Meadowlands Hospital’s Tangled Web of Questionable Business Practices
Million-dollar fines, acrimonious union relations, and investors who have made a fortune while some critics argue that quality of care has dipped precipitously …
This is the second in series of stories investigating Meadowlands Hospital Medical Center. The first articleAmeriMama, the facility’s troubled birth-tourism program. The final story its close ties to powerful NJ politicians.
New Jersey officials appeared unfazed by Meadowlands Hospital Medical Center’s involvement in AmeriMama — a controversial birth-tourism business — when they issued the facility aearlier this year. The program encouraged pregnant Russian women to come to the for-profit hospital to deliver babies who are automatically eligible to be U.S. citizens.
But AmeriMama is far from the only indicator that something is awry at MHMC .
The 230-bed Secaucus hospital has been cited for various health and safety violations over the years and hit with escalating state fines totaling nearly $200,000 for late or missing financial filings, several of which are still outstanding. It accumulated roughly $4.5 million in federal tax liens, battled two national health insurance providers in court, and has been locked in a long-running dispute with the state’s largest healthcare union.
Meanwhile, the hospital’s investors reaped millions, and managed to tuck away even more by having the facility spend heavily on products and services offered by other companies they control.
But a number of healthcare advocates, legislators, and labor leaders said “birth tourism” is only the latest in a long history questionable business practices undertaken by the facility’s current owners. For years critics have sought to increase state oversight of for-profit facilities like Meadowlands Hospital, which aren’t necessarily subject to the same disclosure standards that apply to nonprofit organizations. (Today a dozen of New Jersey’s 72 acute-care hospitals have for-profit status. Ten years ago there were only a few.)
A Timeline of MHA LLC's Ownership of Meadowlands Hospital Medical Center
Now, after six years of financial struggles, labor disputes, and a significant decline in patient population, a group has submitted a proposal to buy the troubled hospital. State officials are reviewing the proposal, which has yet to be made public.
MHMC was purchased by a group of investors, several with ties to other embattled healthcare practices, for $17.6 million in December 2010. State approval required them to continue operating a full service facility for at least seven years.”
Almost as a first order of business, the new management cut nurses' hours and allegedly withheld employee wages in order to balance the budget; sold the physical facility and its grounds in exchange for a long-term lease; and aggressively pursued lucrative same-day surgeries, for which they charged rates far above average. One report found that, a few years after the sale, Meadowlands Hospital was the most expensive hospital in the nation.
Tamara Dunaev, the board’s vice chair, and chairman Dr. Richard Lipsky — two of four principal investors — have blamed the previous owners for many early problems and said bad blood with the union and negative press coverage have made the hospital’s recovery a challenge. The union, Health Professionals and Allied Employees, which represents some 300 workers there, said that management improperly withheld wages and benefits and even fired some workers; the case led to a federal National Labor Relations Board case, in which a decision is pending.
At the NLRB trial this spring, Lipsky blamed union officials for triggering government inspections and collaborating with insurance companies and elected officials to disparage Meadowlands Hospital. “Their goal was to take us down,.”
“Meadowlands became a scapegoat,” Dunaev said. “The hospital census has dropped because of this. The patients were refusing to come to the hospital when the ambulance picked them up for emergencies.”
Hospital staff declined to speak publicly about conditions at the hospital out of fear they would be fired or otherwise punished, but sources said the new owners treated staff poorly, leading doctors to leave and resulting in a decline in patient numbers. Vendors left over payment disputes, they said, not what they read in the papers.
The hospital is currently owned by MHA, a limited-liability corporation with a complex patchwork of owner groups that feature four principals — Pavel Pogodin, Anastasia Burlyuk, Lipsky, and Dunaev — and more than two-dozen smaller investors. Lipsky and Dunaev are particularly active in managing the hospital. These four principals are considered “preferred investors” and, as such, are guaranteed monthly payments of $160,000 apiece, plus other revenue.
