NUMC chairman suing state, possibly in a move to stall a takeover

Daily Point

Blakeman’s position on dispute uncertain; talks continue with NY over control

Nassau University Medical Center has filed a $1.06 billion notice of claim against New York State, saying the state "orchestrated a ruse to fool the federal government" in the handling of funds it was owed as part of the federal Disproportionate Share Hospital program.

The legal contretemps comes against a backdrop of intensifying negotiations over control of the facility. State officials have been discussing the possibility of installing a temporary operator at NUMC, a conversation that has included Nassau County Executive Bruce Blakeman and Nassau Interim Finance Authority chairman Richard Kessel.

A Blakeman spokesman declined to comment. A source with knowledge said the notice of claim would have "no impact" on negotiations regarding a temporary operator.

But it's unclear whether Blakeman, who has been part of the ongoing negotiations with the state, supports NUMC chairman Matthew Bruderman’s lawsuit. If Blakeman were to side with the hospital, the negotiations could fall apart. That would force the state to take unilateral action to install a temporary operator. If Blakeman sides with the state, it’s more likely that a joint county-state agreement on new management which would likely include the removal of Bruderman, Blakeman’s own pick, could move ahead.

The hospital’s legal notice, filed with Attorney General Letitia James, comes just two days after the NUMC board authorized interim chief executive Megan Ryan to negotiate contracts with two outside law firms, Susman Godfrey and Pollock Cohen, in order to provide them with up to $325,000 each for "legal services." Wednesday’s notice of claim was filed by Susman Godfrey attorney Steven M. Shepard.

But Kessel told The Point that NIFA hasn’t seen or approved the two legal services contracts.

"We are obligated under our control period to approve all contracts over $50,000 that are entered into with the hospital," Kessel said. "We have yet to see these contracts — and have not approved them at this point and so spending any money before our approval would be inappropriate."

A NUMC spokesman, in response to questions from The Point, wrote in an email: "The initial retainers did not require NIFA approval but any amendments that may be necessary will be appropriately filed with NIFA, as is our usual practice. Any suggestion of impropriety on the part of NUMC to deflect from NIFA and the State’s malfeasance here doesn’t hold water."

When asked additional follow-up questions, the spokesman told The Point in another email that any "additional questions will be answered by counsel as we proceed with the lawsuits and other consequences associated with this malfeasance on the part of the state."

The lawsuit comes as NUMC continues to owe the state more than $380 million in payments to the New York Health Insurance Program, which provides employees and retirees with their health insurance coverage — a fact Kessel emphasized in his own response to the hospital’s legal claims.

"As far as the lawsuit, I think it’s frivolous and superfluous and I think they ought to spend their time cleaning up their own act and figuring out how they’re going to pay the $380 million they owe to NYSHIP rather than filing silly, frivolous lawsuits," Kessel said.

In the notice of claim letter, NUMC argued it was owed a $100.2 million payment this year, but received only half that money after some complicated maneuverings.

Usually, half that disproportionate share payment comes from federal funds, while half is supplied by either local or state governments. But in its notice of claim, NUMC said that while it received the federal portion, the local portion was provided through a convoluted mechanism in which NUMC itself initially provided the funds that later were returned to the hospital. The state, NUMC said, required the hospital to wire the Nassau County treasurer $50.1 million earlier this year. The county in turn wired the same amount to the state Department of Health, which in turn sent the money back to NUMC.

The letter claims that the hospital "has been the victim of similar schemes since at least 2001."

Multiple sources, however, said the system of payments was based on ongoing and previous agreements between NUMC and Nassau County. The county, not the state, they said, is ultimately responsible for the local DSH share.

But a NUMC spokesman wrote The Point in response to a query: "The state is responsible."

State officials said they are continuing to work on potential strategies for NUMC going forward.

"We care about the fiscal health of the hospital and patient care and we are working toward a solution for the future of NUMC," said Gordon Tepper, a spokesman for Gov. Kathy Hochul. "All of this is noise."

— Randi F. Marshall randi.marshall@newsday.com

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