The city’s Municipal Hospital Authority, which is the governing body set up in 2006 to run Hoboken’s only hospital, is in need of operating funds. State funding for hospitals is expected to be cut in the near future, but no one knows how much funding will be lost, and the hospital depends on the state funding to run operations.
The MHA put an application this month to the state Department of Community Affairs (DCA) to restructure $12 million of the $52 million dollar bond that the City Council passed two years ago to keep the hospital running.
Roughly $40 million of the original bond issue was tax-exempt and therefore restricted for use on capital improvement projects, but MHA officials would like to move $12 million of that money into taxable status so it can be used for current operating costs.
The matter was scheduled to be heard by the DCA’s Local Finance Board at their Trenton meeting last Wednesday, May 14.
However, this aroused the ire of 2nd Ward Councilwoman Beth Mason, because the City Council was not informed of the move. In fact, the timing was unusual because the council had just heard arguments the week before as to whether they should try to “demand” that Mason drop a lawsuit to get more public information out of the hospital – and no one at the meeting revealed that the bond matter was coming up.
Held a month
However, just before the meeting was to occur, the hospital asked the state to instead postpone their application until June.
The reason was that the application was submitted without all of the accompanying paperwork, specifically an audit of their budget covering Feb. 1, 2007 to Dec. 31, 2007.
According to hospital and MHA officials, the audit was not completed in time to give the DCA sufficient time to review it.
Hoboken University Hospital CEO Harvey Holzberg said that the application was “deemed incomplete” by the DCA.
At the same time, Mason had released a statement on Tuesday, May 13, calling for the DCA to halt the bond hearing and “immediately commence a full and comprehensive review into this matter.”
She went on to say that the MHA and hospital officials appeared at a City Council meeting the week before, and no word of the bond restructuring was mentioned.
“The fact that the hospital needs to borrow money to pay its current expenses is a bad sign,” Mason said in the statement.
Mason has been concerned that the taxpayers will have to foot the bill for the $52 million bond if the hospital closes.
She contacted Councilmembers Michael Russo, Dawn Zimmer, Angelo “Nino” Giacchi, Peter Cunningham, and Council President Theresa Castellano before the hearing, and according to Mason, none of them had been made aware of the $12 million bond hearing either.
Last week, George Crimmins, the executive director of the MHA, said that the council does not need to be notified of a restructuring, since they already approved the original $52 million bond issue and the MHA is not asking for any additional funding.
Crimmins said that notice of the application to the DCA was posted in local papers and was available at the hospital and the city clerk’s office. However, a few residents said they had problems obtaining copies.
After the meeting was postponed, Castellano and Mayor David Roberts sent letters requesting that MHA and hospital officials appear before the council at their meeting this coming Thursday, May 22 to explain their situation.
The council meeting is coming up this Thursday rather than Wednesday because of the veteran’s parade this Wednesday.
Robbing Peter to pay Mary
The hospital is just one of many hospitals in the state that could be affected by state funding losses. While Gov. Jon Corzine is cutting funding in the state budget, hospitals already have been strapped due to difficulty getting reimbursement from insurance companies and from Charity Care.
In the last five years, two of Hudson County’s hospitals – St. Francis and Greenville in Jersey City – have closed due to financial problems.
Hoboken University Hospital Vice President Joan Quigley said last week that the hospital is “always under threat from the federal and state level.”
“No hospital can tolerate the cuts being proposed,” she added.
Holzberg, who earns roughly $800,000 per year to run the hospital, said last week that other than the anticipated state funding losses, the hospital is experiencing no trouble.
He said that revenue is up and patient volume is up, but that the hospital has a “cash flow problem.”
According to Holzberg, all hospitals experience payment delays after services have already been given, delays that take 90 to 120 days for the hospital to get paid by patients and their insurance carriers.
The hospital counts on state “disproportionate share funding” to fill the gap in payments, and this money was cut last year and is expected to be cut this year.
“It could be a problem,” Holzberg said. He said it won’t be a problem immediately, but in a couple of months.
What’s in the audit
He said that vendor payments are the first to be affected, and last year the hospital racked up $1.5 million in late payment fees to vendors.
The audit of the hospital budget shows that in the 11 months ending Dec. 31, the hospital took in operating revenues of $123.56 million and spent $123.45 million, leaving a profit of $110,848 before depreciation and amortization.
After depreciation and amortization, the hospital shows a loss of $4 million, but according to hospital officials, the loss is a “paper loss,” as depreciation is “not a cash item.”
Ron DiVito, Hoboken University Hospital CFO, said that hospitals are modeled to break even, rather than to make a massive profit.
The hospital is now reprioritizing projects to use the money allotted to fix the cash flow problem, they said.
They are “delaying” a conversion to entirely private patient rooms and construction of a cardiac catheterization lab.
The new emergency room is not being delayed – running ahead of schedule, according to officials – and is expected to increase revenue as much as 10 percent when it is completed. It is scheduled for June of 2009. Construction of maternity rooms is also continuing as planned.
“No hospital can tolerate the cuts being proposed.”
– Joan Quigley
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He said that the $4 million can keep the hospital running for two to three months, but that if it drags out too long, “then we have some serious problems.”
Worst case?
If the worst case scenario plays out and the hospital has to fold someday, then the MHA would turn the property over to the city.
If that happened, the city would at least have the property and land to ease the $52 million loss, as the city is considered “cosigners” for the hospital.
Another scenario would have the hospital turned over to a non-profit organization in the next few years if it stays afloat. This is considered a contingency plan by MHA and hospital officials, and is not currently being pursued.
Hospital officials said that contrary to talks that swirled when the hospital was in negotiations with Bon Secours – the former owners of the hospital – there is no waiting period or moratorium on selling the property. While one rumor said that the hospital property could not be sold during the first five years of operations, Crimmins said that this is untrue. He said that during negotiations, it came up, but it was not an accepted stipulation in the contract.
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