Financial Questions Arise in Plan to Shift UMDNJ to Rutgers

Colleen O'Dea | March 28, 2012 | Budget
Union’s white paper examines how universities will split outstanding debt

A union representing healthcare workers is raising more concerns over the proposed restructuring of higher education in New Jersey, including questions about the apportionment of debt between Rutgers University and the University of Medicine and Dentistry of New Jersey.

A white paper titled “The Reorganization of UMDNJ: Getting it Right” by the Health Professionals and Allied Employees (HPAE), representing 4,000 nurses, medical researchers, and other health professionals at UMDNJ, poses 65 questions it contends need answering before the university should be carved up, with pieces given to Rutgers. The 15-page report also includes more details about the schools involved than the 57-page document by the UMDNJ Advisory Committee, which suggested the changes.

“HPAE put the backgrounder together to raise the questions that we thought were either overlooked or minimized by the advisory committee,” said Jeanne Otersen, the group’s policy director. “What the report called details, we call substance. We would support a report that lived up to the goals of collaborating among universities, medical schools, and University Hospital to advance medical education, research, and healthcare services — but we think the report didn’t achieve that.”

One major area of concern is the financial aspects of the proposal, on which the committee was silent.

The white paper lists $664 million in bond debt currently held by UMDNJ and $40 million in debt service payments last year and concludes “the majority of the debt is difficult to parse out” since more than half of it is considered “system-wide.”

Under the committee’s proposal, which is supported by Gov. Chris Christie, Rutgers-New Brunswick would take over Robert Wood Johnson Medical School — founded in 1961 as Rutgers Medical School but later affiliated with UMDNJ — as well as the School of Public Health, and the Cancer Institute of New Jersey. RWJ’s debt is $58.3 million and the Cancer Institute’s is $89.6 million. The lion’s share, $349 million, was considered system-wide.

Moody’s credit rating agency issued a “special comment” last month, following the release of the UMDNJ Advisory Committee’s report. In it, the agency stated that “at least a portion of UMDNJ’s outstanding debt would have to be paid off or defeased.” Moody’s also noted that the university, which it has given a negative outlook that means a downgrade is likely, has loaned University Hospital in Newark $85 million.

Last week, the Rutgers Board of Trustees heard from the university’s chief financial officer about the debt. Several trustees reportedly were unhappy with the lack of information available, including how much of the debt the university would assume and how it would affect Rutgers’ credit rating. Rutgers has hired a financial consulting firm to help sort out questions regarding bonds and debt.

Greg Trevor, a Rutgers spokesman, said the issue does not just involve UMDNJ bonds, but also more than $900 million in Rutgers bonds.

“These issues are significant but solvable,” he said. “Rutgers will continue to work with our consultants, UMDNJ and state officials to address these issues.”

UMDNJ, whose remaining schools would be known collectively as the New Jersey Health Sciences University, doesn’t have any answers yet, either.

“We are not yet aware of what would happen to the debt,” said Jeffrey Tolvin, a UMDNJ spokesman.

Michael Drewniak, Christie’s spokesman, said officials from Rutgers, UMDNJ, the governor’s office and the office of the secretary of higher education have been meeting weekly on the transfer of the three UMDNJ units to Rutgers.

“During those meetings and conversations, a number of integration issues have been identified, including UMDNJ’s bonded indebtedness,” Drewniak said. “Rutgers and UMDNJ have both hired independent financial consultants and attorneys to look at the issue, and those experts, along with the governor’s office, have been working collaboratively to ensure that post-integration, debt is appropriately apportioned between UMDNJ and Rutgers and that UMDNJ is stronger financially than it was prior to the higher education restructuring.”

Otersen balked at the idea that the details of the implementation should be hammered out behind closed doors.

“We believe instead that the NJ legislature, community leaders, patients, faculty and health professionals need to be engaged in the process to shape the future of these institutions,” she said. “The [committee] report merely hands off implementation to ‘integration teams’ without even legislative oversight.”

HPAE is one of 11 groups that have formed the Higher Education Healthcare Coalition to monitor the reorganization. They are seeking to ensure that the plan improves collaboration among public healthcare facilities and educational institutions, increases funding for medical research, improves access to health services, at least maintains access to quality and affordable education at all the schools and maintains the jobs and employment conditions for all staff.

At a hearing by the joint Senate and Assembly Education Committee held earlier this month at UMDNJ, Kathleen Hernandez of Local 1031 of the Communications Workers of America said moving the medical schools and cancer institute to Rutgers “is not as simple as changing the letterhead or a sign on the door.”

She said unions have sought to be included in the integration team looking into human resources issued but been denied.

“There are hundreds of positions that are in limbo,” Hernandez said. “These issues will take more than a few months to work out and without legislation clearing up the finance and funding issues, the merger should not take place.”

Debt is only one aspect of the reorganization that the advisory report shortchanged, said Otersen.

“It ignored the costs — not only of implementation, but the need to fully fund our schools and University Hospital,” she said. “The merger in some ways is really a split into three institutions, and we believe can weaken Newark unless certain issues are addressed, like commitment for funding. The whole issue of private partnership is left vague — is it a privatization scheme? Will there be oversight?”

Newark Mayor Cory Booker is among those concerned about how the reorganization could hurt the university and the hospital, which has 519 beds and is the major healthcare provider to the city’s residents, including many who are low income and receive charity care or are on Medicaid. The plan proposes a public-private partnership, likely with Barnabas Health, to operate the hospital.

A specific reorganization proposal remains elusive.

Christie said yesterday that his chief counsel and the state attorney general’s office are reviewing an opinion by the Office of Legislative Services that the authority to put forth a reorganization plan rests with lawmakers and not the governor.

“We are still talking to the legislature about the best, most effective way to accomplish this merger,” Drewniak said. “Meanwhile, the affected institutions have already begun planning.”

That may be true of Rutgers-New Brunswick, UMDNJ and Rowan University, but not of Rutgers-Camden. The South Jersey portion of the reorganization would have Rowan absorb the state university’s Camden campus, a move opposed by students, faculty and Chancellor Wendell Pritchitt.

Otersen said the HPAE agrees that the reorganization should proceed through legislation and “cannot see how this ‘happening’ by July 1 is either possible or wise.”