Legislation Impacts Due Process

 

News Releases

For Release: Immediate
Monday, December 08, 2008

Contact: Jason Butkowski
(609) 292-5215

 

 

VITALE BILL TO EASE ECONOMIC PRESSURES ON CLOSING HOSPITALS APPROVED

TRENTON – A bill sponsored by Senate Health, Human Services and Senior Citizens Committee Chairman, Senator Joseph F. Vitale, which would make changes to the Hospital Asset Transformation Program to provide financial assistance to nonprofit hospitals in the process of closing was approved by the Committee today by a vote of 7-0, with 3 abstentions.

 

“New Jersey needs to do everything it can to ensure a healthy hospital network which meets the health care needs of its residents,” said Senator Vitale, D-Middlesex. “However, there are times when demand has dried up, or costs are too high, and the only sensible solution is to re-focus our limited State resources elsewhere. When closure is inevitable, the State has a responsibility to make that process as painless as possible for the care-providers and the community at large.”

 

The bill, S-2352, would clarify provisions under the “New Jersey Health Care Facilities Financing Authority Law,” which governs the hospital asset transformation program. Under the bill, hospitals would be authorized to apply for and receive transitional aid to pay off any outstanding bonds or existing debt service, regardless of the status of any third-party appeals into the closure of the hospital. The Department of Health recommended the change because the appeals process, in regards to hospital closure, can sometimes take up to two years, exhausting the hospital’s resources to provide a seamless transition to a more sustainable community health care model.

 

“The health of the community should not be held in limbo while the hospital closure appeals process is going on,” said Senator Vitale. “People within the community have every right to appeal the decision to close a local hospital. But out primary focus has to be on the continuation of health care services for the community in need.”

 

Senator Vitale noted that the appeal over the closure of Muhlenberg Regional Medical Center in Plainfield stood as the perfect example for the need to change the existing system. In 2007, operating losses at Muhlenberg had become unsustainable, and Muhlenberg’s parent company, Solaris Health System, applied with the Department of Health for a Certificate of Need to close the Medical Center, so as not to jeopardize care at Solaris’s other affiliates. Muhlenberg’s Certificate of Need was approved and the hospital closed its doors to inpatients on August 13.

 

However, more than a month after Muhlenberg closed acute care services, a third-party group representing the City of Plainfield, People’s Organization for Progress, and the Save Muhlenberg group filed an appeal. According to Senator Vitale, because the appeals process is ongoing, Muhlenberg cannot access financial assistance intended for closing hospitals, and as a result, safety net programs at Muhlenberg, and the financial integrity of Solaris’s other affiliates, may now be in jeopardy.

 

“Regardless of your opinion on whether or not Muhlenberg should be closed, New Jersey needs to ensure that the financial insolvency that lead to the hospital’s problems doesn’t spread to other health care affiliates under Solaris,” said Senator Vitale. “We need to do what we can to isolate the problem, and ensure that people in the community served by a closing hospital still have access to quality health care. This bill would act as a needed shut-off valve to protect the integrity of the rest of the health care system when a hospital begins the process of closing its doors to the public.”

 

The bill now heads to the full Senate for consideration.

 

12/15/2008	Vitale Bill To Ease Economic Pressures On Closing Hospitals Receives Final Legislative Approval
12/8/2008	Vitale Bill To Ease Economic Pressures On Closing Hospitals Approved

 

 

 

For Release: Immediate

Contact: Jason Butkowsk
Monday, December 15, 2008i
(609) 292-5215

VITALE BILL TO EASE ECONOMIC PRESSURES ON CLOSING HOSPITALS APPROVED

TRENTON – A bill sponsored by Senate Health, Human Services and Senior Citizens Committee Chairman, Senator Joseph F. Vitale, which would make changes to the Hospital Asset Transformation Program to provide financial assistance to nonprofit hospitals in the process of closing was approved by the Committee today by a vote of 7-0, with 3 abstentions.

“New Jersey needs to do everything it can to ensure a healthy hospital network which meets the health care needs of its residents,” said Senator Vitale, D-Middlesex. “However, there are times when demand has dried up, or costs are too high, and the only sensible solution is to re-focus our limited State resources elsewhere. When closure is inevitable, the State has a responsibility to make that process as painless as possible for the care-providers and the community at large.”

