The Nassau Interim Finance Authority is exploring whether to begin overseeing the finances of Nassau University Medical Center, which could lead to imposition of an employee wage freeze and requirements that the public hospital submit contracts, budgets and union agreements to the fiscal control board for approval, NIFA chairman Adam Barsky said.
Barsky's statements come as NUMC, Nassau's only public hospital, struggles with persistent budget deficits, high debt levels and leadership turnover.
But costs continue to rise, and approval of future federal and state subsidies is uncertain.
Barsky said that while George Tsunis, chairman and interim chief executive of NuHealth, the public benefit corporation that runs NUMC, “has done a terrific job of trying to turn around the hospital, the situation he inherited is pretty dramatic, and of great concern.”
Barsky cited a June audit of NuHealth’s financial statements by consultant Grant Thornton. The report said federal, local and state aid were scheduled to end or be cut back, prompting “substantial doubt about [NuHealth's] ability to continue as a going concern.”
With “going concerns,” accountants prepare financial statements under the assumption that the organizations have enough resources to continue operating into the near future.
“In light of the ‘going concern’ opinion and the lack of availability of additional resources from the county, state or the federal government for that matter … the question is what is going to save the hospital?” Barsky said in an interview.
Tsunis, a prominent Democratic fundraiser and hotelier who was appointed by County Executive Laura Curran in February 2018, has moved to reduce the number of patronage employees and practices he's viewed as wasteful — such as sending hospital executives to the Caribbean for insurance meetings on the taxpayer's dime.
However, Tsunis and the board last month approved a union pact providing more than 3,000 hospital employees with total raises of 8% over four years. NuHealth officials have not provided an estimate of what the raises will cost the health system.
NIFA, a state board established in 2000 to oversee Nassau County finances, has controlled county finances since 2011. That year, the deficit reached 1% of the county budget, the trigger for a control period allowing NIFA to impose wage freezes and require submission of contracts for its approval.
As they explore the possibility of overseeing NUMC's finances, NIFA officials cite a recent opinion from their outside counsel, Skadden Arps. The opinion says that under the NIFA Act, NUMC can become an agency "covered" by the control board.
The designation would enable the NIFA board "to approve the hospital’s budget, conduct audits, hire consultants to review the viability of the hospital, make recommendations, review and approve contracts and implement a wage freeze if necessary,” Skadden Arps wrote.
NIFA only agreed to provide an excerpt of the opinion, which Barsky said the Manhattan law firm had issued within the last week.
Officials also have expressed concern about NUMC's debt. Nassau County guarantees $188 million in hospital debt and pays about $22 million a year in annual debt service on behalf of the hospital.
NUMC itself posted a $46.6 million deficit in 2018, compared with $25.7 million in 2017.
Tsunis said the deficit is projected to drop to $8 million in 2019. But he said it could balloon to $82 million next year if $53 million in state federal grants that NUMC won in 2019 are not approved for 2020.
Jerry Laricchiuta, CSEA Nassau County Local 830 president, questioned why NIFA would move now to oversee hospital finances.
Laricchiuta noted that three previous CSEA contracts were approved by the hospital without NIFA's signoff.
“Obviously, we’ve had three contracts imposed in negotiations since NIFA’s been around.” Laricchiuta said. “I don’t believe they are a covered entity, and if they were, then somebody screwed up for three contracts."
But he said, “NIFA’s a responsible agency, and I don’t believe they’re out to hurt anybody. I think if they review this contract, there are ways to pay for it.”
NIFA began to look seriously at the possibility of overseeing NUMC finances after the NuHealth board approved the CSEA agreement Nov. 13.
On Nov. 21, the NIFA board met in executive session to discuss concerns about NuHealth's financial condition, Barsky said.
Although the CSEA contract does not require county approval, Curran, a Democrat, also cited the agreement in expressing concern about the hospital's viability.
“NUMC has to survive and thrive and be able to take care of the most vulnerable residents who need its services," Curran said in an interview. "So is this an institution in jeopardy? Does the hospital have a financial plan to pay for raises? These are my questions.”
She said she recognizes “how dedicated the employees of NUMC are, and we need to make sure that this agreement fits within the hospital's financial plans.”
Laricchiuta defended the labor deal.
“I know we’re working with a distressed financial system, but in order to make that better, we need to have good qualified employees," said Laricchiuta, who called the terms of the contract “really nothing to brag about.”
Laricchiuta said county officials resisted the Nov. 13 vote on the labor agreements.
The NuHealth board voted 7-0 to approve the pact, with Ryan Cronin, a commercial litigator and former State Senate candidate whom Curran appointed to the board in October, abstaining.
“My appointee, Ryan Cronin, wanted more time to review the contract, and to review the financial plan to support the contract, and I thought that was a good approach,” Curran said.
Curran also expressed concern about NUMC's debt.
“If the hospital is not functioning, the debt service has to be paid by the county in full and in cash," Curran said.
"The bottom line is both the county and the hospital have a vested interest in keeping NUMC going,” she said. “Let’s not forget, Nassau County is still under a financial control period with NIFA, and we cannot afford to pay debt service.”
Addressing the hospital's overall financial problems, Barsky said the NIFA board is concerned about multiple issues, including the CSEA contract.
“This is not about the contract, that’s one aspect," he said. "This is about the hospital and how long the hospital can stay in business."
Barsky continued, “the problems at the hospital are acute, and are requiring lots of monitoring and intervention and will require very difficult choices to be made by all involved. This problem at the hospital doesn’t appear to be getting the proper attention that it deserves.”
Barsky declined to be specific about the NIFA board's discussions. But he said as the board considers whether to begin overseeing NUMC's finances, it's considering to what degree "NIFA wants to have the hospital subject to the various controls that are prescribed in the NIFA act.”
Addressing a possible wage freeze, Barsky said, “We’re saying that should it be needed, due to a severe downturn in the hospital’s finances, it’s something that could be considered.”
Tsunis declined to comment on “the hypothetical” of a wage freeze or the possibility that NUMC would have to submit contracts to NIFA for approval.
Tsunis said he and top officials from NUMC and NIFA had a "very extensive" meeting last Monday.
"We think their involvement and knowledge of municipal finance is very helpful, and their willingness to be a resource to NUMC is very much appreciated," Tsunis said of NIFA.
“I have great respect for chairman Barsky and have long admired his contributions to local, city and state governments and authorities,” Tsunis said.
He said Barsky “is undoubtedly a recognized expert in this field. NIFA and NUMC have forged a constructive working relationship to try to solve the financial problems of NUMC that have been going on for decades, and I look forward to continuing to work with NIFA and find solutions that are equitable to the team members of NUMC and financial responsibility.”
Nassau University Medical Center
In 2018, the public hospital posted a $46.6 million deficit, compared with $25.7 million in 2017.
NUMC’s deficit is likely to be $8 million in 2019, but could ballon to $82 million in 2020 if $53 million in state and federal grants are not approved, hospital officials say.
Guarantees $188 million in debt service for NUMC
Pays about $22 million annually for NUMC debt service.
Source: Nassau County; Nassau Interim Finance Authority; Nassau University Medical Center