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STATE SHORTHAND REPORTING SERVICE, INC.
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MINUTES OF THE STATE HEALTH PLANNING BOARD MEETING
Thursday, May 5, 2016
Members Present:
Susan Olszewski, ChairpersonJudy Donlen (via phone)Dr. Joseph BaroneMichael GrossMichael BakerDr. Poonam AlaighAlison Gibson (Representing Commissioner O’Dowd, Department of Health)Margaret Springer (Representing Commissioner Velez, Department of Human Services)Susan Brewen-Alvino (Representing Commissioner Blake, Department of Children & Families)
Excused Absent:
Catherine AinoraHenry Kane Connie Bentley McGheeJon Brandt
Staff:
John CalabriaJamie HernandezMichael Kennedy, DAG
CALL TO ORDER
Susan Olszewski, Chairperson opened the meeting at the Department of Health, Market and Warren St., H&A Bldg., 1st Floor, Auditorium, NJ on Thursday, May 5, 2016.
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MOTION SUMMARY
1. Approval of February 4, 2016 minutesMotion – Ms. Olszewski, Second – Mr. Gross
2. Approval of Certificate of Need Application for the Partial Transfer of Ownership of Hoboken University Medical Center Motion – Dr. Donlen, Second – Dr. Barone
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May 5, 2016
VOTING RECORDVOTING BOARD MEMBER ROLL 1 2
Dr. Donlen X Y Y
Ms. Ainora - - -
Mr. Kane - - -
Ms. Olszewski X Y Y
Ms. Bentley-McGhee - - -
Dr. Barone X Y Y
Mr. Baker X A R
Mr. Gross X Y Y
Dr. Alaigh X Y Y
Mr. Brandt - - -
Susan Dougherty (representing Mr. Conroy) – non voting member
X - -
Margaret Springer (representing Dr. Lind) – non voting member
X - -
Ms. Brewen-Alvino – non voting member
X - -
Total
Total Absent
9
5-Y
0-N
1-A
0-R
5-Y
0-N
0-A
1-R
KEY: Y=YES N=NO A=ABSTAIN R=RESCUE
STATE SHORTHAND REPORTING SERVICE, INC.
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1 - - - - - - - - - - -X STATE OF NEW JERSEY
2 STATE HEALTH PLANNING BOARD DEPARTMENT OF HEALTH
3- - - - - - - - - - -X
4COMPUTERIZED TRANSCRIPT of the stenographic
5notes of the proceedings in the above entitled
6matter as taken by DENISE L. SWEET, a Certified
7Court Reporter and Registered Professional Reporter,
8at the DEPARTMENT OF HEALTH, Market and Warren
9Streets, H&A Building, First Floor, Auditorium,
10Trenton, New Jersey on Thursday, May 5, 2016, at
119:30 in the forenoon.
12
13BOARD MEMBERS:
14 Susan Olszewski, ChairwomanAlison Gibson
15 Suzanne Brewen-AlvinoMichael Kennedy
16 Dr. Joseph BaroneMichael Gross
17 Michael BakerDr. Poonam Alaigh
18 Dr. Judy Donlen (via speakerphone)
19 STATE DEPARTMENT REPRESENTATIVES: John Calabria
20 Susan Dougherty
21PUBLIC COMMENT:
22 Paul Hollander, Esq.
23APPLICANT REPRESENTATIVES:
24 Tom Kolb, Esq.Leslie Prizant, Esq.
25 Ann Logan
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I N D E X
1AGENDA: PAGE
2I. Call to Order 4
3II. Chairperson's Report 5
4 - Approval of April 9, 2015 minutes 5- Approval of February 4, 2016 minutes 6
5III. Commissioner's Report 6
6IV. Certificate of Need Application for the 7
7 Partial Transfer of Ownership of HobokenUniversity Medical Center
8A. Department Presentation 7
9 B. Public Comment on the Application 22C. Applicant's Presentation 36
10 D. Board Discussion and Vote 57
11 V. Other Business 59
12 VI. Adjournment 60
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17
18
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23
24
25 CHAIRWOMAN OLSZEWSKI: We do have a
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1 quorum, so our meeting can begin.
2 MS. HERNANDEZ: This is a formal
3 meeting of the State Health Planning Board.
4 Adequate notice of this meeting has been published
5 in accordance with provisions of Chapter 231, Public
6 Law 1975, c-10:4.10 of the State of New Jersey
7 entitled Open Public Meetings Act.Notice was sent
8 to the Secretary of State who posted the notice in a
9 public place. Notices were forwarded to 12 New
10 Jersey newspapers, one New York newspaper, one
11 Philadelphia newspaper, three news organizations and
12 the NJTV.
13 I will now call role. Ms. Gibson?
14 MS. GIBSON: Here.
15 MS. HERNANDEZ: Dr. Lind? Ms.
16 Brewen-Alvino?
17 MS. BREWEN-ALVINO: Here.
18 MS. HERNANDEZ: Mr. Kennedy?
19 MR. KENNEDY: Here.
20 MS. HERNANDEZ: Ms. Ainora? Mr.
21 Kane? Ms. Olszewski?
22 CHAIRWOMAN OLSZEWSKI: Here.
23 MS. HERNANDEZ: Ms. Bentley-McGhee?
24 Dr. Barone?
25
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1 DR. BARONE: Here.
2 MS. HERNANDEZ: Mr. Gross? Mr.
3 Baker?
4 MR. BAKER: Here.
5 MS. HERNANDEZ: Dr. Alaigh?
6 DR. ALAIGH: Here.
7 MS. HERNANDEZ: Mr. Grant? Dr.
8 Donlen?
9 DR. DONLEN: Here.
10 MS. HERNANDEZ: We have seven
11 members present, which does constitute a quorum.
12 CHAIRWOMAN OLSZEWSKI: Okay. Thank
13 you. Dr. Donlen, you're on the agenda for the
14 Chairperson's report. Do you have a report?
15 DR. DONLEN: No.
16 CHAIRWOMAN OLSZEWSKI: Okay. The
17 first item was the approval of the April 9, 2015
18 minutes, but there's not enough people here for us
19 to do that, so we -- oh, we do now? Now there are.
20 Okay. Just a moment. So, could you please state
21 your name? I'm sorry. Mickey Gross has joined.