The bill, S-2352, would clarify provisions under the “New Jersey Health Care Facilities Financing Authority Law,” which governs the hospital asset transformation program. Under the bill, hospitals would be authorized to apply for and receive transitional aid to pay off any outstanding bonds or existing debt service, regardless of the status of any third-party appeals into the closure of the hospital. The Department of Health recommended the change because the appeals process, in regards to hospital closure, can sometimes take up to two years, exhausting the hospital’s resources to provide a seamless transition to a more sustainable community health care model.

“The health of the community should not be held in limbo while the hospital closure appeals process is going on,” said Senator Vitale. “People within the community have every right to appeal the decision to close a local hospital. But out primary focus has to be on the continuation of health care services for the community in need.”

Senator Vitale noted that the appeal over the closure of Muhlenberg Regional Medical Center in Plainfield stood as the perfect example for the need to change the existing system. In 2007, operating losses at Muhlenberg had become unsustainable, and Muhlenberg’s parent company, Solaris Health System, applied with the Department of Health for a Certificate of Need to close the Medical Center, so as not to jeopardize care at Solaris’s other affiliates. Muhlenberg’s Certificate of Need was approved and the hospital closed its doors to inpatients on August 13.

However, more than a month after Muhlenberg closed acute care services, a third-party group representing the City of Plainfield, People’s Organization for Progress, and the Save Muhlenberg group filed an appeal. According to Senator Vitale, because the appeals process is ongoing, Muhlenberg cannot access financial assistance intended for closing hospitals, and as a result, safety net programs at Muhlenberg, and the financial integrity of Solaris’s other affiliates, may now be in jeopardy.

“Regardless of your opinion on whether or not Muhlenberg should be closed, New Jersey needs to ensure that the financial insolvency that lead to the hospital’s problems doesn’t spread to other health care affiliates under Solaris,” said Senator Vitale. “We need to do what we can to isolate the problem, and ensure that people in the community served by a closing hospital still have access to quality health care. This bill would act as a needed shut-off valve to protect the integrity of the rest of the health care system when a hospital begins the process of closing its doors to the public.”

The bill now heads to the full Senate for consideration.

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12/15/2008	Vitale Bill To Ease Economic Pressures On Closing Hospitals Receives Final Legislative Approval
12/8/2008	Vitale Bill To Ease Economic Pressures On Closing Hospitals Approved

 

Muhlenberg Foundation Inc.

Review of 12/31/2008 & 12/31/2007 Forms 990

 

 

 

In 2007, the Muhlenberg Foundation made payments to the Muhlenberg Regional Medical Center of $5,571,490, which included the transfer of stock of the Midtown Shops Corporation, a firm that has extensive holdings of commercial real estate.  The Muhlenberg Foundation received the Midtown Shops stock as a pledge from the Harold B. & Dorothy A. Snyder Foundation in 2007 and valued it on their books at $4,712,976, which included $208,570 in cash.  Prior to the stock being controlled by the Muhlenberg Foundation, the Snyder Foundation received a yearly dividend of $109,000 from the Midtown Shops Corporation. The transfer resulted in 30.4 percent of the net assets of the Muhlenberg Foundation being transferred to the Muhlenberg Regional Medical Center. The purpose of this transaction needs to be questioned.  Was it done in good faith?  Why was Midtown Shops stock transferred from the Muhlenberg Foundation to the Muhlenberg Regional Medical Center within months after the Foundation received the total pledge, which was settled over a period of three years.  We question how the income from the Midtown Shops is reflected on the Muhlenberg Regional Medical Center Return for the years ending December 31, 2007 and December 31, 2008.   

 

The closing of the Muhlenberg Regional Medical Center (MRMC) acute care hospital by Solaris Health Systems in August of 2008 violated the original Articles of Incorporation, which clearly states that the sole purpose of the organization is “to provide a hospital for the residents of Plainfield, New Jersey.”  The Muhlenberg Foundation was formed to operate exclusively for the benefit of the Muhlenberg Hospital and was the principal fundraising arm of the hospital.  Thus, the closing of the hospital left the Muhlenberg Foundation without a hospital to support in Plainfield, New Jersey.  The statement of Program Service Accomplishments on the Muhlenberg Foundation Form 990 for 2008 now states the Foundation is “to engage in programs and activities for the benefit of Solaris Health Systems.” This is a drastic change from the purpose as stated in the Foundation’s Articles of Incorporation.  The change was made prior to a New Jersey Appellate Court hearing challenging the closing of the Muhlenberg Regional hospital.

