Meadowlands Hospital slated to be sold
Meadowlands Hospital Medical Center –the Secaucus hospital where inpatient admissions have dropped to fewer than 30 patients a day – is slated to be sold to a multimillionaire real estate developer who owns a pair of surgery centers in Bergen County.
Like the group of investors who bought Meadowlands in 2010, Yan Moshe has no experience running a hospital – and his surgery center in Hackensack has been cited several times for failing to meet safety regulations. If the state approves the sale, the Long Island developer will put up just $5 million of the $12.2 million price for the hospital and the current owners will lend him the rest, according to documents filed with the state. He is to pay another $26 million for the hospital's land, which had been sold in 2012.
The potential change in ownership puts the hospital in the spotlight once again. Regulators have asked questions about the deal, including whether Meadowlands is even needed, whether Moshe has the assets to run a hospital and how a judge's order about pensions and back pay could affect the sale. State officials are also pressing the current owners for overdue financial data, saying the lack of transparency may affect their approval.
Meadowlands is an anomaly in New Jersey's healthcare landscape for many reasons: it's had some of the highest charges in the nation for certain procedures and it has the nation's highest rate of early-elective deliveries. After its owners converted Meadowlands into a for-profit hospital and began funneling patients there from outpatient centers, investors were paid millions. But at times, paychecks bounced.
The hospital is being fined $21,000 a month by the state for overdue financial reports. It averages just 28 patients a night, a volume more typical of a hospital in rural America than a New York City suburb.
WHAT TO KNOW: Here's what you need to know about the possible sale
VIOLATIONS: Judge says Meadowlands Hospital repeatedly violated union’s contract
FINES: Owners of Meadowlands Hospital Medical Center fined $92,000 over financial reports
Meanwhile, the prospective owner has faced his own issues. A surgery center in Hackensack that Moshe owns was cited for several safety issues, including failing to have a director of nursing on site, as required by law, for several days. Its website identifies a doctor as the medical director, but the doctor's license is inactive – he gave it up after allegations that he "facilitated the unlicensed practice of medicine" there, according to licensing documents.
The group of investors who own the hospital started talking about selling Meadowlands in late 2015, documents filed with the state say. Their company, MHA, decided not to advertise for bids because it might harm the hospital financially and damage its ability to recruit doctors. They chose Moshe's company because it was local, they said.
Secaucus Mayor Michael Gonnelli says his main concern is that Meadowlands remain a hospital. With so many industries and warehouses nearby, as well as highways and a train station, it's important to have a good emergency room close by, he said. "As long as it stays a hospital, and they can do something to upgrade it," the community will be satisfied, he said.
The hospital provides Secaucus with free EMS service, which involves 5,000 to 6,000 ambulance runs a year, he said. Talks to continue that arrangement have been put on hold pending the sale, he said.
If the sale proceeds, Moshe will inherit an unconventional strategy to boost volume. Meadowlands hopes to benefit from the long-anticipated – and oft-delayed – opening of the American Dream mega-mall in the Meadowlands, according to documents filed with the state.
The hospital's current owners have agreed to pay the mall developers $6.6 million over 10 years for the rights to run two first-aid stations and a wellness center at the mall, and to have two ambulance bays there to transport patients to Meadowlands, the application for state approval of the sale said. Employees of mall retailers would also be able to join the hospital's network of physicians for physicals and disease-management.
In another unusual business arrangement, Meadowlands sponsors the Georgia School of Orthodontics in Atlanta. The hospital plays no role in educating the students and considers it a "passive investment," the filings said. Meadowlands will eventually receive 25 percent of the school's proceeds, an investment interest that Moshe would acquire along with the hospital.
Moshe referred requests for comment to Al Gaburo, a public relations representative who also represents MHA. Gaburo said Moshe would be happy to discuss his plans to revitalize the hospital after the state considers the application complete, but until that time, any comment would be "premature."
MHA's principals also declined comment while the transaction was pending, Gaburo said.
To the State Health Department officials who must approve the transfer of ownership before a sale, the patient volume issue has raised vexing questions.
Admissions have been falling since 2013 at the hospital, and same-day and outpatient surgeries – which used to account for a big part of its business – declined by more than half over the last three years, according to the application. In fact, the hospital's occupancy is so low that some state officials asked whether Meadowlands should stay open as a full-service hospital.
Higher patient volumes – for physicians and hospitals – generally are associated with better health outcomes for a wide variety of surgical procedures and medical conditions. Four other hospitals are located within seven miles of Meadowlands, and on an average day, they have a combined total of 293 empty, staffed beds, state officials pointed out. The implication is that its patients could easily be absorbed.
"Please explain, in detail, why Meadowlands should remain open as an acute-care hospital," one of the state's reviewers asked in their questions about the application.
BELLEVILLE: Hospital unveils 87,000-square-foot addition
HACKENSACK: Hospital plans to add 300,000 square feet
The hospital's owners don't deny their low occupancy, but say that shouldn't be a factor in the state's decision. Two Essex County hospitals – St. Michael's Medical Center in Newark and East Orange General Hospital – received state approval for their sales, even after a consultant for the state said Essex County had a large surplus of hospital beds, the hospital owners wrote.