22 He's a member of the State Health Planning Board.
23 So, does Mickey vote on this one?
24 MS. HERNANDEZ: No.
25 CHAIRWOMAN OLSZEWSKI: Okay. So,
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1 we are going to table the approval of the April 9,
2 2015 minutes.
3 But, we can look at approving the
4 February 4, 2016 meeting minutes. Do I have a -- is
5 there any discussion?
6 MR. GROSS: Motion to approve.
7 CHAIRWOMAN OLSZEWSKI: I'll second.
8 MS. HERNANDEZ: Ms. Olszewski?
9 CHAIRWOMAN OLSZEWSKI: Yes.
10 MS. HERNANDEZ: Dr. Barone?
11 DR. BARONE: Yes.
12 MS. HERNANDEZ: Mr. Gross?
13 MR. GROSS: Yes.
14 MS. HERNANDEZ: Mr. Baker?
15 MR. BAKER: I'll abstain.
16 MS. HERNANDEZ: Dr. Alaigh?
17 DR. ALAIGH: Yes.
18 MS. HERNANDEZ: Dr. Donlen?
19 DR. DONLEN: Yes.
20 MS. HERNANDEZ: We have five yeses.
21 Motion moved.
22 CHAIRWOMAN OLSZEWSKI: Okay. Thank
23 you. Next, do we have a commissioner's report,
24 Alison?
25 MS. GIBSON: We do not.
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1 CHAIRWOMAN OLSZEWSLI: No, we do
2 not.
3 MS. GIBSON: No, we do not.
4 CHAIRWOMAN OLSZEWSKI: Okay. Then
5 we will proceed to the business at hand, which is to
6 look at the Certificate of Need, Application for the
7 Partial Transfer of Ownership of Hoboken University
8 Medical Center.
9 Now, how we do this is, we start
10 with the Department presentation. Next, we have
11 public comment. Is there anyone from the public who
12 signed up to speak today? Just so you know, that's
13 up to an hour. Okay. One. Okay.
14 MS. HERNANDEZ: I have a list here.
15 CHAIRWOMAN OLSZEWSKI: Was there a
16 list? Okay. And the applicant's presentation and
17 then we'll have Board discussion and vote.
18 So, if we can start with the, okay,
19 yes, we do have Paul Hollander. Okay. That's you,
20 but we will start with the Department presentation.
21 So, John, you're up.
22 MR. CALABRIA: John Calabria,
23 C-A-L-A-B-R-I-A. Thank you and good morning to the
24 members of the Board. Today we're here to review
25 with you the application submitted for the partial
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1 transfer of Hoboken University Medical Center. The
2 ownership interest of the applicant will increase
3 from 9.9 percent to 25 percent and that goes over
4 the 10 percent threshold that we have for review of
5 all kinds of applications. I will, as is practice,
6 go over the Department's reasons for approval right
7 now and go over with you the conditions that we're
8 recommending be placed on such approval.
9 In the staff recommendations, based
10 on the documentation of proposed compliance with
11 regulatory and statutory criteria, Department staff
12 recommends approving the partial transfer of
13 ownership of HUMC Opco to MPT of Hoboken for the
14 following reasons and with the conditions noted
15 below.
16 First reason, this transfer is
17 expected to result in the continued promotion of the
18 sharing of services and administrative efficiencies
19 among Hoboken University Medical Center, CarePoint
20 Health, Bayonne Medical Center and CarePoint Christ
21 Hospital.
22 In March of 2012 MPT of Hoboken
23 acquired a 9.9 percent ownership interest in HUMC
24 Holdco. Subsequent to this change of ownership
25 interest, the overall occupancy rate for all
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1 maintained beds has remained relatively stable from
2 2012 through 2015.
3 Number three, applicant assures the
4 Department that MPT of Hoboken, a taxable Real
5 Estate Investment Trust subsidiary, will not and
6 cannot, as prohibited by IRS regulations,
7 participate in the management of the business and
8 operations of HUMC Opco and HUMC.
9 HUMC has operated in the region
10 traditionally serving the same primary and secondary
11 service areas and no data exists to suggest that
12 this partial transfer of ownership will change the
13 hospital's relationship with other Hudson County
14 hospitals or adversely impact the healthcare status
15 of the community.
16 Number five, the applicant assures
17 the Department that there will be no impact on the
18 number and work status of the current professional
19 and nonprofessional employees of the hospital and
20 clinic employees as a result of this transaction.
21 Six, the applicant has complied
22 with the Department's general transfer of ownership
23 criteria. There is a willing buyer and seller. The
24 buyer has presented a financially feasible project
25 and the buyer does not have any identifiable track
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1 record violations sufficiently serious to warrant
2 denial of the application.
3 The application and its attachments
4 shall be incorporated and accepted as conditions of
5 licensure.
6 Number eight, the applicant has
7 stated that HUMC Holdco, MPT of Hoboken and HUMC
8 Opco, in accordance with regulation, will not deny
9 admission to any patients on the basis of their
10 inability to pay or source of payment.
11 I'll go into conditions and there
12 have been changes that were sent to the Board
13 yesterday in the original submission by the
14 Department. These were at the request of the
15 applicant due to concerns that some of you had
16 originally that could imply or hint at that they had
17 some operational control of the hospital, which is
18 not the case.
19 So, the conditions, number one,
20 HUMC Opco shall file a licensing application with
21 the Department's Division of CN Licensing to execute
22 the proposed partial transfer of ownership of HUMC
23 Opco to MPT of Hoboken.
24 In accordance with regulation, HUMC
25 Holdco and MPT of Hoboken shall provide prior
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1 notification in writing to the Division of any
2 change in their respective ownership interests in
3 HUMC Opco.
4 MPT of Hoboken, number three, MPT
5 of Hoboken must meet with the Department to discuss
6 its plans before taking any extraordinary action as
7 identified in section 3.14(a) of the LLC agreement.
8 Before MPT of Hoboken takes any
9 extraordinary action identified in section, of
10 sections of that agreement, except with respect to
11 the marketing of the hospital for sale, it shall
12 submit an application for a CN to the Division in
13 accordance with statute and regulation and obtain a
14 CN from the Department.
15 Provision number five, for the
16 initial five years following the transfer of
17 ownership, the following reports shall be submitted.