 

The Attorney General under Governor Jon Corzine failed to protect the interests of the Muhlenberg Foundation and the 13 communities serviced by the Muhlenberg Regional Medical Center when it stood silent and allowed the Muhlenberg Hospital to close.  The closing of the hospital terminated the purpose of the Foundation.  Did Solaris Health Systems, the Muhlenberg Regional Medical Center, or the Muhlenberg Foundation notify the Attorney General or the Surrogate Court of the hospital’s closing or seek direction as to the disposition of its assets?  The net assets of the Muhlenberg Hospital were reduced by 1,026%!!   Net assets in the beginning of 2008 were $5,238,417 and at the end of the year they were (-$53,788,837).  The $55,808,594 loss from discontinued operations was charged against unrestricted net assets and needs to be verified by a complete audit of the return. (The discontinued operations loss was primarily the acute care hospital income and operating expenses for the period January 1, 2008 through August 2008).  However, included in net assets of the Muhlenberg Regional Medical Center was $1,875,325 in perpetual trusts. The health services rendered at the Muhlenberg Regional Medical Center have been reduced to a bare minimum, which resulted in the constructive closure of the hospital facility.  The remaining health services are:

a.      Home Health Care (Per 2008 Form 990 for MRMC, Home Health Care receives 45% of the revenue from non-acute care hospital sources of income)

b.      School of Radiology

c.      A small satellite Emergency Room that will close in 3.5 years

d.      minimal outpatient services

e.      A limited X-ray department that does CAT scans twice a week.

 

As of December 31, 2008, the net assets of the Muhlenberg Foundation were    $7,597,236.  This includes $2,950,583 in investments in publically traded securities and $1,767,663 in beneficial interest in perpetual trust. Included in this total was $1,640,356 in assets described on the Balance Sheet as “Assets whose use is Limited”?   A specific analysis needs to be completed in order to determine the nature and purpose of assets classified as “Assets whose use is Limited”.

 

Other Issues requiring resolution by independent review of the Forms 990 for the years ending 12/31/2007 and 12/31/2008 are as follows

:

1.      Why did the Investment Income on Form 990 of the Muhlenberg Foundation decrease from $330,625 in 2007 to $4,563 in 2008?

2.      Why did the investments in publicly traded securities on Form 990 of the Muhlenberg Foundation decline from $5,803,443 in 2007 to $2,950,583 in 2008?

3.      Determine reason(s) for the large decrease in net assets of the Muhlenberg Foundation from $9,760,931 in 2007 to $7,597,236 in 2008.

4.      Form 990 - Part 5, question 6a - Did the organization solicit any contributions that were not tax deductible? The “yes” box was checked.  From whom and for what reasons were these contributions solicited?

5.      Form 990 - Part 5, question 7a – Did the organization provide goods or services in exchange for any quid pro quo contribution on more than $75.00?  The “yes” box was checked.  What were the goods and services provided and why was it considered a quid pro quo transaction?

6.      Form 990 - Part 6, Section A, question 7a – Does the organization have members, stockholders, or other persons who may elect one or more members of the governing body?  The “yes” box was checked.  The Foundation was established to support a hospital in Plainfield, New Jersey, which is located in Union County.  If the control of the governing body is transferred outside of Plainfield and Union County, the community may have been harmed by decisions from a Board of Directors without ties to Plainfield, New Jersey or Union County.

7.      Form 990 - Part 6, Section A, question 7b – Are any decisions of the governing body subject to approval by members, stockholders or other persons? The “yes” box was checked.  The issue in item 7b is the same as in item 7a; were the decisions by the Board of Directors compromised by persons not living and associated with the Plainfield community and Union County?

8.      Why were $229,892 (2007) and $74,095 (2008) of net assets released from restrictions for use in operations on the Foundation’s Form 990? 

