The Hoboken Tax Reform Coalition
Hoboken University Medical Center - Presentations to City Council - November 16th
The financial health of the Hoboken University Medical Center (HUMC) should be of high interest to all Hoboken taxpayers since three years ago, at the urging of the Mayor Dave Roberts, the City Council approved a $52 million bond for initial capital guaranteed by the City of Hoboken (i.e., the taxpayers).
Recently, HUMC released the conclusions of an independent audit that found that poor financial practices at HUMC led to overgenerous financial predictions, resulting in a $22 million loss in fiscal 2008, significantly higher than budgeted. As a result, HUMC CFO, Ron DeVito, resigned.
Kevin Kramer, Chairman of the Municipal Hospital Authority, and Spiro Hatiras, CEO of HUMC, appeared before the City Council on November 16th to explain the poor financial performance and address questions from the Council on how the hospital administration will ensure better fiscal performance going forward.
If you have not had a chance to hear the presentations by Chairman Kramer and Mr. Hatiras, you may find the following summary of their presentations interesting. If the hospital fails, Hoboken taxpayers will, as always, be the ones to pay.
Kevin Kramer, Chairman, Municipal Hospital Authority
Chairman Kramer reviewed the progress made at HUMC in the last three years. He reported that cutting edge technology, such as new MRI’s and ultrasound equipment, has been acquired. He reported that there are more births at HUMC than ever before (but no specific statistics provided) and that HUMC is truly a “learning” institution, justifying the “university” name (but also without any substantiation of this claim). He presented no information on the financial position of the hospital.
In response to a question from the council, Chairman Kramer described the relationship between HUMC and Hudson Healthcare (HH). He explained that State law requires municipal hospitals to be managed by independent, not-for-profit organizations. HH was created to fulfill this state mandate. All employees at HUMC are employees of HH. Chairman Kramer did not address the questions regarding how HH was selected to be the managing body of HUMC and which other healthcare managing organizations were considered at the time.
Councilwoman Beth Mason asked for financial information on the hospital. 2008 losses are estimated at $22 million, with $17.5 million of that total in cash and $5 million in depreciation expense. The budgeted loss for the year was $5 million. The hospital has cash on hand of only $94,000. HUMC and HH are hopeful of receiving state aid to reduce these losses.
Chairman Kramer could not confirm Councilwoman Mason’s statement that the City of Hoboken is required to totally indemnify HH for all HUMC losses. He indicated that he would need to review the contract with the City.
Chairman Kramer could also not explain why the audit results were not reported in a timely way. When asked to share the corrective action plan (CAP) from the audit and all financial information on the hospital, Chairman Kramer said that HH will provide access to any information “allowed under the law”. Kramer confirmed that the HUMC CEO and CFO are responsible for finalizing and implementing the CAP.
Chairman Kramer bristled when requested to come before the Council to present the CAP, indicating that he was too busy to attend council meetings every two weeks.
Spiro Hatiras, CEO, Hoboken University Medical Center
Mr. Hatiras began his presentation by reminding the Council that he has been in office for only 4.5 months. He was taken by surprise by the magnitude of losses reported by the auditors. Auditors concluded that approximately $9.5 million of booked accounts receivable will not be collected. Also, the hospital booked $3.5 million in state aid that was not received in the fiscal accounting year, resulting in a total cash loss of $17.5 million versus the $9 million that he expected when taking office.
When asked about the reasons for the high losses, Mr. Hatiras offered the following factors:
1) The State of New Jersey pledged financial support through a five year strategic plan, but started cutting back support in year two. The Council commented that further cut backs can and should be expected under the new Christie administration.
2) HUMC has poorly negotiated managed care contracts with the major insurance companies. HUMC collects $7 million less than the average of peer hospitals in the region. Partially, this is due to inadequate leverage in the contract negotiations.
3) 17,500 Hudson County residents seek and receive their medical care outside the county. Retention of 50% of these patients would make all Hudson County hospitals profitable. The lack of resident confidence in the quality of care in Hudson County is a key issue which needs to be addressed.
4) The hospital was a failing proposition even as it was being transferred to municipal ownership. The Franciscans gave Hoboken the hospital and provided $13 million in cash. This was still a great deal for them because it would cost $100 million to shut the hospital down.
Mr. Hatiras placed high reliance on receipt of State aid to get through this financial crisis. He was asked on several occasions during the meeting whether there was a contingency plan in the event State aid does not come through, or if such aid is in an amount lower than projected. Repeatedly, Mr. Hatiras indicated that there was no contingency plan, to which Councilwoman Mason called for the termination of Mr. Hatiras and the entire hospital board. Mr. Hatiras responded that he does not care if his employment is terminated and that although he is not obligated to give the City Council any information, he will cooperate in providing information permissible under law and which, in his judgment, will not place HUMC at a competitive disadvantage.