18 HUMC Opco shall submit annual reports to the
19 Division detailing an annual accounting of any long-
20 or short-term debt or other liabilities incurred on
21 the hospital's behalf and reflected on HUMC Opco's
22 balance sheet, and also a list of completed capital
23 projects itemized to reflect both the project and
24 its expenditure. Finally, the members of HUMC Opco
25 shall submit reports to the extent such member has
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1 made an investment in HUMC during the previous year
2 Number six, HUMC Opco’s annual
3 audited financial statements shall be posted on the
4 hospital's website within 180 days of the close of
5 the hospital's fiscal year and shall ensure that the
6 hospital's quarterly unaudited financial statements
7 are posted on the website within 60 days of the
8 close of the hospital's fiscal quarter. All annual
9 and quarterly statements shall be prepared in
10 accordance with generally accepted accounting
11 principles. With respect to the posting of
12 quarterly unaudited financial statements, HUMC Opco
13 may include disclaimer language regarding the
14 unaudited nature of the quarterly financial
15 statements on its website where such statements are
16 posted.
17 Number seven, within 60 days of
18 posting its audited annual financial statements to
19 its website, HUMC Opco shall hold an annual public
20 meeting in New Jersey pursuant to statute and shall
21 make copies of those audited annual financial
22 statements available at the annual public meeting.
23 HUMC Opco shall develop mechanisms for the meeting
24 that address the following: A, an explanation in
25 layperson's terms of the audited annual financial
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1 statement; B, an opportunity for members of the
2 local community to present their concerns to HUMC
3 Opco regarding local healthcare needs and hospital
4 operations; C, a method for HUMC Opco to publically
5 respond in layperson's terms to the concerns
6 expressed by community members at the annual public
7 meeting; and, D, HUMC Opco shall develop these
8 methods, A through C above, within 90 days of the
9 date of this approval letter and provide them to the
10 Division.
11 Number eight, HUMC Opco shall
12 maintain compliance with the United States
13 Department of Health and Human Services standards
14 for Culturally and Linguistically Appropriate
15 Services in Health and Healthcare. Compliance shall
16 be documented and filed with the Division with the
17 annual licensing renewal.
18 Number nine, in regard to contracts
19 with insurers, HUMC Opco shall on its, shall post on
20 its website the status of all insurance contracts
21 related to patient care between the hospital and
22 insurance plans. HUMC Opco shall provide notices to
23 patients concerning pricing and charges relating to
24 coverage during termination of plans. B, HUMC Opco
25 shall notify the Department within 48 hours of the
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1 status of notices concerning any HMO or commercial
2 insurance contract that will expand out-of-network
3 service coverage. HUMC Opco shall meet with
4 representatives from the Department and the
5 Department of Banking and Insurance to discuss the
6 intent to terminate any such contract, willingness
7 to enter into mediation and shall document how it
8 will provide notice to patients and providers, as
9 well as the impact that such action is reasonably
10 expected to have on access to healthcare.
11 Ten, HUMC Opco shall remain
12 obligated to comply with all conditions contained in
13 the Department's 2011 CN approval letter. That was
14 the original transfer of the hospital from the
15 municipality of Hoboken.
16 11, all these conditions shall
17 apply to any successor organization to HUMC Opco who
18 acquires HUMC within five years from the date of
19 this CN approval.
20 And, finally, number 12, MPT of
21 Hoboken shall not interfere with HUMC Opco's
22 compliance with the preceding conditions, as well as
23 any conditions contained in the Department's 2011 CN
24 approval letter, to the extent as a member MPT has
25 any power to do so.
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1 That's the rationale for our
2 recommendation for approval. Again, this is an
3 approval to go from 9.9, already 9.9 percent to 25
4 percent. I'll be happy to try to respond to any
5 questions anybody may have.
6 CHAIRWOMAN OLSZEWSKI: John, I'd
7 like to just start, because I'm the Chair today, I
8 guess. Judy, you'll have your chance.
9 This seems, I'm reading it to be,
10 basically, a financial, it's just, it's, basically,
11 a financial type of change and doesn't truly,
12 because of the agreement, because a REIT is
13 involved, doesn't seem to impact and, actually, by
14 IRS regulation and by contract between the parties,
15 can't deal with the day-to-day operations of the
16 hospital. So, are we, as the State Health Planning
17 Board, we're, basically, to treat this as a
18 financial operation?
19 MR. CALABRIA: Well, it is,
20 essentially, that. I think you're correct in that
21 and you're correct in your description of the IRS
22 and how Real Estate Investment Trusts and the IRS
23 handles that and so forth. But, this is a CN,
24 because we have, as I mentioned in the beginning,
25 you know, if anything less than 10 percent, even if
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1 it’s not a CN licensing transfer, if it’s less than
2 10 percent it’s a notification to the Department.
3 If it's something that just needs a licensing
4 application, once you hit 10 percent, then you file
5 a licensing application or for something that it's
6 like a CN with a hospital, then you have to come to
7 the Department and come through the CN process so
8 the public has some knowledge of what's going on and
9 they can express any concerns they may have. But,
10 essentially, your statements are correct.
11 CHAIRWOMAN OLSZEWSKI: Okay.
12 Because, it was difficult for me to contemplate
13 reasons not to approve this, because, you know,
14 we're most concerned about access to care in the
15 State and that's truly not, it doesn't appear to be
16 an issue here as long as we ensure in the conditions
17 that a separation exists between day-to-day
18 operations and coverage.
19 MR. CALABRIA: As indicated by our
20 recommendation for approval, we are, as the staff
21 and the Department, very comfortable with what you
22 just said. That is entirely correct.
23 CHAIRWOMAN OLSZEWSKI: Okay. Okay.
24 The one thing I would ask you, and it does involve
25 operations, when I was looking through the material
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1 provided, it looks like clinic visits have dropped
2 dramatically in Hoboken by, like, 50 percent since
3 2011. And I don't know, the staff didn't mention
4 that. It probably isn't an issue here, but --
5 MR. CALABRIA: Well, I know when, I
6 understood that you asked that question, I did look
7 back, because if you look at the, it's in your
8 report, the maintained beds, and you'll see there's
9 fluctuations in occupancy, fluctuations in numbers
10 of beds, occupancy down low, as a result of that
11 beds came down. So, clinic visits are probably just
12 a reflection of fluctuations in utilization of the
13 hospital as a whole.
