Audit: NUMC operator runs record $164 million deficit
Nassau University Medical Center, operated by NuHealth, which reported its widest budget deficit ever, $164 million, in 2022. Credit: Newsday/Steve Pfost
The public benefit corporation that runs Nassau University Medical Center had an operating loss of $164 million in 2022, a $28 million increase that represented its widest budget gap ever, heightening concern the hospital may not survive without a major infusion of funds.
For the fifth straight year, an outside auditor warned that the Nassau Health Care Corporation, or NuHealth, could cease operating as a "going concern."
New York accounting firm Grant Thornton conducted the review, obtained by Newsday, which showed NuHealth's financial statements.
The widened budget hole comes after operating losses of $135.6 million in 2021; $102.3 million in 2020; $64 million in 2019; $46.6 million in 2018, and $25.7 million in 2017. NuHealth is expected to run out of cash by year's end, acccording a warning issued in January by the Nassau Interim Finance Authority, a state control board that oversees county and hospital finances.
NuHealth operates Nassau University Medical Center in East Meadow and the A. Holly Patterson Extended Care Facility in Uniondale, both of which treat large numbers of uninsured and Medicaid-enrolled patients.
Much of the increase came from a spike in the deficit at A. Holly Patterson, from $19.6 million in 2021 to $38.5 million last year.
Dr. Anthony Boutin, chief executive and president of NuHealth, said layoffs may be necessary without more state and federal aid, which has been reduced in recent years.
Cutting staff "would be irresponsible, but maybe unavoidable," Boutin said in an email.
Supporters say NUMC plays a critical role in Nassau County — and should remain immune to budget cuts — because it provides health care to underserved patients at a low cost.
NUMC treats more than 300 patients daily and fills a role that other hospital systems could not take on if it were to fail, experts have said.
But health care consultants and some Nassau County officials say the institution is no longer financially viable.
The 19-story hospital, situated on more than 50 acres of land in East Meadow, has two floors that were never fully developed, and it has struggled financially as major hospital systems have expanded and absorbed independent facilities into their networks.
Medicaid reimburses NUMC at lower rates than private providers and Medicare, putting the hospital at a disadvantage compared with major hospital networks that rely primarily on patients with private insurance.
NuHealth's "costs have continued to go up, and they don’t generate enough revenue to cover it,” NIFA chairman Adam Barsky said.
The end of the federal Delivery System Reform Incentive Payment program, which provided incentive payments for hospitals, has been cited as a key reason for the recent spikes in NUMC's deficit.
The program, which reimbursed hospitals for achieving efficiencies, was administered by New York State and generated tens of millions of dollars for NuHealth annually, from 2011 through 2020.
The final DSRIP payment, $50 million, came in 2020. NuHealth officials "didn’t really plan to adjust their budget and finances around the fact that there's a big chunk of revenues that they were no longer going to have,” Barsky said.
Boutin said NuHealth has also struggled with rising costs for employee and retiree pension.
"While we have only increased staffing levels 1% per year since 2017, contractual obligations, increases in pension costs and the increased costs of employee benefits have added more than $80 million in obligations," Boutin said.
He said the supply chain crisis and inflation increased costs by $13 million in 2022.
"These increases in expenses are amplified when we are reimbursed for only 21% of our services" from insurers, he said.
Dr. Bruce Siegel, president and chief executive of America’s Essential Hospitals, which represents safety-net hospitals such as NUMC, said the pandemic worsened the struggles of facilities "that were barely holding their head above water" prior to it.
“Someone is going to have to write a check,” Siegel said. NUMC is "going to need an infusion of funding, and that funding needs to be sustainable. One year won't solve this problem."
Wendy Darwell, president and chief executive of the hospital advocacy group Suburban Hospital Alliance of New York State, said "there's a simple math problem here."
Medicare and Medicaid "reimburse hospitals at less than what it costs to provide the care," Darwell said.
"We've got to have a financial model that supports keeping those beds open," she said.
Nassau would be on the hook for unpaid hospital debt. Nassau guarantees more than $131.6 million in NuHealth debt, according to the most recent data, and would have to pay it off if the hospital failed.
Chris Boyle, a county spokesman, said: “We are hopeful that the state will provide further funding to keep NUMC viable and the county is looking to further its contractual relationship with them for a variety of services that create a revenue stream for the hospital."