9.      What was the $464,370 unrealized gain from investments other than trading securities on the Foundation’s Form 990 for 2008?

10.  The issues as reflected in items 6 & 7 above are also present on the 2008 Form 990 of the Muhlenberg Regional Medical Center.

11.  What systems are in place in order to protect the Muhlenberg Foundation’s Perpetual Trusts of $1,767,633 and the Muhlenberg Regional Medical Center’s Perpetual Trusts of $1,875,325?  Are the terms of the trust instruments being followed?

12.  A review of the Forms 990 of the Plainfield Neighborhood Health Center shows that Muhlenberg Regional Medical Center loaned the PNHC $2,040,000 in 1997.  It also indicates that this loan was paid off in 2004; however, was this transaction ever recorded in the Union County, NJ County Clerk's office?  If not, why?

 

It appears that Solaris Health Systems has developed a corporate culture, led by    management and acquiesced to by the Trustees of the Muhlenberg Regional Medical Center and the Muhlenberg Foundation, Inc., that the delivery of health care is best left exclusively to the sole judgment of management.  This resulted in the acute care hospital being closed, assets being liquidated, and tangible personal property, such as beds and medical equipment being transferred to other related Solaris entities prior to the Appellant Court’s decision in a case challenging the Commissioner of Heath and Senior Services’ decision to terminate the Muhlenberg Hospital’s Certificate of Need.  It should have been the New Jersey Attorney General’s function to oversee the Muhlenberg institutions and protect its charitable assets.  In Connecticut, the Attorney General intervened in a situation involving an acute care hospital facility abandoning its historic core mission as an acute care facility to become an ambulatory care facility with an emergency room.  There, the hospital trustees voted to close in-patient care and lay off related medical support staff.  The Connecticut Attorney General’s Office contended that such a fundamental transformation required cy pres action, and the court agreed. In New Hampshire the Attorney General is a necessary party in any proceeding involving cy pres, or deviation or termination of charitable trusts.  Finally, we need the New Jersey Attorney General to oversee and protect the medical needs of Plainfield, a minority community.

 

Muhlenberg 2010 Financial Issues

Muhlenberg Regional Medical Center

Financial Statement Issues

For the Year Ended December 31, 2010

 

Issue 1

The closing of the Muhlenberg Regional Medical Center’s (MRMC) acute care hospital by Solaris Health Systems in August of 2008 violated the original Articles of Incorporation, which clearly state that the sole purpose of the organization was “to provide a hospital for the residents of Plainfield, New Jersey.”

A conclusion can be reached that the actions of the MRMC’s Board of Governors did not protect the interest of the 13 communities serviced by the Muhlenberg Regional Medical Center, when they stood silent and allowed the Muhlenberg Hospital to close.

The MRMC Federal Tax Return 990 for the year 2010 now changes the mission statement which reads:

“Muhlenberg Regional Center is committed to excellence in providing quality and compassionate healthcare services to diverse communities.”

Not only was the mission statement changed, it appears that Solaris Health Systems, the Muhlenberg Regional Medical Center and/ or the Muhlenberg Foundation did not notify the New Jersey Attorney General or the Surrogate Court of the hospital’s closing and seek direction(s) as to the disposition of its many assets. A cy pres proceeding before the courts may have been warranted.

 

MRMC December 31, 2010 Financial Statements – page 6 paragraph 1

Notes to Financial Statements

December 31, 2010 and 2009

1. Organizational Structure and Nature of Operations

Muhlenberg Regional Medical Center, Inc. (“MRMC”) is a not-for-profit, controlled entity of Solaris Health System, Inc. (“Solaris”).

MRMC was a 355-bed acute care medical center located in Plainfield, New Jersey. MRMC was established and is operated for the promotion of health.

On February 21, 2008, the Solaris Board of Directors voted to immediately authorize the filing of a certificate of need (“CON”) application to close MRMC. The CON application was approved on July 29, 2008 and MRMC was closed on August 13, 2008, without a needs assessment or impact study ever being done, which was required by the state.