14 We have not been informed of any
15 complaints to the Department that there is a lack of
16 access to clinics that they're supposed to have. We
17 did, with the applicant in the review process,
18 confirm that they have, they do have clinics for all
19 patients, all the services for staffing these beds.
20 CHAIRWOMAN OLSZEWSKI: Okay. I
21 think we all know having served on this committee
22 for years and know the environment around that you
23 could have, you could have the clinic and the hours,
24 you can discourage patients from coming in,
25 potential patients from coming in. So, that just
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1 raised a flag for me.
2 MR. CALABRIA: I just want to
3 assure you and the Board that we do hear about that.
4 We either --
5 CHAIRWOMAN OLSZEWSKI: Okay.
6 MR. CALABRIA: -- I will call the
7 hospital myself or we'll submit it as for a
8 complaint investigation, if that doesn't work or
9 there's some other concern.
10 CHAIRWOMAN OLSZEWSKI: That's good.
11 Okay. One last thing, I know that we do the
12 insurance, the contracts with the insurance
13 companies. Now, we've learned from the past
14 experience to put that as conditions in here and
15 since the takeover of HUMC Opco in 2011, 2012, has
16 there been any issues, real issues with insurance
17 coverage?
18 MR. CALABRIA: Not that I'm aware
19 of.
20 CHAIRWOMAN OLSZEWSKI: Okay. Okay.
21 No. That's good. That's all for me. Anyone else
22 around the table? Oh, actually, Judy, would you
23 like to have some questions? Do you have questions?
24 DR. DONLEN: I have questions.
25 I'll wait and see if anybody else asks them. It's
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1 harder to hear them from me, so if mine are answered
2 now I'll wait.
3 CHAIRWOMAN OLSZEWSKI: Oh, we can
4 hear you just fine. But, okay. Anyone else,
5 questions?
6 DR. BARONE: To add to it, it seems
7 like we already have approved the 25 percent
8 threshold. So, they started at 9.9. We're just
9 allowing them to do what, essentially, has already
10 been agreed to.
11 MR. CALABRIA: Yes, between the
12 buyer and the seller it has already been agreed to.
13 CHAIRWOMAN OLSZEWSKI: Okay. Dr.
14 Alaigh?
15 DR. ALAIGH: So, thank you again
16 for explaining the reason why we're here today. And
17 so, you know, it makes perfect sense to have sort of
18 a discussion to the rationale. And the one thing I
19 wanted to find out was, what was the financial
20 reason for increasing the ownership of, to 25
21 percent? Was there a revenue issue, a stream issue
22 for the hospital finances, or were there concerns
23 around needing more capital and that's why changing
24 that ownership order?
25 MR. CALABRIA: I think it was a
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1 couple years back when they had the convertible
2 promissory note and that promissory note between the
3 applicant and the hospital was that they could
4 convert that to ownership interest up to 25 percent.
5 So, they took the first step a couple years back and
6 did 9.9 percent and now they're taking a step to go
7 up to with what they had agreed to. So, that was
8 the financing arrangement between the two parties.
9 DR. ALAIGH: From a Department
10 perspective, are there any concerns around the
11 financial health of the hospital that requires
12 additional capital infusion?
13 MR. CALABRIA: Not at this time,
14 no, there's not.
15 DR. ALAIGH: And then the one
16 rationale, number eight that you talked about, is
17 that, it's number eight or number seven or somewhere
18 in there, but it's pretty clear that the applicant
19 has no role in the operations of the hospital.
20 MR. CALABRIA: It's not just us
21 either. It's the IRS. They, in this regard,
22 they're much more powerful than we are.
23 DR. ALAIGH: Do they have a seat on
24 the Board or governance in any way? Are you aware
25 of that?
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1 MR. CALABRIA: The applicant is
2 going to be a part of the ownership and the
3 governance board. The applicant can tell you that.
4 That wasn't something we looked into in any detail.
5 When the applicant is up, they can, you can ask
6 them.
7 DR. ALAIGH: And do the conditions
8 ensure that the services are, the clinical services,
9 are going to be maintained?
10 MR. CALABRIA: Yes, I believe they
11 do. It's not just the conditions that are here.
12 Remember, one of our last couple conditions says you
13 have to meet the conditions we placed on them in
14 2011 also and those conditions do have that.
15 DR. ALAIGH: Okay. That's all.
16 CHAIRWOMAN OLSZEWSKI: Mr. Baker?
17 MR. BAKER: I'm good.
18 CHAIRWOMAN OLSZEWSKI: Mr. Gross?
19 MR. GROSS: I'm good.
20 CHAIRWOMAN OLSZEWSKI: Okay. Judy?
21 DR. DONLEN: My questions wind up
22 being for the applicant, so I'll wait.
23 CHAIRWOMAN OLSZEWSKI: Okay. Okay.
24 So, no more questions for the staff? Thank you,
25 John.
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1 MR. CALABRIA: Thank you.
2 CHAIRWOMAN OLSZEWSKI: Okay. Now
3 it's time for public comment. So, Paul Hollander
4 signed up. When you come forward, could you please,
5 for the minutes here, state your name and spell it?
6 MR. HOLLANDER: Good morning. My
7 name is Paul Hollander, H-O-L-L-A-N-D-E-R. I'm an
8 attorney with the firm Okin, Hollander LLC and I'm
9 here representing the City of Hoboken this morning.
10 I'd like to thank the Board members
11 for affording us this opportunity to make some
12 comments on this Certificate of Need application and
13 trust that the Board members are aware that the City
14 did submit a letter dated April 20 providing certain
15 written comments to the MPT CN application and we'd
16 like to expand, not expand, but sort of reinforce
17 some of the comments that were made in that letter.
18 Now, the City is appreciative of
19 what it views is the efforts on the part of the
20 Department of Health staff to incorporate and
21 address in the original set of conditions some of
22 the concerns that the City expressed in its letter
23 in terms of including conditions that would make
24 more certain that the applicant couldn't have any
25 management or active day-to-day role in the
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1 operation of the hospital. I'm a little bit
2 concerned having learned this morning that some of
3 those conditions have been rewritten and I would ask
4 if it was possible for a black-lined copy of the new
5 conditions to be provided so that we can see exactly
6 what impact it might have on and how they differ
7 from the original conditions. Certainly changes to
8 condition three and four are very much of concern to
9 the City.