The ownership group has a checkered history with regulators. Lipsky, a Russian-born anesthesiologist, operated an ambulatory-surgery center cited by state officials for multiple safety violations and for delinquent in paying state fees. Lipsky has also made news for his involvement with a controversial rapid drug-detox practice.
That history didn’t stop the state from approving theallowing MHA to purchase the facility. The CN process is designed to determine if potential owners have the resources and experience to safely and effectively run an acute-care hospital.
“The Department did take track-record information involving the current owners into account,” Department of Health communications director Donna Leusner said.
But, in granting the CN, the department established certain conditions for the new owners. It required they maintain the current level of clinical services for at least seven years; establish a board that includes community members and doctors not employed by the hospital; adopt a policy to prevent conflicts of interest; develop an umbrella community advisor group; regularly report financial data on the hospital and principals involved; and meet with state officials at regular intervals. It also called on the hospital to retain most of the existing staff, with the same level of benefits, and to maintain then-current health insurance contracts.
From red to black
When MHA purchased the Secaucus facility six years ago it the deal involved $5 million in loans from companies associated with that previous owner, Liberty Healthcare – covering nearly a third of the total purchase price. MHA did not repay these entirely and the dispute ended up in court, resulting in a nearly $3 million judgment against the Meadowlands group.
A representative for Barnabas Health, which has since taken over Liberty, declined to comment on the sale due to ongoing litigation with Meadowlands.
New management quickly sought out savings. In 2011, they reduced the hours nurses worked by as much as 50 percent and increased by nearly 900 percent the number of potentially lucrative same-day surgeries, according to a union analysis. Eventually these accounted for more than 40 percent of the hospital’s total gross revenues. State regulators eventually questioned the hospital’s high number of lucrative auto insurance claims.
“Almost as soon as MHA took ownership, pain-management procedures for auto accident victims took center stage at the hospital, preempting other procedures in the operating rooms,” HPAE members wrote in aon Meadowlands Hospital.
Tamara Dunaev: Second in Command at Meadowlands Hospital
Tamara Dunaev is vice-chair of the board of directors of Meadowlands Hospital.
Her job entails "overseeing overall the performance of the hospital's all departments and managers," she told a National Labor Relations Board hearing. She has held this job since MHA (the company that owns MHMC) took over.
The ownership of MHMC and its relationships with other similar organizations and principals are convoluted. Dunaev, 59, is a manager of ATRP LLC, which is a majority owner of MHA. She is also a majority owner of a company that is part owner of ATRP. And she, like the other three principals, is a manager of Veritas Health Management LLC, the company that hires paraprofessionals to work at Meadowlands.
Dunaev is also associated with a number of other businesses:
She incorporated Bergen Ambulatory Surgery Center in 2004 and was on its board of directors.
According to the hospital's financial audits, MHMC paid more than $1.3 million for equipment from Bergen Ambulatory Surgery in 2010 and 2012. Some of that had been purchased by BASC with a bank loan and the bank had a lien on the equipment. The hospital assumed the loan payments. It also still owed BASC about $800,000, including interest, at the end of 2013.
The same Saddle Brook address address was listed as the headquarters of Vogster Entertainment LLC, of which Dunaev was president when it was registered in New Jersey in 2005. Vogster was a video game company that released three titles. The hospital paid Vogster more than $3 million between 2010 and 2013 for computer hardware, software, website development, and support for electronic medical records and billing. Dunaev, a Ukrainian émigré cancelled its New Jersey registration in 2011. Days later, MHMC principal Pavel Pogodin, the husband of Dunaev's partner in BASC and Vogster Entertainment, registered Vogster Online LLC in New Jersey.
Records show that Dunaev is or was involved with five other businesses unrelated to the hospital.
With her husband Vladimir, Dunaev lives in a Franklin Lakes home they bought in 2008 for $3.34 million, property records show.
Other ideas never got off the ground. Early in 2011, the hospital entered a $1.25 million contract to build a geothermal project on site. More than $760,000 of this was paid off by the time the ambitious undertaking, which might have saved on energy costs, but the project was abandoned December that same year.
