter Gould, the executive vice president of District 1199C of the National Union of Hospital and Health Care Employees, which represents a bulk of the hospital's workers, called the payroll debacle "unique."

"In 30 years doing this, I've never had a situation where workers didn't get paid due to something like this," Gould said Friday morning. "None of our members are happy. But their tolerance has been varied based upon their ability to handle this kind of upheaval."

***

According to officials earlier in the day, Dandolu's DBR Healthcare LLC. will purchase Kessler for $7.5 million.

A $300,000 down payment will be used to pay the rest of the payroll costs, and a $2 million bridge loan will help the facility operate until the deal closes. The parties will have 75 days to close the deal, officials said earlier.

At the emergency meeting the Town Council called Friday to vote on the loan, the council questioned whether this was the best deal for the hospital's future. Dandolu has never run a hospital before and the $7.5 million falls well short of the what Bayonne originally offered, officials said.

Dandolu attempted to buy Plainfield's similarly troubled Muhlenberg Regional Medical Center in 2008, but that deal eventually fell through, Kessler officials said.

"This, as was the case with the previous deal, is a deal of last resort," Morano said. "We are out of time and out of options."

But Dandolu, a Mount Laurel resident, claims that while he has never directly overseen a hospital's operations before, his family operates several dozen hospitals worldwide, including the California-based Prime Healthcare Services Inc., which he said has 14 hospitals to its credit.

"The main thing we want to do is increase the amount of doctors with the good connections we have," Dandolu said via telephone, adding he is already in negotiations to affiliate Kessler with Temple University Hospital in order to attract more doctors to Hammonton. He said he would keep Kessler an acute-care hospital. "We want to double our physicians and double our patients. We can have success."

Dandolu said he signed a letter of intent at 4 p.m., but as of 8 p.m. he was still waiting for the hospital's board to make a decision.

E-mail Robert Spahr:

RSpahr@pressofac.com

Anonymous wrote:

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Sorry I have to change the subject for a minute.  Why does a Democratic blog which is representative of a local party that has no chance in hell of getting anywhere  in such a overwhelmingly Republican environment start putting Republican weekly addresses on its website?  Once again, as a life-long  Democrat, I will be avoiding the locals as I did in this last election because of your unwillingness to support the Democratic nominee for President/Vice President. Good Luck! When and if you ever find candidates who support the party, I might reconsider.

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