10 But, putting that matter aside,
11 what the City's primary concern is, at this point,
12 assuming that all of the conditions hopefully are
13 acceptable, is that I assume the Board is aware that
14 there was litigation between the applicant and the
15 owner of the hospital. Thank you very much. And in
16 that litigation, the applicant and the owner took
17 diametrically opposed and conflicting views about
18 what the corporate governance documents of the
19 hospital were intended to provide and they were very
20 sharp disputes. It's part of the CN application,
21 the pleadings before the Chancery Court in Delaware
22 of the party's perspective positions and they were
23 quite different in terms of what role MPT believed
24 it had. And as also part of the CN application in
25 answers to completeness questions, there's
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1 indications that there’s been an agreement in
2 principal to settle those disputes and to settle
3 that litigation, but although the Department was
4 told about that in March of 2015, the actual
5 documentation pursuant to which those disputes have
6 been settled, and whether or not the settlement of
7 those disputes has resulted in any changes in either
8 the LLC operating agreement or any other corporate
9 governance documents have, to my knowledge, never
10 been provided to the Department of Health. And
11 unless people are afforded, the Department of Health
12 and the staff and the Board members, an opportunity
13 to understand what the definitive, final
14 documentation of that settlement is, we don't have
15 any way of knowing of what other changes, if any,
16 have been made in the LLC agreements or the
17 operating agreements or whether the conditions that
18 have been imposed or at least recommended by the
19 Department of Health staff --
20 CHAIRWOMAN OLSZEWSKI: I'm sorry,
21 continue.
22 MR. HOLLANDER: -- would continue
23 to be applicable to the extent these documents have
24 been revised.
25 So, for example, in condition three
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1 and four of the original staff recommendations, they
2 dealt with issues of major default, removal events
3 and extraordinary actions under the original 2012
4 LLC agreement. Okay. And imposed, as we think it's
5 quite appropriate, requirements that notice be given
6 to the Department, consultation be had with the
7 Department and, in certain instances, actual CN
8 approvals be obtained before certain of these
9 actions were taken.
10 But, quite frankly, if the LLC
11 agreement hasn't been changed in any way so that
12 these provisions have been altered, it's difficult
13 for either, I believe, the Department or an
14 interested party, such as the City, to understand
15 whether those conditions would continue to be
16 equally effective and applicable to a revised LLC
17 operating agreement or any other corporate
18 governance document that the parties may have
19 entered into in connection with the settlement of
20 the Delaware litigation.
21 So, in our letter we asked that the
22 applicant be required to come forward and disclose
23 the actual definitive agreements so that -- I'm
24 sorry.
25 CHAIRWOMAN OLSZEWSKI: I'm sorry.
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1 I should have started off with this and I'm taking
2 over the Chair today, so I neglected to mention at
3 the beginning of the meeting, but we did, the State
4 staff did receive yesterday morning a copy of the
5 updated agreement, the limited liability agreement,
6 and that was provided to us via, to the staff and
7 the Planning Board members last night, via e-mail.
8 So, we do have a copy of that and that was, as I
9 understand it, part of the information that was used
10 in whether the conditions were altered.
11 Okay. So, I'm sorry. So, just so
12 that you, I understand you do not have a copy of
13 that, but --
14 MR. HOLLANDER: Yes, although
15 somebody from the Department staff, I think, handed
16 up a black-lined copy of the conditions. So,
17 although I haven't yet had a moment to read them --
18 CHAIRWOMAN OLSZEWSKI: Okay.
19 MR. HOLLANDER: -- but, aside from
20 the matters that I think go to the heart of the
21 corporate governance concerns that a number of the
22 Board members expressed, condition, the original
23 condition ten of the staff's recommendation was that
24 all of the terms of the original CN approval back in
25 2011 continued to be adhered to. And one of the,
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1 condition number nine of the original 2011 CN
2 approval letter, mandated that the hospital would
3 establish a functioning board of trustees to provide
4 institutional management for the hospital.
5 Now, if anybody has had, been awake
6 at night and couldn't fall asleep and read the
7 Delaware pleadings, you would see that that was a
8 big bone of contention between MPT and the hospital
9 in the Delaware litigation as to whether or not it
10 was appropriate to have an actual functioning board
11 of trustees that had real powers. And the applicant
12 took the position that having such a board of
13 trustees was a derogation of certain of their
14 contractual rights and, again, perhaps maybe if the
15 staff had the chance to review the LLC agreement --
16 CHAIRWOMAN OLSZEWSKI: We did.
17 MR. HOLLANDER: -- I don't know how
18 that issue, it was clearly a disputed issue in the
19 Delaware litigation, and we don't know how that
20 particular issue was resolved.
21 So, those were really, and I
22 started out trying to keep to my three-minute limit.
23 I appreciate that you've allowed me to go over.
24 CHAIRWOMAN OLSZEWSKI: Well, you
25 are, I think, our only public speaker, so I wanted
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1 to give you time. You came a long way and the City
2 has an important role here.
3 MR. HOLLANDER: I thank you and I'm
4 sure the Mayor and the citizens appreciate that.
5 But, I think that it's in everybody's interests,
6 okay, that, assuming that the Board elects to
7 approve this, that the conditions match up with the
8 current operating agreement. So that once this is
9 approved, at least a starting point, you know that
10 conditions have been properly adapted so that
11 there's no slippage and so that what seems to be a
12 common agreement of both the Board members that have
13 spoken and from what I've read from the applicant
14 that MPT has no intention of becoming involved in
15 any aspect directly or indirectly in the management.
16 Although, I think, for example, one
17 of the Board members brought up a very good question
18 as to what voting rights MPT has in this
19 reconstituted governance arrangement, which
20 presumably is reflected. And I think it was an
21 excellent question. It goes to the heart of many of
22 the concerns that were expressed and, yet, the fact
23 that that isn't clear from, I assume it's not clear,
24 from the operating agreement, because otherwise I
25 think somebody would have been able to state that,
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1 that's troubling to the City that we still don't
2 have a full and complete understanding as to what
3 this governance structure is.