In November 2011, the hospital sought state permission to treat individuals with autism using a controversial hyperbaric oxygen therapy -- and purchased a $200,000 piece of equipment for the procedure. Autism experts criticized the practice as being ineffective and possibly dangerous and the hospital eventually withdrew its application. The treatments were very expensive and not covered by insurance.
Insiders said the owners pursued new revenue streams in many aspects of the operation; adding parking fees, charging for staff meals and Internet service. Vendors had trouble getting paid, according to one source, which occasionally led to shortages of bed linens or similar supplies.
These efforts seemed to pay off, at least for those in control. Documents filed with the state show MHA projected awith a $10.5 million profit its first year. The investors were soon being paid dividends – totaling at least $9 million so far - and the facility has spent nearly $8 million to buy medical equipment, computer systems and other goods and services from other companies controlled by its owners.
But state officials have defended what they describe as their unprecedented oversight of Meadowlands Hospital. DOH’s Leusner said that, in considering the hospital's re-licensing this spring, " the hospital did not have any significant quality-of-care or safety problems, and none of the deficiencies cited at Meadowlands during complaint surveys resulted in enforcement action.”
In addition to assessing hundreds of thousands of dollars in late penalties, the state monitors the hospital’s board meetings and maintains contact with the financial consultant Meadowlands hired two years ago at the department’s urging, Leusner said. The hospital remains delinquent in submitting financial data from 2014 and 2015.
Labor relations, safety violations
While the HPAE reached a three-year contract with the new owners before the sale was finalized, the relationship quickly soured. Within the year, nurses and other Meadowlands staff were filing regular reports citing safety violations, which prompted visits from government regulators.
Inspections in 2011 found a variety of concerns: an operating room not properly cleaned; medicines and therapies not correctly administered; and problems with preadmission testing, patient consent forms, and discharge plans. Plans were created to address these findings, but problems continued.
in 2014 discovered poor tracking of medical mistakes; error-prone systems to control drug dispensation; problems with nursing oversight; and physical concerns like peeling paint, exposed wires, and dirty surfaces. Visits the following year revealed poor recordkeeping, expired food, and deteriorating building conditions, according to published reports.
An analysis of information filed by the hospital last October, conducted by a nonprofit watchdog, the Leapfrog Group, suggests the hospital has had some quality-control problems. Data showed patients at MHMC suffered a very high rate of bedsores, catheter infections, and injuries as a result of hospitalization.
Leapfrog also issues a generalevery six months based on a compilation of data. Meadowlands received a “D” in the April report; only Saint Michael’s Medical Center, another for-profit facility, in Newark, received a lower grade, an “F.”
A low census – on average, only 16 percent of its beds were full in 2015 – only compounds these concerns, healthcare advocates said. The fewer patients a facility treats, the harder it is to maintain high-quality care.
The hospital has had contentious relationships with several private insurance companies. A 2012 beef with Aetna ended up in federal court; eventually Aetna agreed to pay $7 million of what the hospital claimed was $39 million in expenses.
A 2013 dispute with United Healthcare landed in state court when MHMC claimed United owed $200 million; arbitration followed and in 2014 a judge barred the hospital from pursuing collection efforts.
During the NLRB trial, Dunaev and Lipsky repeatedly stated that hospital management was doing its best to keep the doors open at the struggling facility, to protect workers' jobs and patient access to care. Lipsky also downplayed the inspection reports and questioned the impartiality of Leapfrog, which he accused of being influenced by union leaders.
“People in Secaucus love us,” he insisted. “We’ve increased the scope of services since we bought the hospital.”
Questions of disclosure and delay
While the investors made money, public scrutiny of the hospital escalated in the years following the sale. Observers questioned how the new owners were able to turn a profit so quickly and a lack of current information about the hospital’s finances and operations has further fueled the confusion.
Some have blamed state officials for not forcing the owners to disclose what the law requires. “The Department of Health is not even enforcing the rules that they have,” HPAE President Ann Twomey said.