Moshe will try to recruit more doctors, work with community health centers, and join more insurance networks to attract more patients, the application said. Unlike the hospitals sold in Essex County, though, Meadowlands will not become part of a larger corporation or health-care system. Standalone hospitals have become less common in New Jersey and across the country in recent years, as the health industry consolidates.
Another issue that could affect the state's decision is the owner's lack of transparency about finances at the 200-bed hospital. MHA has been fined $368,000 over the last five years for its delays and failure to give the state its audited financial reports.
The hospital's "failure to submit annual audited financial statements for 2014 and 2015 may impact the Department's review of the … application requesting approval of the sale of the [hospital] to Yan Moshe," Assistant Commissioner Susan J. Dougherty wrote last week.
MHA, LLC, is a consortium of investors led by Richard Lipsky, Tamara Dunaev, Pavel Pagodin and Anastasia Burlyuk.
None had experience running a hospital when they purchased Meadowlands – which had been losing money for two years – for $17.6 million in 2010. Lipsky, MHA's chairman, is an anesthesiologist whose license is inactive and Dunaev, its vice chairman, owned and managed New Jersey same-day surgery and MRI centers, and had founded a video game company, Vogster Entertainment.
They converted Meadowlands from a nonprofit to a for-profit operation, and it took just a year to reverse $10 million in losses and achieve an $11 million profit. The earnings were gained in part through a questionable, if legal, strategy to transfer patients from surgery centers – in which MHA's members had an interest – to the hospital, which could charge insurers more than what they had been billed by the centers. Contracts with managed-care companies were terminated, allowing the hospital to bill high out-of-network rates for emergency care. By 2011, according to Medicare data, the hospital was the most expensive in the nation for some procedures
The owners also sold the land out from under the hospital in 2012 to a subsidiary of a Canadian real estate developer for $18 million in cash and a leaseback arrangement.
The hospital proved profitable for MHA's owners. MHA's members received $14 million from the hospital in their first three years as owners, and also were paid for services by companies they owned: the video game company received $917,000 for computer work and a surgery center received $1 million for supplies and equipment.
But there were also complaints of bounced paychecks and unpaid health claims and pension contributions for the workers. The National Labor Relations Board filed a case. The IRS imposed liens on the hospital, subsequently paid, for failing to pay payroll taxes. In 2013, the state recommended the hospital hire an independent financial consultant. The former president of that consulting firm is now the hospital's acting chief financial officer, according to the filings.
Meadowlands owes some employees and former employees back pay as well as retirement-savings contributions, according to an order by a judge for the National Labor Relations Board. Administrative Law Judge Steven Davis found after a long trial that MHA had violated its collective bargaining agreement with the Health Professionals and Allied Employees union in several ways.
The union estimated in September the hospital owed as much as $2.5 million.
Ann Twomey, the union's president, said that the state "must hold the current owner and any future owner accountable to their legal obligations to both the State and to its employees. In this case, nurses and health care workers are owed millions of dollars in unpaid pension contributions, benefits and lost wages."
MHA is challenging parts of the judge's order. The union is afraid the hospital owners will strip the hospital of its assets to avoid paying, or "dissipate the proceeds of the sale and leave no funds available for the union members," Emma R. Rebhorn, the union attorney, wrote the National Labor Relations Board's executive secretary in November.
Whatever is owed will not be the responsibility of the buyer, the owners said in their filings. "This will not impact the sale."
Moshe plans to buy back the land – 20 acres on Meadowlands Parkway – the hospital sits on. This prompted state officials to ask whether Moshe's resources were adequate to make the purchase – which his accountant said would cost $26 million – and operate the hospital.
"He has sufficient assets to meet the requirements of a $12.2 million hospital purchase and an additional $26 million land purchase," wrote the accountant, Rina Esterov of Nassau County N.Y. "After the purchase of these assets … Mr. Moshe has additional net worth of approximately $50 million available to fund operations."
Moshe gave as his address a home in Old Westbury, N.Y. He is also the CEO of Tuhsur Development, LLC, in Queens, according to his LinkedIn page.
The prospective owner of Meadowlands Hospital had a previous business transaction with the hospital's CEO, Richard Lipsky: He bought the Hackensack surgery center for which Lipsky was the licensed operator in August 2011. Moshe changed the name from Essex Surgery Center to Excel Surgery Center, and recently changed it again to Dynamic Surgery Center. Moshe also owns a Saddle Brook center, Healthplus Surgery Center.
The state has investigated three separate complaints at the Excel Surgery Center during Moshe's ownership. Inspectors found the center failed to report an incident where a car fire in the parking lot caused patients to be evacuated, didn't have proper procedures in place for using multi-dose vials of medication in the operating room, and didn't have a director of nursing on site, as state regulations require, on several days when the center was open. The center's correction plans were filed with the state and accepted.
Dynamic Surgery Center's website lists its medical director as Dr. Navrajan Kukreja, an anesthesiologist with "extensive involvement in personal injury" -- even though his medical license is inactive, according to the state Board of Medical Examiners. Kukreja voluntarily gave up his license in 2015, according to a consent order, after "allegations that he facilitated the unlicensed practice of medicine while employed at Excel," and after the Health Department's inspection "resulted in multiple violations and citations."
The state has set no timetable for its decision about the sale. Once the application is deemed complete, two public hearings will be held and the State Health Planning Board will make a recommendation to the Health Commissioner about whether to approve the sale.