In a final request for a contingency plan, Mr. Hatiras reaffirmed that there is no short-term plan other than fighting for the anticipated State aid, but offered the the following actions should help stem the losses and bring HH to profitability in 2010:
1) Affiliation of HUMC with another (unidentified) major regional hospital which could entail a take-over of the management contract from HH. Discussions are currently underway. Councilman Michael Russo cautioned that care should be taken in such negotiations since similar proposed collaborations with the hospital he believes is involved ended without consummation.
2) Renegotiating the managed care contracts, even if termination of coverage is necessary to get negotiating leverage (similar to Bayonne).
3) Reduction in expenses, not through lay-offs, but through better management of overtime and use of temporary agency workers.
Responding to inquiries, Mr. Hatiras confirmed that Harvey Holzberg (the former CEO of HUMC) and Ron DeVito (former CFO) are both still on the payroll of HH. Holzberg will be paid through year-end and DeVito will be on the payroll until April 2010. There has been much criticism of the high salaries drawn by Holzberg ($800,000) and DeVito and whether the compensation packages are consistent with not-for-profit organizational standards.
Assemblywoman Joan Quigley helped Mr. Hatiras explain how HH came to manage HUMC. She indicated that when St. Mary’s Hospital was being transferred to municipal ownership, it was deemed that there were no qualified not-for-profit management companies to run the hospital, as required by State law. At the request of Mayor Dave Roberts, Mr. Holzberg was recruited to create HH to manage HUMC.
Recently, HUMC released the conclusions of an independent audit that found that poor financial practices at HUMC led to overgenerous financial predictions, resulting in a $22 million loss in fiscal 2008, significantly higher than budgeted. As a result, HUMC CFO, Ron DeVito, resigned.
Kevin Kramer, Chairman of the Municipal Hospital Authority, and Spiro Hatiras, CEO of HUMC, appeared before the City Council on November 16th to explain the poor financial performance and address questions from the Council on how the hospital administration will ensure better fiscal performance going forward.
If you have not had a chance to hear the presentations by Chairman Kramer and Mr. Hatiras, you may find the following summary of their presentations interesting. If the hospital fails, Hoboken taxpayers will, as always, be the ones to pay.
Kevin Kramer, Chairman, Municipal Hospital Authority
Chairman Kramer reviewed the progress made at HUMC in the last three years. He reported that cutting edge technology, such as new MRI’s and ultrasound equipment, has been acquired. He reported that there are more births at HUMC than ever before (but no specific statistics provided) and that HUMC is truly a “learning” institution, justifying the “university” name (but also without any substantiation of this claim). He presented no information on the financial position of the hospital.
In response to a question from the council, Chairman Kramer described the relationship between HUMC and Hudson Healthcare (HH). He explained that State law requires municipal hospitals to be managed by independent, not-for-profit organizations. HH was created to fulfill this state mandate. All employees at HUMC are employees of HH. Chairman Kramer did not address the questions regarding how HH was selected to be the managing body of HUMC and which other healthcare managing organizations were considered at the time.
Councilwoman Beth Mason asked for financial information on the hospital. 2008 losses are estimated at $22 million, with $17.5 million of that total in cash and $5 million in depreciation expense. The budgeted loss for the year was $5 million. The hospital has cash on hand of only $94,000. HUMC and HH are hopeful of receiving state aid to reduce these losses.
Chairman Kramer could not confirm Councilwoman Mason’s statement that the City of Hoboken is required to totally indemnify HH for all HUMC losses. He indicated that he would need to review the contract with the City.
Chairman Kramer could also not explain why the audit results were not reported in a timely way. When asked to share the corrective action plan (CAP) from the audit and all financial information on the hospital, Chairman Kramer said that HH will provide access to any information “allowed under the law”. Kramer confirmed that the HUMC CEO and CFO are responsible for finalizing and implementing the CAP.
Chairman Kramer bristled when requested to come before the Council to present the CAP, indicating that he was too busy to attend council meetings every two weeks.
Spiro Hatiras, CEO, Hoboken University Medical Center
Mr. Hatiras began his presentation by reminding the Council that he has been in office for only 4.5 months. He was taken by surprise by the magnitude of losses reported by the auditors. Auditors concluded that approximately $9.5 million of booked accounts receivable will not be collected. Also, the hospital booked $3.5 million in state aid that was not received in the fiscal accounting year, resulting in a total cash loss of $17.5 million versus the $9 million that he expected when taking office.