 

Issue 2

On the 2008 Muhlenberg Hospital Form 990, the Statement of Program Service Accomplishments indicated that the two main sources of revenue were from the School of Nursing and Home Health Care. The 2009 Form 990 for the Muhlenberg Regional Medical Center indicated that the JFK Medical Center (a corporation in Edison, New Jersey) took over the operations of the Harold B. and Dorothy A. Snyder School of Nursing, which includes Radiology, Nuclear Medicine Technology, Radiation Therapy and Diagnostic Medical Sonography. The net income from the Nursing Schools and its related Radiology activities on the 2008 Form 990 was $1,043,762 ($4,960,571 revenue, less expenses of $3,916,809).

Thus, it appears $1 million in net profits from the Nursing School were transferred unilaterally without the approval of the New Jersey Attorney General, since Solaris Health Systems or the Muhlenberg Regional Medical Center did not request a cy pres hearing before the Court. The nursing school was established to benefit the Plainfield area public. The net profits from the School were transferred to an Edison, New Jersey Corporation. Were these material transactions approved by the independent Board of Governors of the Muhlenberg Regional Medical Center? Did directors from outside the Plainfield community make decisions that were and are detrimental to the Plainfield public?

 

MRMC December 31, 2010 Financial Statements – page 6 paragraph 1

Notes to Financial Statements

December 31, 2010 and 2009

Organizational Structure and Nature of Operations

“The Community Hospital Group, Inc .d/b/a JFK Medical Center during 2008, and then the School of Nursing and School of Radiology were transferred to The Community Hospital Group, Inc. d/b/a JFK Medical Center during 2009. As of December 31, 2010 and 2009, only the Home Health Department remained operating under MRMC.”

 

 

Issue 3

A review of the Muhlenberg Regional Medical Center’s, Form 990, Statement of Program Services indicated that Home Health Care made large profits in the 2009 and 2008 tax years. The 2009 profit was $1,023,558 ($7,157,616 revenue less expenses of $6,134,058).

In 2008, the Home Health Care profit was $2,001,864 ($7,093,553 less expenses of $5,091,689).

In 2010 a 50% interest in the Muhlenberg Home Health Care was sold to Meridian Health. Meridian At Home formed a new affiliate corporation called JFK Home At Home to operate the Muhlenberg Home Healthcare. It appears that this transaction will leave MRMC with very little operating income.

Was this transaction completed unilaterally without the approval of the New Jersey Attorney General?

 

 

Issue 4

MRMC December 31, 2010 Financial Statements – page 6 paragraph 2

Notes to Financial Statements

December 31, 2010 and 2009

Organizational Structure and Nature of Operations 

“On December 31, 2010, MRMC formed a joint venture with Meridian Healthcare to establish the new organization, JFK Meridian Home Care Services LLC d/b/a JFK at Home. JFK at Home is a Home Health Care provider. The operations of Muhlenberg’s Home Care Department ceased as of that date. In connection with the formation of the joint venture, MRMC transferred property and equipment at its carrying value of approximately $258,000 to the joint venture for 50% ownership in the joint venture for $5,000,000, and a gain on sale of the Home Care business of $4,619,185, net of closing costs, was recorded in the consolidated statement of operations as of December 31, 2010. The investment in the joint venture is accounted for on the equity method of accounting and included in other assets on the consolidated balance sheet.”

Was this transaction completed unilaterally without the approval of the New Jersey Attorney General?

 

Issue 5

In 2007, the Muhlenberg Foundation made payments to the Muhlenberg Regional Medical Center of $5,571,490. This included the transfer of stock of the Midtown Shops Corporation, a firm that has extensive holdings of commercial real estate. The Muhlenberg Foundation received the Midtown Shops stock as a pledge from the Harold B. & Dorothy A. Snyder Foundation in 2007 and valued it on their books at $4,712,976, which included $208,570 in cash. Prior to the stock being controlled by the Muhlenberg Foundation, the Snyder Foundation received a yearly dividend of $109,000 from the Midtown Shops Corporation.

The purpose of this transaction needs to be questioned. Was it done in good faith? Why was Midtown Shops stock transferred from the Muhlenberg Foundation to the Muhlenberg Regional Medical Center within months after the Foundation received the total pledge, which was settled over a period of three years? Wasn’t it necessary to notify the State Attorney General about this transaction? The income from the Midtown Shops is now reflected on the Muhlenberg Regional Medical Center return for the years ending December 31, 2010.

