Reader Mail: Hospital Concerns

3/6/2009:

When you receive over 20,000 emails per month – some are certainly bound to get overlooked.

One such email was from Hoboken resident Jamie Steiner – who has some thoughts about Hoboken University Medical Center:

hoboken-university-medical-center-reader-mail-hoboken411.jpg

So what is going wrong?

“There are few reasons to be optimistic that the HUMC can return to profitability this year. We know the hospital suffered a 4.3 mm dollar operating loss, but that is not the whole story. There are two ways that the hospital could be forced to close within the next year, causing an interruption of services, or triggering the 52 mm dollar loan guarantee given by the city. Do not rely on Hoboken taxpayers to get you out of your mess!

Added to the 4.3 mm loss is a depreciation expense of 4.6 mm and interest of 2.2 mm, totaling over 11 mm. Accounting rules state that depreciation and interest are separate from “operating losses”, but this is an accounting fiction. It will be necessary to borrow when repairs inevitably must be made. Interest expense is also real and is being made up for by borrowing yet more money.

Borrowing has gotten harder. Last November, due to these losses, the hospital needed cash. Unable to get long term financing, the authority issued 9.7 mm dollars of short term debt due this May. The hospital kicked the can down the road until after the municipal elections. Now, credit markets are worse, and Hoboken’s credit – upon which the hospital relies – is worse too. If the hospital cannot roll over the debt before May, the city could be called upon to pay 9.7 mm dollars in cash or close the hospital. Higher taxes, anyone?

Read the rest of the letter after the jump…

(Letter about Hoboken University Medical Center, continued…)

“In addition to borrowing, hospitals can obtain financing by putting off its vendors until cash comes in – they hope to put off the day of reckoning.
The HUMC’s accounts are 90 days overdue – the statewide average is 60 days.
Vendors eventually become unwilling to deal with the hospital, stopping its operations. The hospital assures me that they are not having this problem yet.

So what is going wrong? New Jersey hospitals must provide medical care to everyone, regardless of their ability to pay, but the state “Charity Care subsidy” has changed. The HUMC will be getting as much as 3 mm dollars less from the state in 2009 than in 2008. At the same time, more people than ever do not have health insurance. The HUMC’s plan is to reduce non-essential staff and pay the doctors less. We hope that the quality of care will not suffer.

These discouraging difficulties raise the specter of closure, but closure isn’t all bad. A nearby regional hospital could operate the new emergency room. This should comfort those who fear that traffic could delay life saving treatment for residents. In fact, patients would probably achieve a better standard of care in regional hospitals with more resources.

The city should not keep the hospital open at any cost when other alternatives exist. If the hospital administration is unable to turns things around, don’t ask the taxpayers to foot the bill – it is not the only answer.”

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34 Comments on "Reader Mail: Hospital Concerns"

strand tramp
Member
strand tramp

[quote comment=”141614″]A special meeting of the Hospital Authority has been scheduled for 7pm this Wednesday for approval of the 2009 bond resolution (rollover of a short-term $9.7M note to a 10-year bond, proceeds of note having been used to address cash-flow issues). That’s $9.7M removed from the capital improvements plan that was to bring the hospital back to profitability.

At the same time, the city council will hold a special meeting for introduction of the amended 2009 budget.[/quote]
to put this action in perspective for those that may not spend much time focusing on muni finance; this action is akin to taking out a cash advance on your Visa card to pay your rent, and then opening up a home equity line to pay off the visa account cash advance. do YOU think this is a viable strategy? is there anyone here who DOESN’T think this whole hospital charade is a disaster on a countdown?
i would compare this situation to the Dems pouring money down the GM rat hole just to pay back the UAW for their votes. it is a waste of money. they are still going to fail. and all the taxpayers are paying for the few jobs that should have been eliminated already.

jvsteiner
Member
jvsteiner

[quote comment=”141279″][quote comment=”141277″]Why are we paying the CEO of a small municipal hospital $800K/yr?[/quote]

Don’t worry. The more he and his cronies make, the sooner it gets shut down and we can put up some 75 story condos on that plot of land. All that development will magically make our tax problems disappear. Didn’t you hear? Roberts said so……..ha ha[/quote]
The salary is high end, but not out of range. Additionally, since his tenor was always meant to be temporary, this is probably appropriate IF he can make the hospital operate at breakeven or profitably. I have no issues with private compensation agreements.

jvsteiner
Member
jvsteiner

estevens,
This is a new special meeting? They presented the 2009 budget last wednesday, plus the bond resolution AFAIK. Is this something new?

estevens
Member

A special meeting of the Hospital Authority has been scheduled for 7pm this Wednesday for approval of the 2009 bond resolution (rollover of a short-term $9.7M note to a 10-year bond, proceeds of note having been used to address cash-flow issues). That’s $9.7M removed from the capital improvements plan that was to bring the hospital back to profitability.

At the same time, the city council will hold a special meeting for introduction of the amended 2009 budget.

jvsteiner
Member
jvsteiner
[quote comment=”141154″]This guy is a blithering idiot—talk about twisting the truth. Yes depreciation and expense allowances come home to roost but not with such “scare everybody” immediacy. its like saying I paid for my car yesterday so i’ll need another 40 grand to buy one tommorrow———the car we pd for will take some time before replacement is required—-he must be using eighth grade school yard accounting rules—-a little knowledge is a dangerous thing[/quote] It’s more like I bought a car on credit, I can make the interest payments, but I have no way to pay back the principle – and when I need a new car, I’m going to have to borrow more money, but I still won’t be able to pay back the original loan. Oh, and I’m borrowing money for gas and oil and repairs along the way. But lets assume for a second that your right: they will magically make money some point down the road and make up for all of these accumulated losses. They still don’t count interest expense – so 4.6 mm is still not the right number because there was 2.2 mm in interest. If you look at the bond docs, they say the maximum interest rate they can pay is 10%. The bonds they are rolling over currently yield more than 10%, and that’s only until may: longer dated debt usually requires a higher interest rate to place. So what happens if they can’t issue for 10%? Will they issue with a… Read more »
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