Nassau Health Care Corporation Tells NYS DOH: Major Reforms Already Improving Financial Performance, Enhancing Patient Care

Response to State Highlights Significant Progress Toward Fiscal Sustainability, Makes Clear Increased NIFA Involvement Would Violate State Law

UNIONDALE, NY- Over the past year, Nassau Health Care Corporation (NHCC) has undertaken significant management and operational reforms to enhance efficiency, increase revenue, reform financial standards and practices, and improve the quality of services. That was the message from NHCC, parent organization to Nassau University Medical Center in its recent response to the NYS Department of Health (DOH).

In 2023, NHCC initiated a comprehensive Financial Sustainability Reform Plan that is already increasing cash flow to the hospital and demonstrating that it can be financially sustainable. Through the continued execution of this reform plan, NHCC's goal is to rely on less State aid over time.

The 22-page response was accompanied by a 163-page addendum, highlighting its existing compliance with numerous DOH recommendations. Additionally, NHCC emphasized certain recommendations for increasing the control of the corporation by the Nassau County Interim Finance Authority(NIFA) would contravene State law. A copy of the full letter to DOH can be found HERE.

Below are several key NHCC responses to DOH requests and claims.

DOH: NHCC should enact "revenue enhancement and cost reduction initiatives."

NHCC: "NHCC has implemented reforms that have already resulted in monetary returns. Implementation of these reforms has been with the assistance of NHCC's new CFO and with the guidance of our Chairman. Our CFO began on January 1, 2024, after being hired by NHCC's Board of Directors (with notice to NIFA).

"… When the Chairman was appointed, NHCC had no CFO, no budget, no current financial statements and no timely audit. Further, NUMC's charge master (pricelist) was more than a decade old-crippling our revenue cycle. One of Chairman Bruderman's first actions was to assess and rebuild our finance department and to begin the process of hiring a CFO. He then engaged a turnaround expert, Marwood Group Practice Transformation LLC (Marwood), to continue and execute that effort which recently resulted in the hiring of our very competent CFO.

"Our charge master is now updated, our financial statements are now current, we now prepare daily cash reports that we distribute (to NIF A), and we passed a timely budget. For the first time, we completed a timely audit last June performed by one of the world's leading independent audit experts Grant Thornton LLP. We will be early with our audit this year and will have it completed in May.

"Reforms that were undertaken in just the last several months have included restrictions of non-clinical overtime that is yielding an immediate savings. As an example, a comparison…shows a 23% drop in overtime, saving NHCC millions of dollars annually… initial changes in Faculty Practice Plan distributions have resulted in more than $4 million in annual savings thus far…

"We are already making personnel changes and other cuts. In addition to these things, we have been going line by line. For example, NHCC's supply expense decreased $800,000 in one month year over year. This savings is due to renegotiating contracts and reducing usage. We also have been proactively seeking funds by creating teams to apply for the State grants ( e.g., statewide technology, etc.). We have significantly restricted travel and other reimbursements for employees further creating millions of dollars in savings. We have now renegotiated six of our managed care contracts…we have also increased efforts on collections and timely documentation to improve receipts and enhance our revenue cycle."

DOH:NHCC must "implement significant changes supporting financial stability in order for the State to consider providing VAPAP funding (Vital Access Provider Assurance Program)."

NHCC: "…NHCC has already implemented most of your requests. That being said, NHCC asks DOH to reconsider certain items. For example, additional funding from the State to help close NHCC' s funding gap does not need to be exclusively VAPAP funding. Instead, some funding could be provided by a payment to cover NHCC's non-federal share for IGT programs, like the State provides the SUNY hospitals."

DOH: State funding should be tied to additional controls of NHCC by the Nassau County Interim Finance Authority (NIFA).

NHCC:"…such requirements conflict with a number of legal provisions. For example, NIFA is a statutory entity and as such only has the powers authorized by NY Public Authorities Law (PAL) §§ 3650-3672. Requirements set forth in your letter exceed NIFA's statutory authority and DOH cannot expand the authority granted to NIF A by the Legislature. Also, functions such as approval of management-level employees constitute the operation of a hospital pursuant to DOH regulations, specifically 10 NYCRR §405 .1. Pursuant to DOH' s rules, NIFA would need to obtain establishment approval from the Public Health and Health Planning Council in order to exercise such authority. Any effort for NIFA to exercise such control would not only breach DOH' s regulatory requirements, but would encroach on authority expressly granted to NHCC's board of directors… Furthermore, not only does NIFA not have the legal authority to operate a hospital and it does not have the experience of doing so. We trust that DOH agrees with these points. If that is not the case, we ask for the opportunity to discuss them."

DOH: Claimed NHCC failed to comply with NIFA recommendations as laid out by consulting firm Alvarez and Marsal (A&M).

NHCC: "As stated, NHCC has been fully compliant with NlFA. We have also been responsive and transparent with NlFA's two engagements with their vendor Alvarez and Marsal ("A&M"), despite A&M's lack of transparency, failure to review data and lack of accurate financial forecasting in 2020.

"In 2020, A&M recommended that NUMC reduce hospital services, including emergency department services, during a national pandemic in which NHCC served as Nassau County's only overflow hospital. A&M notes on page 8 of its 2020 report that the NUMC was "'poised to deplete its operating cash by 2022 or sooner." A&M's predict[ed] of NHCC running out of cash by 2022, then November 2023, December 2023 and February 2024. However, NHCC has operating cash on hand today and current management has continuously extended the life of the hospital because of the cost saving and revenue enhancement initiatives that NHCC implemented are taking hold…

NHCC: Alvarez and Marsal repeatedly omitted material information to draw flawed and unsupported conclusions about NHCC.

"In September of 2023, NHCC continued to follow all NIFA protocols. NIFA was aware and NIFA approved NHCC's engagement with Marwood. NHCC learned of NIFA's re-engagement of A&M from Newsday. Chairman Bruderman encouraged cooperation with A&M and was optimistic about having a third-party consultant evaluate and validate the progress of the new management. However, it soon became apparent that A&M supported a different narrative that included material omissions like the significant drop in revenue from the state. Their reports talked about the erosion of profitability and increase in losses without making mention of the reduction of the hundreds of millions of dollars in state funding to NHCC, which represented the majority of those increases in losses.

"…both Marwood and NHCC complied with all of A&M' s requests and provided ALL data requested. NHCC passed a timely 2024 budget (NIFA attended the board meeting and was sent the budget materials beforehand). NHCC's Chairman and leadership met numerous times with the newly appointed NIFA Chairman and A&M, in addition to our weekly NIFA/A&M meetings….A&M' s 2024 report does emphasize the critical cash levels of the hospital, but fails to note that NHCC has seen reduced State funds year over year, which is the primary driver of the critical cash condition.

"… In summary, the latest A&M report, consistent with their past reports, does not discuss the current stabilization and improvement efforts noted on slide six of their report, nor the long-term sustainability that NHCC is on track to achieve with State support."

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