4 And I don't want to bring up straw
5 men and try to create fear, but we're looking at
6 this in the context where for many months there was
7 litigation between these parties in Delaware going
8 to the heart of the issues that are now before this
9 Board on the CN process and what had to be disclosed
10 to the Department of Health and whether disclosures
11 that were proposed were being handed and fulsome and
12 full of disclosure. So, that, in that history, all
13 right, and when the Mayor and other members of the
14 administration in the City saw that those disputes
15 were being litigated, in effect, behind, although it
16 was in the public proceeding, but nobody was aware
17 of that, it sort of heightened their concern that
18 these issues really need to be pinned down in a way
19 that people can walk away with a high level of
20 comfort.
21 CHAIRWOMAN OLSZEWSKI: Thank you.
22 Thank you. Are there any questions?
23 DR. BARONE: Counselor, are there
24 any concerns from the Mayor or the City about the
25 quality of healthcare services being provided by the
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1 institution? Has there been any change? Is there,
2 because it seems the root of this is that you're
3 concerned that the hospital may not be able to
4 provide the types of services that the citizens of
5 the City require. So, I'm not trying to put you on
6 the spot, but it doesn't appear that, to us, that
7 there's been a change or a slippage. I just want,
8 what is your feeling, what is the City's feeling?
9 And that seems to be part of the concern.
10 MR. HOLLANDER: I think the,
11 certainly the Mayor and the City's concern is that
12 they're constantly looking at the ability of the
13 hospital to serve the needs of the citizens,
14 including the needs of all the citizens and retirees
15 and family members that the City insures and which I
16 think makes up a significant part of the population
17 and the admissions to the hospital.
18 Now, I'm going to bring up what I'm
19 sure is everybody's favorite target or subject is
20 that the City's probably greatest concern on a
21 day-to-day basis has to do with managed care related
22 issues and assuring that its employees, their family
23 members and retirees are able to get access to
24 in-network benefits. The City has, obviously, great
25 concerns about changes in terms of the new proposed
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1 network or the Omni Care product and the fact that
2 the City was extremely upset that Hoboken Municipal
3 Hospital was put in Tier II.
4 So, I think to try to answer your
5 question as well as I'm able, I think the Mayor
6 probably every day is concerned about that aspect of
7 the environment and how, you know, the managed care
8 contracts and wants to do what is possible to ensure
9 that as many of both the employees, family members
10 and retirees have access to in-network services and
11 that, very disturbed about the fact that the
12 hospital was put in Tier II and what long-term
13 impact that could have on the viability of the
14 hospital, you know, is a major focus of her
15 administration and wanting to ensure that the
16 hospital remains viable, remains a full service
17 general hospital serving the 50 some odd thousand
18 residents of the City of Hoboken.
19 So, but I recognize that that
20 obviously gets off into a whole different area that
21 you can spend days, if not weeks, getting comments
22 on. So, the City is acutely and keenly aware of
23 wanting to do whatever is within its power to make
24 sure that the hospital remains viable and remains
25 committed to remaining a general hospital, which was
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1 the whole premise of the 2011 CN approval, the whole
2 premise of the sale process, pursuant to which
3 Holdco was allowed to purchase the hospital and I
4 think that's the best way --
5 DR. BARONE: Thank you.
6 MR. HOLLANDER: -- that I can
7 answer that question.
8 CHAIRWOMAN OLSZEWSKI: Okay. Thank
9 you. Yes. Mickey?
10 MR. GROSS: Counselor, just so we
11 have it on record here, would it be correct to say
12 that at the present time the application in front of
13 us, the City of Hoboken is against this application?
14 MR. HOLLANDER: No, I don't, I
15 think what in our letter, our point was that we
16 wanted to make sure that this application didn't
17 become a vehicle by which there was a creeping
18 change of control and a creeping fundamental change
19 in who was operating the hospital and what the
20 objectives, many of which were set forth in the
21 original 2011 CN. That is sort of the expectation
22 that the City had when the City's Hospital Authority
23 sold the hospital. And, in a very simple letter, I
24 think the City wants to ensure that it gets the
25 benefit of what it thought the Department of Health
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1 had recommended at that time, that, you know, that
2 the ownership structure, the corporate governance
3 structure, remains the same. I mean, obviously, we
4 are aware that in this environment hospitals do get
5 bought and sold, okay, and that's something that we
6 would, obviously, the City would have to address at
7 the time.
8 But, no, we're not vehemently
9 opposed. What we're more interested in is making
10 sure that everybody lives up to what we understood
11 and what we think the Department of Health
12 understood to be the original arrangement and that
13 through going from 9.9 percent to 25 percent that
14 there isn't some slippage. And, of course, when we
15 got the CN application and started reading all the
16 exhibits and finding out what had gone on in the
17 State of Delaware in the Chancery Court there and
18 all of the disputes relating to the governance of
19 the hospital, it sort of heightened the City's
20 concern that they just can't sit in the back row and
21 be a bystander. They have to try to get actively
22 involved.
23 And, as far as we're concerned, I
24 think we tried to do it in a constructive way. We
25 want this hospital to survive. We want it to
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1 survive as a full service hospital and, but, part of
2 that is the structure where MPT is really a
3 financing arm and there is a very fixed wall, I was
4 going to say a Donald Trump wall, but I think that
5 would be a poor choice of words, but a wall between
6 their financial interests and the operation of the
7 hospital and how that impacts all of the Department
8 of Health's responsibilities and objectives.
9 And I think that's the way the City
10 views it and that's the way the City wants to see it
11 continue and that's why, you know, we want to make
12 sure that as this all gets documented it fully
13 reflects whatever changes have taken place in the
14 corporate governance documents so we don't wind up
15 coming back here in two or three or four years and
16 find out that the conditions that you imposed were
17 well intentioned and designed based upon the
18 original governance documents, but no longer serve
19 the same purpose if those documents have undergone
20 some changes that would impact them.
21 CHAIRWOMAN OLSZEWSKI: Okay.
22 MR. HOLLANDER: Is that -- I didn't
23 mean to dodge the question.
24 MR. GROSS: That's fine. That's
25 fine.
