The Hoboken taxpayers’ worst fear – not to mention the fears of low-income residents of Hudson County with medical problems – may be coming true.
After the Hoboken City Council voted in 2006 to bond for $52 million to save the city’s only hospital, the taxpayers feared the ailing facility might continue to lose money and cause a tax increase nevertheless.
Now, the city released information last week revealing that Hoboken University Medical Center is in much worse shape financially than it was thought to be earlier this year.
Expectations for revenue from the new Emergency Room may have been too optimistic, officials said.
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The hospital has addressed some of those issues, but still lost $22 million last year and reduced its net assets by more than one third.
The hospital has had financial difficulties for some time, partly due to the fact that it serves many indigent people. By law, the hospital must provide Charity Care for any underinsured or uninsured people who come into the Emergency Room. The facility is reimbursed by the state for some of those expenses, but not all of them.
Turning it around
Hatiras said he is confident the hospital can rein in budget expenses, even thought HUMC expects further losses this year. He said last week that he has charged his staff with creating a break-even budget in 2010.
In the meantime, Hatiras does not see an immediate need for layoffs. Actually, he said a 5 percent staff reduction executed in January is increasing the costs by running up overtime.
“Rarely, if ever, do layoffs work,” he said. “The best way to get to break even is to make sure revenue comes in.”
Under new management
Hatiras took over in June as chief executive officer of HUMC and president of Hudson Healthcare, the hospital’s management firm.
Hatiras replaced Harvey Holzberg, who had run the hospital since the city purchased it from Bon Secours in 2006, backed by $52 million taxpayer bonds.
Holzberg was widely criticized for collecting an $800,000 salary, considered by many exorbitant for the head of a small community hospital.
Holzberg is still employed as a consultant until Dec. 31, but Hatiras said the hospital can take $1.2 million off the books once Holzberg and DeVito are out of the picture.
Hatiras collects half of the salary that Holzberg did, $400,000. He was formerly the hospital’s COO, in charge of more than 600 employees, and has not replaced himself in that position. So he is basically pulling double duty at half the price.
He said he is one of the lowest paid hospital CEOs in the state, if not the lowest paid, and he is proud of it. In fact, he said he asked for it during the CEO search.
‘Disappointing’ audit
Hatiras said in an interview on Wednesday that the hospital is correcting the poor accounting practices and other recurring issues addressed in the audit.
“The results came as a surprise to me.”
According to the audit, the hospital administration failed to address the negative findings of the audit for the past two years. There is no legal requirement to provide a corrective action plan, but the hospital was paying the auditors to find out what was wrong with its operations without doing anything to fix it.
Extra losses
Hospitals in general experienced rough a year in 2008, Haritas noted. In Hoboken, he said the hospital administration overspent their budget by roughly $6 to 7 million to accommodate for unexpected needs, like mandatory upgrades to the sprinkler system and new data servers.
He said hospital volume decreased in the tail end of 2008, and the number of elective care procedures declined.
On top of all that, the state fell short in subsidy for Charity Care, he said.
But payments from private payers caused the biggest discrepancy in the budget.
The issue that led to DeVito’s resignation was that the hospital was anticipating this revenue, Haritas said. He said that a 1 or 2 percent variation in what the hospital expected to collect from private payers, like Aetna, multiplied to millions. The hospital administration was not adjusting their expectations – and some observers speculate that miscalculations were made purposefully to hide the dire financial situation.
Some of the miscalculations go back to 2007, Hatiras said, and resulted in “a 2008 that looked much worse than it should have.”
Until the hospital starts a search for a new CFO, Director of Finance Vinny Riccitelli will assume the role.
Patients going to hospitals in other counties
Hatiras suspected that a large number of patients in Hudson County are leaving for other hospitals, but not just the specialists in New York City.
Hatiras commissioned a study that showed a total of 17,500 paying patients per year migrate out of Hudson County to hospitals in other New Jersey counties.
HUMC – much like Jersey City medical Center and Christ’s Hospital – treats roughly 8,000 paying patients per year, Hatiras said.
“Hudson County is exporting patients to other [counties],” he said. “The business is there; we’re just not capturing it.”
The hospital is working with the Stevens Institute of Technology to create a two-year strategic plan.
Being more cautious
Hatiras can’t say for sure whether the hospital’s vaunted new Emergency Department is putting a dent in the hospital deficit until he reviews six-month figures.
“In the past, [hospital management] celebrated victory so quickly,” he said. “You have to wait until you have a trend.”
Officials did say that the projected 15 percent increase in revenue from the new department “may have been optimistic.”
The hospital also has applied – Hatiras stops just short of calling it begging – for $10 million is state stabilization funding.
Long-term, Hatiras wants to see the hospital move away from taxpayer backing and become financially independent.
“We need to strengthen to the point of self-sustaining,” he said. “It’s a huge economic engine for the city.”
Government aid?
Since the city is on the hook for the $52 million bonds, many government officials are concerned with the state of the former St. Mary’s.
Acting Mayor Dawn Zimmer said last week in a release, “Given our own fiscal problems, we are not in a financial position to guarantee additional debt or to provide operating subsidies. But within those limitations, I am fully committed to doing everything within my power to help the Hospital Board find a way to navigate through these difficult times.”
Councilwoman Beth Mason, who has been a hospital watchdog for some time, called for accountability in her release. “As I have said from the beginning, the simple truth is that the hospital was never the financial miracle that it was portrayed to be, and the resignation of the hospital CFO is like having the captain of the Titanic abandon ship,” she said. “It is the responsibility now of the council to demand an emergency meeting with the HUMC to determine what steps can be taken to save the institution, the jobs of the employees, and to protect the $52 million taxpayer investment in the hospital.”
Councilwoman Theresa Castellano, who chairs the council’s Hospital Subcommittee, reached out to hospital board members to set up a date, but board members seemed to agree at their meeting last week that it may be more beneficial to wait until the hospital budget is introduced in December.
Hoboken mayoral candidate Kim Glatt, a former municipal court judge who is facing Zimmer, Mason, and four other candidates in the Nov. 3 municipal election, released a press release last week informing the public of the hospital situation and blaming Zimmer for not releasing the information earlier.
New board members
The council recently appointed Tajil Desai to the hospital board, and she attended the hospital’s board meeting on Wednesday night. Also at the meeting was Dr. Jonathan Metsch, the former head of Jersey City Medical Center, who has been temporarily sitting on the board in place of Zimmer. The mayor has a seat on the board and can send a designee to vote in her stead.
There was some criticism of her choice of Metsch, who left the helm of JCMC two years ago much like DeVito is leaving HUMC. According to reports, Metsch resigned his high-paying position after a potentially damaging audit was submitted to the parent company.
Zimmer said she has looked into Metsch’s past and does not have any issue with the way he left JCMC. “He’s my designee, so he goes when I can’t go,” she said. “He cares about saving the hospital.”
One source at the hospital said last week that Metsch is a bad fit on the board and called into question what happened at JCMC.
Metsch has been a public supporter of Zimmer as a mayoral candidate since last spring.
Metsch declined to comment on Friday.
Timothy J. Carroll may be reached at tcarroll@hudsonreporter.com.