Saturday, October 29, 2011

The Case for Selling the Hospital - by Dr. Jonathan Metsch

It was widely reported that the HUMC sale was close to being finalized after Chris Christie came up with an extra $5 million but the parking agreement for the Hospital sale needed to be passed by a 6-3 super majority on Hoboken's City Council at the last meeting in order to wave the 20 day waiting period before it can go into affect. The issue is simply, the Hospital will not have enough cash to wait that long and will in all likelihood be forced to close. As one hospital official put it "no parking, no hospital".

Without this parking agreement in place on the hospital deal can not be finalized. Mayor Dawn Zimmer is on record saying the hospital will close because it does not have the funding to make the next payroll. If that were to happen the hospital be insolvent and Hoboken might have to declare bankruptcy. 1200 Hospital jobs would be lost, there would be massive municipal layoffs and tax increases.The City of Hoboken could also be put under state supervision.

The Council of No minority of Beth Mason, Tim Occhipinti, Terry Castellano, and Mike Russo  that have been obstructing the Mayor on this deal from day one seem poised to kill the deal. A special meeting this Sunday October 30th at 6pm at Hoboken City Hall has been called and one of them needs to change their mind or the likelihood of this deal falling through is pretty high. Mike Russo accuses the Administration of crying wolf but most intelligent taxpayers that The Hoboken Journal has spoken to are aghast at the shear recklessness and lack of fiduciary duty the Council Minority have displayed here.

Dr. Jonathan Metsch who has served on this HUMC Board for several years for free chimes in with his case for saving the hospital. Read below for his editorial

The Case for Selling the Hospital - by Dr. Jonathan Metsch

On October 7th a federal bankruptcy judge in Newark approved both the settlement agreement between all interested parties, and the sale of the Hospital.

On October 21st, New Jersey's Commissioner of Health and Senior Services issued a Certificate of Need for the transaction, the final necessary regulatory approval to transfer ownership of the Hospital.The transaction's path to closing has been undermined by the City Council minority, where four members have ignored a public policy imperative to get the sale done, and turned the process into a political confrontation focused simply on undermining the Mayor - even if it triggers a the fiscal calamity,that is, an immediate call on the $52 million in City guaranteed bonds.

The City took over the failing Saint Mary Hospital in 2007 using a convoluted governance/ management structure that in large part has led to the current problem. Councilman Russo voted for the City takeover, which was meant to be a short term bridging plan.

A few weeks ago Council members Russo and Mason orchestrated a plan to defeat a self-funding $5 million bond ordinance which was part of the Mayor's exit strategy to privatize the hospital and assure its sustainability.

Last week the same Council members blocked immediate implementation of an ordinance allowing the buyer to lease parking transponders, so the new hospital owners could continue to using the parking garage. Now, the sale cannot be closed until the twenty day clock expires.

As a for-profit entity the Hospital will pay property taxes of well over $500,000 per year!

With the recent public disclosure of three other bids it is important to note that the mythology that Council members Mason and Russo planted about the viability of other offers was just political shenanigans. It was easy for the other bidders to "reinvent" their bids after the selected buyers proposal was posted on the Authority and City web-sites. But they were still deficient proposals.

Nonetheless we are right on the finish line. Governor Christie provided $5 million to add to the amount to be distributed to creditors, additional payments were made by the buyer, and numerous other small steps were identified to fill in the funding gap.

In 2007 after Bon Secours signaled its intention to walk-away from Saint Mary Hospital in Hoboken, and a merger strategy failed to identify a partner, the City of Hoboken, enabled by special state legislation, established the Hoboken Municipal Hospital Authority which became the owner and governing Board of the hospital. As part of the change of ownership the City guaranteed $52 million in bonds to be used for capital projects. The hospital was renamed Hoboken University Medical Center. (H.U.M.C.) When the '07 Audited Financial Statement was finally issued in September '09 it showed a $23 million loss, followed by a $10 million loss in '08, both bottom lines further adversely exacerbated by significant increases in accounts payable. The hospital was in a "zone of insolvency."

Mayor Zimmer recognized the challenges facing H.U.M.C. and took immediate action beginning in November 2009 when elected Mayor of Hoboken and became a Commissioner on the Authority.

Immediate actions were taken to stabilize the hospital including:

  •  New Commissioners were nominated including a former New Jersey health system CEO, a regulatory/ compliance attorney, a municipal bond underwriter, a bond insurance executive with extensive restructuring experience, and a health care company in-house counsel - all residents of Hoboken.
  • Where previously there had been only a Finance Committee (which did not publish minutes), and a Quality Committee with only one outside Boardmember on it (chaired by an ex-officio physician member), two new committeeswere immediately establish - Audit and Compliance, and Strategic Planning.
  • Playing catch-up to industry "best practices" an operations/financial performance/ quality dashboard was put in place.
  • Having missed the opportunity in '09, an application was made for Health Care Stabilization funding and the State awarded the hospital $7 million in 2010.

Then Mayor/ Commissioner Zimmer established the following goals for the Hospital:

  •  Ensuring that H.U.M.C. remains open as a full service, acute Care hospital providing access to quality medical care for all Hoboken residents and neighboring communities.
  • Maintaining the almost 1200 jobs of our valued hospital staff.
  • Respecting the commitment of the Hospital's medical staff to the Hospital over the recent challenging years.
  • Addressing the Commissioner of Health and Senior Services regionalization objectives of reducing excess capacity and Hudson County hospitals' reliance on extraordinary State financial subsidies
  • Relieving the City of Hoboken from the financial obligation of the bond guarantee while achieving Hospital sustainability by "privatization," that is finding a new owner with access to capital so the Hospital is able to consider new program development, acquire advanced technology, and maintain the facility.

Next, the Hospital Authority chose a financial advisor and special counsel, an RFP Process was established and implemented, proposals were evaluated, and a "buyer" was selected by a unanimous vote of the Authority. Mayor Zimmer established a close working relationship with the Governor's Office, the Commissioner of Health and Senior Services, the NJHCFFA, and DCA.

Despite overwhelming legacy issues we are on the cusp of guarantying that H.U.M.C. remains an acute care hospital for all residents of Hoboken, those who work in Hoboken's bustling business community, the thousands of commuters who pass through Hoboken every day, the residents of neighboring communities, and maintains its critical role in emergency preparedness.

"Re-Privatizing" the Hospital will bring it stability, access to capital, and the ability to compete in the hospital marketplace without dependency on state subsidies and cash advances. It will also relieve the City of the bond guarantee, freeing up bond capacity for other necessary and immediate infrastructure improvements.

This Essential Safety-Net Hospital management transformation initiative - hospital sustainability through privatization - will be a "self-sufficiency" model for replication elsewhere in New Jersey.

Under the Mayor's leadership H.U.M.C.'s finances were stabilized, sustainability goals were established, an RFP process for the sale was managed, an Asset Purchase Agreement was negotiated with the buyer, and the transaction was successfully moved through bankruptcy proceedings and the Certificate of Need process.

Although the Hospital is a "third-rail" of Hoboken politics Mayor Zimmer had the courage to tell Hobokenites that the Hospital is on the verge of closure unless this sale is consummated immediately.

The choice is simple. Support the Mayor's actions to navigate around the Council minority's obstructionist tactics. Or Hoboken will no longer have an acute care hospital but a financial meltdown instead.