The hospital provides health care to the county's correctional center.
A spokeswoman for Gov. Kathy Hochul did not respond to a request for comment.
NIFA took control of the hospital's finances in 2020 after auditors had the first "going concern" notes in 2018 and 2019.
NIFA hired Alvarez & Marsal, a Manhattan-based consulting firm, to recommend major changes. In its 2021 report, the firm suggested a dramatic restructuring: closing the public hospital's emergency room, cutting thousands of staff and selling A. Holly Patterson. A private operator could perform the job at a lower cost to Nassau County taxpayers, and most of the nursing home facility's patients are from Queens, the consultants said.
No elected official embraced those recommendations publicly.
Auditors pegged NuHealth's liabilities at more than $1.15 billion at the end of 2022. A year earlier, the figure was $1.06 billion, according to the Alvarez & Marsal report.
A significant driver is $260 million the corporation owes New York State for unpaid health care insurance premiums.
In 2019, the state agreed to allow NuHealth to make payments of $2 million per month to chip away at the balance, in addition to what is due each month.
Auditors said NUMC has implemented several strategies to boost revenue, such as more aggressive collection of unpaid bills and renegotiation of contracts with commercial managed care companies.
Boutin said the hospital will benefit financially from performing more complicated surgeries, its creation of a dialysis center and future treatment of heart attacks in its cardiac catheterization lab.
Patient revenue was up $14.3 million in 2022, and NuHealth boosted collections by $7.8 million in other initiatives.
NuHealth also received $75.6 million in federal CARES Act revenue for 2022, and $8.7 million in 2021.
Boutin cautioned that none of the reforms "will change the fact that our growing patient population is among the lowest income in Nassau County and our mission is to serve everyone, regardless of their ability to pay."
He addressed NIFA's warning that NuHealth may run out of cash: “We have been fully transparent with the state that the deep cuts made to the aid will put the hospital in a dire financial position by early next year, despite our unwavering focus on the implementation of a range of cost containment controls and revenue enhancement initiatives.”
The public benefit corporation that runs Nassau University Medical Center had an operating loss of $164 million in 2022, a $28 million increase that represented its widest budget gap ever, heightening concern the hospital may not survive without a major infusion of funds.
For the fifth straight year, an outside auditor warned that the Nassau Health Care Corporation, or NuHealth, could cease operating as a "going concern."
New York accounting firm Grant Thornton conducted the review, obtained by Newsday, which showed NuHealth's financial statements.
The widened budget hole comes after operating losses of $135.6 million in 2021; $102.3 million in 2020; $64 million in 2019; $46.6 million in 2018, and $25.7 million in 2017. NuHealth is expected to run out of cash by year's end, acccording a warning issued in January by the Nassau Interim Finance Authority, a state control board that oversees county and hospital finances.
WHAT TO KNOW
- NuHealth, which runs Nassau University Medical Center, sustained an operating loss of $164 million in 2022, its widest budget gap ever.
- The latest audit of the public benefit corporation heightens concern that the hospital may not survive without a major infusion of funds.
- Dr. Anthony Boutin, chief executive and president of NuHealth, said staff layoffs may be unavoidable.
NuHealth operates Nassau University Medical Center in East Meadow and the A. Holly Patterson Extended Care Facility in Uniondale, both of which treat large numbers of uninsured and Medicaid-enrolled patients.
Much of the increase came from a spike in the deficit at A. Holly Patterson, from $19.6 million in 2021 to $38.5 million last year.
Dr. Anthony Boutin, chief executive and president of NuHealth, said layoffs may be necessary without more state and federal aid, which has been reduced in recent years.
Cutting staff "would be irresponsible, but maybe unavoidable," Boutin said in an email.
Supporters say NUMC plays a critical role in Nassau County — and should remain immune to budget cuts — because it provides health care to underserved patients at a low cost.
NUMC treats more than 300 patients daily and fills a role that other hospital systems could not take on if it were to fail, experts have said.
But health care consultants and some Nassau County officials say the institution is no longer financially viable.
The 19-story hospital, situated on more than 50 acres of land in East Meadow, has two floors that were never fully developed, and it has struggled financially as major hospital systems have expanded and absorbed independent facilities into their networks.
Medicaid reimburses NUMC at lower rates than private providers and Medicare, putting the hospital at a disadvantage compared with major hospital networks that rely primarily on patients with private insurance.