The Certificate of Need calls on the hospital to file audited financial reports each July; MHA failed to submit the first three on time and has yet to provide numbers for 2014, which were due more than a year ago. The 2015 report, due last month, is also outstanding.
Hospital officials, who have blamed computer-technology problems for delaying several years worth of filings, have paid an increasingly high price for these delays – with fines eventually reaching $6,000 a month in April.
Meadowlands leaders have unsuccessfully appealed the latest state fine and argued that they should not be forced to submit more financial data, as required by law, until the state agrees not to release key details to competitors, critics, and the media through the Open Public Records Act. State officials denied that request and told MHMC the fines are still due.
The reports that have been filed – for 2010 through 2013 – raise a number of questions.. There is the $18 million “sales-leaseback” deal MHA struck with Rosdev Hospitality, a Canadian real estate developer that owns a 300-bed Secaucus hotel, now under the Clarion banner, less than half a mile from the hospital’s front door. The deal gives MHA a 98-year lease to operate a medical facility onsite.
Other questions relate to payments made to outside entities controlled by MHA’s owners. The hospital paid nearly $1.25 million to Bergen Ambulatory Surgery Center for medical equipment; BASC is owned by Dunaev and Pogodin’s wife, Oksana Matyukhina.
After blaming years of filing delays on computer issues, the hospital spent nearly $3 million to have Vogster Entertainment LLC develop software, provide computer hardware and maintain the hospital website. Vogster’s main business is violent videogames with titles like “Bleedout” and “Gang Wars.” Vogster investors include Dunaev and Matyukhina.
The hospital also paid $3.1 million overand to Veritas Healthcare Management, which is owned by the four principal investors, state filings show. Veritas was hired to manage the hospital’s employee healthcare plan, TruPlan, and eventually to handle on-call physician services.
Opportunities for change, new oversight
The state urged the hospital to hire an experienced financial consultant and, in the spring of 2013, Meadowlands tapped Executive Resources, a company with offices in New Jersey, Louisiana and Florida, to review its finances and create a strategic plan. The news was not encouraging.
In delayed financial reports filed over the next 18 months, the consultant confirmed that Meadowlands faced cash-flow challenges and had no formalized review or budgeting process. In March 2014 it projected that the hospital would need four years to stockpile enough cash for just 15 days of regular operation, an important measure of hospital financial health.
In response, the state asked MHMC to outsource payroll and billing functions to “help ensure that payroll-related taxes will be paid and revenue streams are stable and well managed,” according to a 2013 penalty notice.. Leusner said the hospital did outsource both payroll and billing functions, but has since brought the billing back in house.
Concerns about the hospital’s operations prompted the state Legislature to approve a measure in 2012 that would have required for-profits to file the same financial information as nonprofits.
But Christie issued a conditional veto that August, suggesting the measure was “overreaching into the business arena.” The Legislature enacted Christie’s, which required DOH commissioner O’Dowd to make recommendations on hospital financial reporting — but didn’t force financial disclosure.
A new shot at turnaround came in May 2014, when the hospital hired former state Banking and Insurance Commissioner Thomas Considine as the president and CEO — the third person to take the reins since 2010. At the time, hospital board chairman Lipsky welcomed Considine as a “change agent” who would “further transform the hospital.”
Ironically, Considine – who declined to comment for this series - made headlines during his tenure as insurance commissioner, 2010 to 2012, for limiting the revenue hospitals could collect from auto insurance claims. During the discussions, he pointed to MHMC as the prime offender for the high collections it had built around such practices.
But Considine’s tenure at Meadowlands Hospital was brief. By August 2014 the role had been transferred to Karsos, who had served as the Chief Nursing Officer since the purchase.
At press time it was learned that a new group of investors have submitted a proposal to buy Meadowlands Hospital Medical Center. No other information was made available.
Meadowlands’ leaders declined repeated requests for comment made through their longtime attorney, in person, and in calls and emails to the hospital’s Chief Executive Officer, Felicia Karsos. The hospital’s lobbyist, Princeton Public Affairs, said only that hospital owners looked forward to working with state officials on the sale and that the result will benefit patients and the community.