State Urges Sale of Beleaguered Meadowlands Hospital

Lilo H. Stainton | December 6, 2017 | Health Care
Despite initial hiccups in the process, healthcare panel backs recommendation

New Jersey officials are now one step away from approving the sale of a controversial for-profit hospital in the Meadowlands to a businessman who said he has the right experience, leadership team, and assets to turn the troubled facility around.

After an initial tie vote, the State Health Planning Board approved a recommendation from the Department of Health to support the $12.2 million deal for Meadowlands Hospital Medical Center. That move comes despite warnings from hospital union leaders and others who have urged the state to further investigate the current hospital books as well as the buyer before awarding the application.

The board’s endorsement clears the way for final approval from the acting state health commissioner, Christopher Rinn; while Rinn technically has four months to make the call, some said his decision could come any day.

Several members of the board — which advises the DOH on hospital sales, expansions, and other facility changes — echoed concerns raised by healthcare union leaders and others about the current ownership and their operations of MHMC. The hospital has been struggling with an average occupancy rate of 19 percent, fines of more than $400,000 for failing to file annual financial disclosures required by state law, and low care-quality scores.

But two weeks ago, the board voted to give prospective purchaser Yan Moshe, who owns two surgical centers in Bergen County, a chance to turn the hospital around. While some members had raised the prospect of closing the 204-bed facility at first, the panel decided that approving the sale was the best way to protect the hospital and its programs.

Deep pockets

“I think we’ve got a prior owner who obviously did a lot of things that were unconventional and is paying the price for that,” said board member and consumer representative Henry Kane, adding that Moshe appeared to have a good track record and “a very deep pocket,” based on his application. “But I think shutting (down) or denying this application will be a death knell for that hospital and I’m very concerned for the underserved population in that area,” Kane added.

While patient volume at the Secaucus hospital has plunged in recent years, community members and town leaders emphasized the important role the facility played at a public hearing in October. Members of the police and fire departments praised MHMC and the emergency medical service it operated for the town and longtime residents recalled the quality care they have received there over the years.

But union officials, employees, and other stakeholders have grown frustrated with the current owners, a complex corporate entity led by Dr. Richard Lipsky and Tamara Dunaev, which purchased the near-bankrupt facility in 2010. The owners have since launched a number of unorthodox initiatives to boost revenue, including a largely unsuccessful program to entice Russian mothers to give birth at the facility — a process that would result in American citizenship for the baby and a cash infusion for the hospital.

Working tirelessly

While Lipsky and Duneav have said they have worked tirelessly to improve the hospital’s operations ever since, state records show they may also have benefitted; the principal owners collected nearly $9 million and the hospital paid another $8 million to companies associated with the ownership group for medical equipment or hospital services. The owners have also been locked in litigation with a number of health insurance plans, were assessed $4.5 million in federal tax liens, and have been ordered to pay what could be $2.5 million in back pay and other lost benefits as a result of a union dispute.

In the spring, Lipsky and Duneav’s company started negotiating with Moshe to sell him the hospital. The deal calls for the current owners to provide $7.2 million in financing and for Moshe to kick in $5 million of his own; he has also pledged to invest another $3 million in equipment and facility upgrades over the first five years. (According to his application, Moshe has a net worth of nearly $134 million and is looking to borrow more to help with cash flow early on.)

But leaders at the Health Professional and Allied Employees, the union that represents nearly 300 hospital workers and has monitored the facility’s operations over the years, said it is hard for state officials — or the potential purchaser — to truly assess MHMC’s financials without reviewing the audited financials the current owners have refused to submit.

“Neither the DOH, nor the community nor our elected officials, nor apparently even the proposed buyer knows the nature and extent of the hospital’s assets, liabilities, revenue sources, and expenses,” HPAE president Ann Twomey testified at the public hearing. (The state has yet to receive audited reports for 2014, 2015, and 2016.)

“To allow such a fundamentally incomplete (certificate of need) application to proceed to public hearing makes a mockery of the CN review process,” she said, referring to the state’s protocol for transferring hospital ownership.

Expanding the business

John Grywalski, the hospital’s acting CFO, who is now working with Moshe, said at a later meeting that he had reviewed all sets of financial reports and the month-to-month cash flow suggests there is actually opportunity to expand the business. And state officials insist that the law governing hospital sales requires them to focus on Moshe’s assets, not the finances of the seller.

But concerns raised by the HPAE and others worried some board members enough that an initial vote, taken on November 2, resulted in a 3-3 tie — something observers said was a first for the panel. After the vote, a DOH representative raised concerns about a potential conflict of interest for one member who voted “yes” (vice chair Catherine Ainora, who works for Hackensack Meridian Health, which could be seen as competition to MHMC). The board adjourned to seek legal guidance without a final decision.

The panel reconvened on November 21 and, after additional testimony from Moshe and his team, voted 5-0 in favor of the DOH recommendation to approve the sale; Ainora did not participate in the meeting this time. Several board members, including Susan Olszewski, a consumer representative with two decades of experience on the panel, said they still had concerns about the facility, but felt the sale to Moshe presented the best option for recovery.

Significant hurdle

Olszewski said the low patient census remained a significant hurdle, but she was encouraged by reports from Moshe’s team that they had some initial success in encouraging physicians to return to the hospital; more than a dozen practices had left in recent years, hospital officials said. The new group said it is also making inroads in discussions with insurance companies and hoped it could negotiate in-network agreements with several providers once the sale was approved.

“Without that (current) owner in place, maybe things can proceed — the corrections can be made much more quickly than perhaps I had anticipated,” Olszewski said. She said she was “encouraged” by the updates from Moshe’s team, adding, “I can see that there is a possibility to pull this off.”

The DOH’s recommendation for the sale, presented by director of the healthcare licensing programs, John Calabria, included some 30 recommendations such as maintaining the current level of programs, services and staff, and providing regular reports to the state on any plans to revise these offerings, as well as efforts to expand insurance coverage or contract with new physicians.

Moshe would also be required to convene a community advisory group within three months that could guide the hospital’s work for the first few years. The hospital must also develop and implement a community-needs survey and track and report its local partnerships and other work to improve public health.

In addition, the recommendation outlines the need for Moshe to comply with all existing financial-disclosure requirements and submit the missing audited materials soon after taking over. The hospital would also need to file various other disclosure forms during the year and would be restricted from making deals with other organizations affiliated with Moshe for the first five years.

“While staff have concerns with the consistent low utilization at the Hospital and with the fact that the Applicant is borrowing a significant amount of the purchase price from the current owner,” Calabria wrote, “the proposed transfer appears to be a feasible option for ensuring that MHMC continues to provide healthcare services to the community and to maintain its financial viability.”