NuHealth's "costs have continued to go up, and they don’t generate enough revenue to cover it,” NIFA chairman Adam Barsky said.
Reasons for spike
The end of the federal Delivery System Reform Incentive Payment program, which provided incentive payments for hospitals, has been cited as a key reason for the recent spikes in NUMC's deficit.
The program, which reimbursed hospitals for achieving efficiencies, was administered by New York State and generated tens of millions of dollars for NuHealth annually, from 2011 through 2020.
The final DSRIP payment, $50 million, came in 2020. NuHealth officials "didn’t really plan to adjust their budget and finances around the fact that there's a big chunk of revenues that they were no longer going to have,” Barsky said.
Boutin said NuHealth has also struggled with rising costs for employee and retiree pension.
"While we have only increased staffing levels 1% per year since 2017, contractual obligations, increases in pension costs and the increased costs of employee benefits have added more than $80 million in obligations," Boutin said.
He said the supply chain crisis and inflation increased costs by $13 million in 2022.
"These increases in expenses are amplified when we are reimbursed for only 21% of our services" from insurers, he said.
Dr. Bruce Siegel, president and chief executive of America’s Essential Hospitals, which represents safety-net hospitals such as NUMC, said the pandemic worsened the struggles of facilities "that were barely holding their head above water" prior to it.
“Someone is going to have to write a check,” Siegel said. NUMC is "going to need an infusion of funding, and that funding needs to be sustainable. One year won't solve this problem."
Wendy Darwell, president and chief executive of the hospital advocacy group Suburban Hospital Alliance of New York State, said "there's a simple math problem here."
Medicare and Medicaid "reimburse hospitals at less than what it costs to provide the care," Darwell said.
"We've got to have a financial model that supports keeping those beds open," she said.
Nassau would be on the hook for unpaid hospital debt. Nassau guarantees more than $131.6 million in NuHealth debt, according to the most recent data, and would have to pay it off if the hospital failed.
Chris Boyle, a county spokesman, said: “We are hopeful that the state will provide further funding to keep NUMC viable and the county is looking to further its contractual relationship with them for a variety of services that create a revenue stream for the hospital."
The hospital provides health care to the county's correctional center.
A spokeswoman for Gov. Kathy Hochul did not respond to a request for comment.
Financial takeover
NIFA took control of the hospital's finances in 2020 after auditors had the first "going concern" notes in 2018 and 2019.
NIFA hired Alvarez & Marsal, a Manhattan-based consulting firm, to recommend major changes. In its 2021 report, the firm suggested a dramatic restructuring: closing the public hospital's emergency room, cutting thousands of staff and selling A. Holly Patterson. A private operator could perform the job at a lower cost to Nassau County taxpayers, and most of the nursing home facility's patients are from Queens, the consultants said.
No elected official embraced those recommendations publicly.
Auditors pegged NuHealth's liabilities at more than $1.15 billion at the end of 2022. A year earlier, the figure was $1.06 billion, according to the Alvarez & Marsal report.
A significant driver is $260 million the corporation owes New York State for unpaid health care insurance premiums.
In 2019, the state agreed to allow NuHealth to make payments of $2 million per month to chip away at the balance, in addition to what is due each month.
Auditors said NUMC has implemented several strategies to boost revenue, such as more aggressive collection of unpaid bills and renegotiation of contracts with commercial managed care companies.
Boutin said the hospital will benefit financially from performing more complicated surgeries, its creation of a dialysis center and future treatment of heart attacks in its cardiac catheterization lab.
Patient revenue was up $14.3 million in 2022, and NuHealth boosted collections by $7.8 million in other initiatives.
NuHealth also received $75.6 million in federal CARES Act revenue for 2022, and $8.7 million in 2021.
Boutin cautioned that none of the reforms "will change the fact that our growing patient population is among the lowest income in Nassau County and our mission is to serve everyone, regardless of their ability to pay."
He addressed NIFA's warning that NuHealth may run out of cash: “We have been fully transparent with the state that the deep cuts made to the aid will put the hospital in a dire financial position by early next year, despite our unwavering focus on the implementation of a range of cost containment controls and revenue enhancement initiatives.”
Scott Eidler covers Nassau County government and politics for Newsday. Scott has worked at Newsday since 2012 and previously covered municipal government and education.
