The head of the public benefit corporation that runs Nassau University Medical Center is moving to close what he called "a political patronage pit" that received almost $41 million from the corporation since 2010 — and spent more than $34 million on salaries.
George Tsunis, chairman of NuHealth, which operates the county’s only public hospital, said patronage was a key mission of a division of the Nassau Health Care Foundation.
In 2010, the foundation created the new unit, called a professional employee organization, which administered short-term grants and programs and supplied temporary employees to NUMC.
But Tsunis said over the past nine years, the PEO and the foundation became "one in the same," and the number of foundation employees increased — from 61 in 2010 to 101 in 2017.
The new unit was "supposed to handle the occasional employee on a grant," Tsunis said. "When the grant is terminated, you can get rid of the employee because they're not in the union, they're not in Civil Service."
But, "this was used in quite a different manner," said Tsunis, who became chairman in February 2018. "This was used as the political patronage pit, which may be fine in other constructs, but it’s completely inappropriate in a hospital. It was in my opinion a complete waste of money."
In a letter on March 5, NuHealth directed the foundation to close PEO and reduce the number of foundation employees from the current 10 to one.
NuHealth, with an operating budget of $585 million, had an operating loss of $25.7 million in 2017, NuHealth financial statements show. Nassau County, which subsidized NUMC through 2014, remains liable for the hospital's debt, which at the end of 2017 was more than $202 million.
Backers say the PEO has helped NUMC meet new needs, such as training for treatment of HIV infections.
Mark Schwed, who worked in the PEO’s care management department, said he and a social worker helped discharge NUMC patients, placing them in substance abuse and mental health care programs.
“It was very important in the emergency room when doctors didn’t know where these people were going to go," said Schwed, of North Bellmore, who was let go in January. "It was important to not just discharge them into the street but find appropriate placement.”
Peter Fishbein, an attorney for the foundation, said a state program the foundation administered brought in more than $100 million to NuHealth.
In an email, Fishbein said foundation employees "administer numerous grants, and conduct other Foundation business," and that the nonprofit continues to provide services to NUMC.
"The foundation continues to work with the hospital on other grants, and will remain focused on all of its goals," Fishbein said in a statement.
The Nassau Health Care Foundation was created in 1964 to aid the old Meadowbrook Hospital, NUMC's predecessor.
Available public records relate primarily to the foundation, and those records show the nonprofit grew significantly once it established the PEO in 2010.
Creation of the PEO enabled the hospital to pay the foundation tens of millions of dollars a year from the state, a Caribbean medical school whose students train at NUMC and other sources.
From 2010 to 2017, the most recent year for which records are available, annual payments from NuHealth to the foundation grew from $2.2 million to nearly $9.3 million.
During that period, the foundation received a total of almost $40.6 million from the health system, according to NuHealth records. The foundation spent about $34.5 million on salaries during the period, according to IRS Form 990s the nonprofit files annually. Tsunis said he did not know how the foundation spent the balance.
In 2017, for instance, the foundation spent $5.36 million on salaries, other compensation and employee benefits, federal tax returns show.
Records show another agreement in 2015 between NuHealth and the foundation was key to the foundation's growth.
Previously, NuHealth had been authorized to provide the foundation with revenues including funding for salaries plus an annual administrative fee of 5 percent of salary payments. The new pact permitted the foundation to receive a minimum $2 million annual fee from NuHealth.
Under the deal, the foundation also began administering money NUMC gets from American University's Caribbean School of Medicine. The school pays NUMC, located in East Meadow, for training medical students.
When the training program was announced in 2008, NUMC officials said the hospital was to get $19 million from American over 10 years. Through 2018, NuHealth paid the foundation more than $5.86 million from American University, hospital records show.
Additional hiring occurred after the foundation in 2015 took over administration of the hospital's Delivery System Reform Incentive Payment program.
The multibillion-dollar state program rewards health systems that implement clinical improvements that lead to fewer hospital and emergency room visits. Hospital records show that since 2010, more than $11.4 million has been paid to the foundation for "DSRIP/Transitional Care."
On March 5, NuHealth's outside counsel Kenneth Abell wrote the foundation, requesting that it dissolve the PEO. Abell said "among other things," the PEO had not provided NuHealth with its payroll roster, contracts with consultants or audited financial statements for the past three years, as NuHealth had requested.
Abell also cited, "concerns that the PEO has been delinquent in returning funds" to the public benefit corporation, and neglected to "seek or obtain [NuHealth's] approval before entering into certain agreements."
In the letter, NuHealth asked the foundation to "immediately" fire the remaining PEO employees, including executive director Dominick Polacco. Only Patricia Veneziano, who was to resume her duties as the foundation's chief financial officer, should remain, the letter said.
Tsunis, who was appointed by Nassau County Executive Laura Curran, said he never was able to determine much about what the workers at the foundation and the PEO "actually did, and that's part of the problem; I don't think they did much."
But Fishbein said in an email the foundation "will consider mutual termination once [NuHealth] reimburses the foundation for compensation provided to individuals working on grants per the PEO service agreement."
Fishbein also said NuHealth owes the foundation more than $1.9 million for 2018 and 2019. NuHealth's "refusal to reimburse the foundation is not only a breach" of the service agreement, "but may also violate the parameters of each grant," Fishbein said.
"The foundation has advised [NuHealth] that termination of these individuals working under these grants could have a far reaching impact into the work performed by [NuHealth] as these individuals are working under over a dozen grants throughout" the public benefit corporation, Fishbein said.
In 2017, the Nassau Civil Service Commission sued the foundation for using the PEO to hire workers without Civil Service approvals designed to prevent political influence in hiring.
The foundation denied the allegations, but Tsunis said NuHealth has settled the suit, agreeing to pay the commission's $80,000 in legal fees with no admission of guilt. Martha Krisel, Civil Service executive director, declined to comment.
WHAT IS A PROFESSIONAL EMPLOYER ORGANIZATION?
Generally, PEOs offer human resource services for small and medium-sized businesses, according to the website for the National Association of Professional Employer Organizations.
Such organizations are allowed under New York State law, and about 300 PEOs are registered in the state.
Steve Politis, president of Alcott HR in Farmingdale, a human resources outsourcing firm and a registered PEO, said the organizations offer services such as payroll, risk management, compliance and human resource services.
Politis, a leadership co-chair of NAPEO's New York State branch, likened PEOs to the "HR Department down the street, instead of down the hall."
According to the foundation's website, the Nassau Health Care Foundation's PEO could help Nassau University Medical Center with employee and financial assistance. Services include aid with employee benefits, payroll and workers' compensation, training and development, recruiting, and risk and safety management.
Kevin Dahill, president and CEO of the Nassau Suffolk Hospital Council, a Hauppauge-based trade organization that represents 22 hospitals, said PEOs sometimes are formed to help with the transition when hospitals and health systems become involved in mergers or takeovers.
“Any time I've seen it happen it’s been a temporary measure while an organization is in some state of transition," Dahill said.