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1 CHAIRWOMAN OLSZEWSKI: Other
2 questions? Judy, do you have questions for the
3 City?
4 DR. DONLEN: No, not now. I think
5 I'm waiting for questions to ask the applicant, but
6 I'm okay for now.
7 CHAIRWOMAN OLSZEWSKI: Okay. Okay.
8 Thank you so much.
9 MR. HOLLANDER: Thank you very
10 much.
11 CHAIRWOMAN OLSZEWSKI: John, did
12 you have anything you wanted to say from that
13 speech, from that profer? I'm sorry. You have more
14 on the list? I thought we only had one speaker.
15 Thomas Kolb?
16 MS. DOUGHERTY: Madam Chairperson,
17 he's part of the applicant.
18 CHAIRWOMAN OLSZEWSKI: You're part
19 of the applicant. You're not allowed to speak.
20 That's what I thought. Okay. Everyone else is MPT,
21 CarePoint Health. I think they're all, they're all
22 okay.
23 So, proceed with the applicant's
24 presentation. You have ten minutes.
25 MR. KOLB: Thank you very much.
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1 CHAIRWOMAN OLSZEWSKI: You’ll need
2 to state your name and spell it for the court
3 reporter.
4 MR. KOLB: Sure. Tom Kolb,
5 K-O-L-B. Good morning, everyone. I appreciate the
6 opportunity to talk with you this morning. I'm a
7 lawyer. I represent MPT of Hoboken, TRS, LLC, the
8 applicant, which is an affiliate of Medical
9 Properties Trust, Inc., a publically traded Real
10 Estate Investment Trust. Here with me in the back
11 is Steve Hamder, the chief financial officer of
12 Medical Properties Trust, Inc., and sitting with me
13 here are a representative of CarePoint, Leslie
14 Prizant, in-house counsel.
15 MS. LOGAN: And I'm Ann Logan. I'm
16 the chief operating officer.
17 CHAIRWOMAN OLSZEWSKI: You need to
18 state your name.
19 MS. PRIZANT: Leslie Prizant,
20 L-E-S-L-I-E, last name, P-R-I-Z-A-N-T. I'm the
21 general counsel.
22 MS. LOGAN: Ann Logan, A-N-N,
23 L-O-G-A-N. I'm the chief operating officer.
24 MR. KOLB: Medical Properties
25 Trust, as I was saying, is a publically traded Real
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1 Estate Investment Trust, or REIT, listed on the New
2 York Stock Exchange, headquartered in Birmingham,
3 Alabama and its business is primarily focused on
4 owning hospital real estate and leasing it to acute
5 care and specialty hospital operators throughout the
6 US, England and Western Europe. Although the
7 ownership and leasing of the real estate is our
8 primary focus, the IRS allows MPT to own an interest
9 in the operations of the hospital, such as
10 CarePoint, but provided we comply with rigorous IRS
11 rules that basically say we cannot take any role in
12 the day-to-day management or operations of the
13 hospital. We have to be entirely passive.
14 The application before you today,
15 as has been discussed, we currently own 9.9 percent.
16 We're asking that it be increased to 25 percent.
17 But, to address some of the things that have been
18 said already, we had an original convertible note of
19 five million. We converted 9.9, because within your
20 rules we're permitted to do that as a minority
21 owner. We then, pursuant to that same $5 million
22 note, have now asked to increase it up to the
23 originally contemplated 25 percent.
24 The entity HUMC Opco that owns the
25 hospital is a manager managed Delaware Limited
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1 Liability Company. The management is vested in HUMC
2 Holdco and as described in the application,
3 clarified in the LLC amendment that's been
4 circulated, we cannot and will have no ability to
5 manage the day-to-day operation of the hospital.
6 The hospital continues to be managed and operated as
7 it has in the past. MPT agrees with the proposed
8 approval conditions that were read here today and
9 agrees that any future changes, any extraordinary
10 actions, we'll come meet with the Department and any
11 changes in that governance and management will
12 follow New Jersey rules and regulations, notice,
13 meeting and submitting of the necessary CN
14 approvals.
15 What we're focused on is investing
16 in hospitals. The fact that we have an opportunity
17 to invest in operations with those constraints,
18 that's what we want to do. We don't buy hospital
19 property to reconfigure it or redevelop it into
20 anything else. We're a healthcare Real Estate
21 Investment Trust. We've got a long history of
22 providing capital assistance like CarePoint and we
23 look forward to the hospital continuing to serve the
24 Hoboken community as it has for many years to come.
25 Now, just preemptively some
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1 questions that have been raised here today, we're
2 affirming all those original conditions. We will
3 not interfere. That those will go on as they have
4 been. To the extent that our LLC agreement
5 amendment has not been reviewed by everyone
6 carefully, I invite them to do so, because I think
7 what it does is punctuate again and again how we're
8 subject to the authority of the Department of Health
9 and not going to do anything to disturb that. And
10 if we even begin to think about doing it, we'll come
11 visit Susan Dougherty.
12 So, having said that, I invite any
13 questions.
14 CHAIRWOMAN OLSZEWSKI: Just let me
15 start, because Dr. Alaigh had asked, could you
16 explain why MPT would want to exercise the ability
17 to take the 9.9 and up to the 25 percent interest in
18 the operations of the hospital? What does that give
19 you?
20 MR. KOLB: Well, it gives us more
21 economic return. The thing about Real Estate
22 Investment Trusts, if I could digress for just a
23 moment, years ago REITs were limited to receiving
24 rent or mortgage interest. Well, a public company
25 looking out for its investors, that's a bond. It
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1 doesn't change. It doesn't fluctuate. All of a
2 sudden, the IRS allows us to diversify and get an
3 interest that perhaps increases our return.
4 And so as part of our original
5 investment to buy the hospital real estate back when
6 the transaction took place in 2011, we bargained
7 for, within the rules, that increased equity return,
8 but we had to structure it so that we would be
9 compliant with IRS rules. And the fact is, we're a
10 company that buys hospital real estate pursuant to
11 absolute net leases where the tenant does
12 everything, because we're passive. We're clipping
13 coupons. That's what the public stockholders
14 expect. But, again, it's a, sort of a nice plum for
15 us to have for the benefit of our stockholders to
16 get an increased economic return.
17 CHAIRWOMAN OLSZEWSKI: You actually
18 get, if there's a distribution of profits each year,
19 you get a proportion of that 25 percent?
20 MR. KOLB: That's correct. That's
21 correct.