When asked about the reasons for the high losses, Mr. Hatiras offered the following factors:
1) The State of New Jersey pledged financial support through a five year strategic plan, but started cutting back support in year two. The Council commented that further cut backs can and should be expected under the new Christie administration.
2) HUMC has poorly negotiated managed care contracts with the major insurance companies. HUMC collects $7 million less than the average of peer hospitals in the region. Partially, this is due to inadequate leverage in the contract negotiations.
3) 17,500 Hudson County residents seek and receive their medical care outside the county. Retention of 50% of these patients would make all Hudson County hospitals profitable. The lack of resident confidence in the quality of care in Hudson County is a key issue which needs to be addressed.
4) The hospital was a failing proposition even as it was being transferred to municipal ownership. The Franciscans gave Hoboken the hospital and provided $13 million in cash. This was still a great deal for them because it would cost $100 million to shut the hospital down.
Mr. Hatiras placed high reliance on receipt of State aid to get through this financial crisis. He was asked on several occasions during the meeting whether there was a contingency plan in the event State aid does not come through, or if such aid is in an amount lower than projected. Repeatedly, Mr. Hatiras indicated that there was no contingency plan, to which Councilwoman Mason called for the termination of Mr. Hatiras and the entire hospital board. Mr. Hatiras responded that he does not care if his employment is terminated and that although he is not obligated to give the City Council any information, he will cooperate in providing information permissible under law and which, in his judgment, will not place HUMC at a competitive disadvantage.
In a final request for a contingency plan, Mr. Hatiras reaffirmed that there is no short-term plan other than fighting for the anticipated State aid, but offered the the following actions should help stem the losses and bring HH to profitability in 2010:
1) Affiliation of HUMC with another (unidentified) major regional hospital which could entail a take-over of the management contract from HH. Discussions are currently underway. Councilman Michael Russo cautioned that care should be taken in such negotiations since similar proposed collaborations with the hospital he believes is involved ended without consummation.
2) Renegotiating the managed care contracts, even if termination of coverage is necessary to get negotiating leverage (similar to Bayonne).
3) Reduction in expenses, not through lay-offs, but through better management of overtime and use of temporary agency workers.
Responding to inquiries, Mr. Hatiras confirmed that Harvey Holzberg (the former CEO of HUMC) and Ron DeVito (former CFO) are both still on the payroll of HH. Holzberg will be paid through year-end and DeVito will be on the payroll until April 2010. There has been much criticism of the high salaries drawn by Holzberg ($800,000) and DeVito and whether the compensation packages are consistent with not-for-profit organizational standards.
Assemblywoman Joan Quigley helped Mr. Hatiras explain how HH came to manage HUMC. She indicated that when St. Mary’s Hospital was being transferred to municipal ownership, it was deemed that there were no qualified not-for-profit management companies to run the hospital, as required by State law. At the request of Mayor Dave Roberts, Mr. Holzberg was recruited to create HH to manage HUMC.
Views: 8
Replies to This Discussion
-
Permalink Reply by scott m siegel on
-
The reason it was called "University" was to take advantage of state/federal matching program. When devised, NJ was supposed to provide $8mm which the federal government would match. After continuing a spending spree for 2 years, soon to former Governor Jon Corzine realized (belatedly) that he was spending NJ into the gutter. In his 3rd year he finally got serious (2 years too late) and terminated the program costing HUMC $16mm in much needed cash. The "real" loss is the $17mm figure, exacerbated by misapplying government funds in 2008 instead of the proper 2009. This is why 2008 is $5mm off and '09 is $5mm better off. More important is the fact that HUMC needs $10.7mm by 12/1/09. They are attempting to acquire "stabilization" funds. This is supposed to be a one time grant. Short of that it is my prediction that the Hoboken taxpayers will provide the difference. This along with union wages (among other issues such as successful tax appeals) that taxes will rise this year. Once again it is the Hoboken tax payer who will get these bills. You forgot to mention that Fred Bado will still be collecting his pay until 4/30/09. Why Holzberg, DeVito and Bado aren't at least doing janitorial work is beyond me. May God have mercy on our souls.
-
Permalink Reply by Toni Tomarazzo on -
I missed the end of the appearance by Mr. Hatiras. Where was this left? Will HUMC be returning to the Council Meeting to provide more info? Is there going to be a separate meeting that is open to the public? I believe there is a hospital BOD meeting next Tuesday? Can the public ask questions?
Thanks
-
Permalink Reply by Eric Kurta on -
There's no date set for another HUMC presentation to the council, so far as I know. Yes, questions may be asked at the hospital authority meeting on Tuesday - 7pm at HUMC. Enter through the front entrance and tell the greeter at the desk that you're looking for the authority meeting in Assumption Hall.
