Obamacare Update: Meadowlands hospital hit with lien over unpaid payroll taxes

4/10/2014

AMY NEWMAN/STAFF PHOTOGRAPHER

Meadowlands Hospital Medical Center in Secaucus has been hit with a third IRS lien for not paying payroll taxes.

For the third time since Meadowlands Hospital Medical Center in Secaucus was taken over by for-profit investors, the IRS has imposed a lien on the hospital’s owners for not paying the taxes that were withheld from employee paychecks.
This lien and the two previous ones have been paid off.

The 230-bed hospital’s financial condition has been a concern to state officials and its employees since 2011, with some lawmakers and its nurses union calling for a state monitor. But the owner — MHA LLC — has gone to extraordinary lengths to prevent public disclosure of what it considers “confidential and proprietary financial information,” going so far as to demand return of written materials after meetings with state regulators to avoid leaks, according to legal correspondence with the state.

A lawyer from the Wolff & Samson law firm, which represents the owners, accused the state Health Department in January of “improperly disclosing” information about its business practices and financial condition.

On Wednesday, a spokeswoman for the state Department of Health said state officials knew the hospital had not paid the payroll taxes.

The department in December requested that Meadowlands hire outside firms to handle its payroll and billing to “help ensure that payroll-related taxes will be paid,” according to a letter from Deborah Gottlieb of the Health Department to acting Meadowlands CEO Lynn McVey. It also fined the hospital $31,000 for failing to submit reports from a consultant hired at the direction of the department to straighten out the hospital’s finances.

The Wolff & Samson lawyer, A. Ross Pearlson, appealed both matters; a hearing is set for July.

On Wednesday, the hospital, through a spokesman, did not respond to questions about the tax lien.

Meadowlands, one of a growing number of for-profit hospitals in New Jersey, is owned by MHA, an investment group whose principals are Tamara Dunaev and Richard Lipsky, an anesthesiologist whose medical license is inactive. Neither had experience running a hospital before, though both were involved with ambulatory surgery centers.

As a condition of the purchase, the state Health Department required MHA to submit regular financial reports. But the hospital has been repeatedly fined for failing to do so. The 2012 audited annual report, due last June, is still pending, for example.

Not-for-profit hospitals, in contrast, are required to provide detailed financial filings to the Internal Revenue Service as a condition of their tax-exempt status.

According to Meadowlands’ first — and so far, only — audited financial report, submitted a year late, the owners reversed a $10.4 million operating loss in their first year of operation to post an $11 million profit. By June 2012, the owners had paid themselves $14.4 million. Two years earlier, they had paid $17.5 million for the hospital.

They also sold the land the hospital occupies on Meadowlands Parkway to a Canadian real estate firm in late 2012 for $18 million in cash, in a sale leaseback arrangement.

The IRS previously imposed two liens, in 2012 and 2013, for non-payment of federal taxes totaling $4.4 million. Both were paid off. The most recent lien was imposed on Jan. 22 for an unpaid balance of $197,044 that was due on Dec. 23. It was released a week later, when the hospital paid in full.

Non-payment of federal income taxes is a violation of the tax code. Employers withhold the funds from employee paychecks and essentially hold the money in trust to be paid to the IRS. Most large businesses, such as hospitals, automatically make such tax payments.

Amid concerns about the hospital’s financial viability, the state insisted last year that Meadowlands hire an independent financial consultant to review the books and make projections about whether the hospital would survive through December 2017.

Reached Wednesday, the consultant, John Grywalski of Executive Resources Inc., said he signed a non-disclosure agreement with the hospital and couldn’t discuss his findings. He said he is still engaged, and in weekly communication with the Health Department. All of his reports have been oral, he said.

His continued work could signal that his help is still needed to advise the hospital on achieving a positive operating margin, or a profit from operations. That was to have been the third and last phase of the work required by the Health Department.

The union representing nurses at the hospital said the recent lien was a further sign of the need for tougher oversight.
“The department has consistently said they have the tools to oversee Meadowlands,” said Jeanne Otersen, a spokeswoman for the Health Professionals and Allied Employees union. “This is one more piece of evidence that says they do not and we need a monitor at the hospital.”

The hospital is in the midst of a trial before a National Labor Relations Board judge about charges that it violated its union contract. The complaints include non-payment of benefits, including health claims filed by employees. In addition, the state Labor Department investigated complaints that employee paychecks had bounced.

Last week, the hospital announced that it had hired Thomas B. Considine, a former insurance commissioner in Governor Christie’s Cabinet, to serve as CEO starting on May 1. The hospital also named Neil E. Sullivan, an assistant commissioner of insurance, as its general counsel. Both were involved in the state’s approval of a specialized insurance plan, known as a Multiple Employer Welfare Arrangement, that the hospital began offering last year to employers in the Meadowlands area as well its own workers.

The appointments show “Mead­ow­lands’ commitment to fully engage, in a transparent way, in the public discourse that is the health care marketplace in 2014,” Lipsky said in a statement.


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