 

MRMC December 31, 2010 Financial Statements

Notes to Financial Statements

December 31, 2010 and 2009

Financial Statements – page 34 – last paragraph

“21. Subsequent Event

Subsequent to December 31, 2010, an offer was made to purchase Midtown Shops. As of the date of the report, the sale was still pending.”

***According to land records in Union County, New Jersey, on 06/28/2011, Deed Book 5867, page 0607, a deed was recorded which transferred ownership of Midtown Shops, Inc., real estate property in the amount of Four Million Ten Thousand Dollars ($4,010,000.00).***

 

Issue 6

Are Beneficial Interest in Perpetual Trusts and Endowments protected? Based on the Financial report statement, it appears that theses Trusts and endowments are being handled correctly. However, the Attorney should be informed of any material changes to the Trusts and Endowments.

MRMC December 31, 2010 Financial Statements 

Notes to Financial Statements

December 31, 2010 and 2009

Financial Statements – page 29

 

14. Temporarily and Permanently Restricted Net Assets

 

Temporarily restricted net assets are related to, or restricted for, the following:

                                                                                                                    

                                                                                                                 2010          2009

Assets held for betterments to plant facilities and

Purchases of equipment                                                                  $ 243,516      $ 196,728            

 

Beneficial interest in temporarily restricted net assets                                                    

of the Muhlenberg Foundation                                                           5,802,381    5,842,547                                                                                                                                                                

 

Total                                                                                              $ 6,045,897     $6,039,275

 

 

 

 

Permanently restricted net assets are related to the following:

                                                                                                                       

                                                                                                                 2010           2009

Investments to be held in perpetuity, the income from

which is generally available for MRMC operations                                  $1,328,059         $1,328,059

and programs

                                   

Beneficial interest in permanently restricted net assets of

Muhlenberg Foundation, Inc.

                                                                                                                    3,863,421           3,725,375

Beneficial interest in perpetual trust                                                            2,351,775           2,205,965

 

Total                                                                                                        $ 7,543,255     $ 7,259,399

                 

MRMC December 31, 2010 Financial Statements

Notes to Financial Statements

December 31, 2010 and 2009

Financial Statements – page 9 paragraph 2

Beneficial Interest in Perpetual Trusts

2. Summary of Significant Accounting Policies (Continued)

Beneficial Interest in Perpetual Trusts

“Pursuant to the terms of the instruments creating such perpetual trusts, MRMC and Muhlenberg Foundation have no legal right to direct the application of the assets and even though these assets are reported in the accompanying consolidated balance sheet, they are subject to the jurisdiction of the court. With the closure of MRMC’s hospital, the perpetual trusts are all being reviewed, however, the possible future financial effects, if any, are not presently determinable.”

 

 

 

Issue 7

Did Solaris Health Systems, the Muhlenberg Regional Medical Center and/or the Muhlenberg Foundation notify the New Jersey Attorney General or the Surrogate Court of the hospital’s closing and seek direction(s) as to the disposition of assets? A cy pres proceeding before the courts may have been warranted.

MRMC December 31, 2010 Financial Statements – page 6 paragraph 2

Notes to Financial Statements

December 31, 2010 and 2009

Financial Statements – page 17 last paragraph

“During 2009, equipment including an MRI machine with an original cost of approximately $2,200,000 and accumulated depreciation of $2,040,000 was transferred from MRMC to JFK Medical Center. The transfer was made at book value with no gain or loss recorded.”

 

Conclusion

Has the New Jersey Attorney General ever addressed the issue of violating the original Articles of Incorporation, which clearly state that the sole purpose of the organization was “to provide a hospital for the residents of Plainfield, New Jersey?  Did Solaris Health Systems, the Muhlenberg Regional Medical Center and/or the Muhlenberg Foundation notify the New Jersey Attorney General or the Surrogate Court of the hospital’s closing and seek direction(s) as to the disposition of assets?  Was a cy pres proceeding commenced?

 

 

2/20/2012 -  revised 5/15/12 – 5/29/12