-
Permalink Reply by Kathy L. Mallow on
-
Perhaps Revolt's Steering Committee (in its copious free time), might want to craft specific questions for the Tuesday meeting? As for Eric's report that Chairman Kramer gave a "bristled" statement about being "too busy" to possibly attend further Council meetings if requested.... I'm confused. If the City owns the hospital, isn't Mr. Kramer accountable to the City? He comes when he is called. And answers questions posed. If he doesn't have the answers, he comes back with them when he's requested to. Period. This hospital situation is a disaster. Many citizens believed the City had no business getting into the health care industry, especially our local dysfunctional one. This is no time for citizens to tolerate lollygagging & subterfuge. If the HUMC folks seriously think they'll get more $$ from the State, I'd respectfully suggest they need to be admitted to Bellevue. I hope concerned citizens can attend Tuesday's Board meeting and get some specific information about the "action plan."
-
Permalink Reply by Gene on
-
Since it appears that every time I read about the contracts that were signed by our Councils and Mayors; it seems that they were not thought out or even vetted very well. The hospital seems like a real mess.
To quote Casey Stengel; "Can' t anyone here play this game"
Every contract seems either open ended or quite willing to be accepted and Hoboken gets screwed.
I suggest that all contracts over $500,00 be subject to a referendum by we voters. That is the only way our officials can be held to task to explain the contracts. The hospital blithely states that the leaders who quit "will be paid through December and one through next April. We are sitting on the verge of a $50,000,000 bond which will become a Hoboken City obligation. That does not include the interest. This looks like "THE MOTHER OF ALL POTENTIAL TAX INCREASES".
It is high time we citizens had input into where our money will be wasted!
-
Permalink Reply by Kathy L. Mallow on
-
Gene,
While I share your frustration, with respect, your referendum suggestion is, frankly, logistically onerous.
I'm uncertain how long you've lived here & whether/n what way you may have translated your concerns into community activism.... But if you've had any experience with referenda, you might understand why your suggestion is problemmatic..
Eric Kurta could perhaps explain how it works.
-
Permalink Reply by FAP on
-
Gene you make a lot of good points. However it's worth pointing out that the type of people we have as Mayor and Council majority has fundamentally changed. There's no chance that the current Mayor and Council would have approved the Hospital agreement as is.
We're stuck with the sins of the past and will have to deal with it as best we can.
-
Permalink Reply by FAP on
-
"I'm confused. If the City owns the hospital, isn't Mr. Kramer accountable to the City?"
I believe the sad answer to this question is No. The Hospital is answerable to the Hoboken Municipal Hospital Authority which is a separate and distinct entity from the city. The authority is not directly answerable to the Mayor, Council, or our citizenry. This is the pathetic deal that Roberts and his council negotiated for us.
-
Permalink Reply by David on
-
"However it's worth pointing out that the type of people we have as Mayor and Council majority has fundamentally changed. There's no chance that the current Mayor and Council would have approved the Hospital agreement as is."
Agreed we have much higher quality elected official, but that can change. I don't want to trust in future individuals. I'd say a fundemental aspect of reform is institutional reform.
Gene may be on the right track. If its not part of the large contracts process already, perhaps we should have an outside accounting or legal firm review contracts to ensure that they offer Hoboken reasonable 'outs' in case of professional incompetence, offer adjustments for things like inflation, and don't violate the law in ways that expose us to six/seven figure lawsuits. Obviously department heads and corporation counsel are supposed to do some of this already. Also this can be 'broken' by picking a fly-by-night firm (hey its my brother-in-law's 1 man firm) to do a review.
I'm open to suggestions, but I don't want count on Dawn and the council not all having the spoiled fish at some event.
-
Permalink Reply by Toni Tomarazzo on
-
Hospital Board meeting tonight Tuesday at 7:00 pm in Assumption Hall at HUMC. .Enter the hospital at the front entrance and ask for directions to the board of directors meeting.
-
Permalink Reply by Thrill on
-
The major reason for this failure is ROBERTS, (a fireman turned mayor) who can't expect to make a competent decision, who apparently understood the medical business. The guy will be forever known as the second biggest scam since Madoff! The hospital is unsightly on the exterior and has received below level scores in comparison with other hospitals in NJ. State of NJ will not and should not spend more money after bad money. These budgets and revenue estimates are not going to be achieved. This hospital went from the stone age before the takeover substandard. It is a shame that jobs will be lost, but this is capitalism allowing the allocation of economic resources based on demand. There are too many superior and first class medical institutions in the city and suburbs which HUMC can't compete with. Good luck Hoboken!
© 2012 Created by Administrator.
Powered by 
.