22 CHAIRWOMAN OLSZEWSKI: Okay. Thank
23 you. That was important to know. Questions for,
24 we'll go around, questions for MPT? Dr. Alaigh?
25 DR. ALAIGH: So, thank you for
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1 being patient and explaining all that. I have a few
2 questions.
3 MR. KOLB: Sure.
4 DR. ALAIGH: So, you said
5 repeatedly in your opening remarks about having a
6 stake in operations, but not day-to-day operations.
7 How do you distinguish the two?
8 MR. KOLB: What I'm really, I
9 probably should have said that better, but we are a
10 member of the limited liability company that owns
11 Hoboken Hospital. We receive distributions. Their
12 profit in that entity from the operation of the
13 hospital, we share in our percentage. We have, as
14 is typical, if you think about a minority owner of
15 an entity that's passive, that is not managing or
16 controlling it, but we have certain consent, limited
17 consent rights. We don't really have an active
18 vote. We have limited consent rights in narrow
19 situations and then we have what you might think
20 that a large creditor might have that had loaned
21 money to the entity. We have things that, what
22 happens if we're not paid our rent or we don't
23 receive our return, we have extraordinary rights,
24 but those extraordinary rights, every single one of
25 them, we would never exercise. What we've committed
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1 to in one of these conditions is that we won't do
2 anything without coming down and meeting with the
3 Department. And if what we propose to do in that
4 worst case scenario, which, believe me, we do not
5 want to occur, where, as in the exercise of those
6 rights, we think that, look, there needs to be
7 perhaps a change, we would do it in accordance with
8 the letter and spirit of your laws, as we say.
9 DR. ALAIGH: Let me understand this
10 better. So, you own the real estate?
11 MR. KOLB: Correct.
12 DR. ALAIGH: And now you're, with
13 this application, you're wanting to own 25 percent
14 of the hospital?
15 MR. KOLB: Of the entity HUMC Opco
16 that owns the hospital operations.
17 DR. ALAIGH: Okay. Now, so as, so
18 you're an investor; correct?
19 MR. KOLB: Correct.
20 DR. ALAIGH: So, there is a part of
21 it which is your return on investment that you're
22 getting.
23 MR. KOLB: Right.
24 DR. ALAIGH: As you get a bigger
25 share, obviously your revenue goes up, right, based
STATE SHORTHAND REPORTING SERVICE, INC.
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1 on how the hospital performs?
2 MR. KOLB: Correct.
3 DR. ALAIGH: So, are you then, and
4 maybe the way to ask that question is, what is your
5 role in governance and in the voting, in the voting
6 of the decisions that come up to the governance of
7 the hospital? So, you can leave the real estate
8 piece out.
9 MR. KOLB: Sure. Well, with
10 respect to many of the questions that were asked
11 today about the clinic usage, et cetera, we can't
12 have any role in making those decisions. REITs are
13 viewed as passive entities and they really aren't
14 allowed to get involved in sensitive operational
15 issues.
16 DR. ALAIGH: But, you're a 25
17 percent owner.
18 MR. KOLB: We are.
19 DR. ALAIGH: So, then you do have a
20 stake in the performance and the accountability of
21 how the hospital is doing.
22 MR. KOLB: We do, right, but the
23 way Delaware law works, you form a limited liability
24 company in Delaware and you state whether that is
25 manager managed or member managed. This is a
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1 manager managed entity, which means the members
2 themselves, except to the extent it is reflected in
3 the operating limited liability company agreement,
4 the amendment of which was circulated here, you
5 really don't have any rights except very, very, very
6 narrow rights that the Delaware LLC Act gives you,
7 which are negligible or as are set forth in that
8 limited liability company agreement. And in that
9 limited liability company agreement, it basically
10 says that HUMC Holdco is the exclusive manager of
11 everything, makes all the decisions.
12 DR. ALAIGH: Let me ask you another
13 question. How many board members are there? How
14 many seats do you have on the board?
15 MR. KOLB: We are a member. The
16 LLC agreement names HUMC Holdco as the manager,
17 general manager, and unless an event occurs, for
18 instance, selling of the company, I don't have a say
19 so.
20 DR. ALAIGH: So, you're not on the
21 board.
22 MR. KOLB: I'm a silent member with
23 limited consent rights.
24 DR. ALAIGH: Do you have a voting
25 right on the board?
STATE SHORTHAND REPORTING SERVICE, INC.
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1 MR. KOLB: Not, I mean, in
2 substance, no. If there was a specific decision
3 that came down the pike, Leslie would have to call
4 me up and say, well, we want, we want to do this, an
5 extraordinary thing, such as sell the company, let's
6 say, and I would have a limited okay, that's, I'm
7 fine with that. But, almost everything of concern
8 to the City of Hoboken, patient care, staffing,
9 quality of care, access to care, we have no role in
10 that.
11 DR. ALAIGH: Okay. But, again, I'm
12 not asking what comes to the governing board. I'm
13 asking just a very simple question. Is there a
14 governing board for Hoboken, the hospital?
15 MR. KOLB: There is a board of
16 trustees --
17 DR. ALAIGH: Okay.
18 MR. KOLB: -- of the hospital and
19 there is a member agreement between MPT of Hoboken
20 TRC, which is a member, and HUMC Holdco, which is
21 the other member.
22 DR. ALAIGH: So, 75 percent of the
23 board seats are HUMC Holdco and 25 percent is your
24 group?
25 MR. KOLB: It wouldn't be accurate
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1 to look at that. I mean, if Opco is holding a board
2 of trustees meeting, let's say, or is a liaison with
3 a community advisory group, we're not there. We're
4 not getting those, that meetings or even
5 participating.
6 DR. ALAIGH: So, is it fair to say
7 this still has to shape out? It seems like you're
8 still, with the increased ownership and interest in
9 the entity, the rules may evolve or would it stay
10 the way it has, nothing will change?
11 MR. KOLB: It will stay the way,
12 nothing will change. Nothing. This is simply
13 working with the requirements of your statute that
14 requires when you go above 9.9 percent that you go
15 through this process. That's what we've done here.
16 DR. ALAIGH: So, to alleviate the
17 concerns of the City of Hoboken, are we comfortable
18 with what their concerns are and is your governing
19 structure ensuring that we're going to be
20 comfortable with their concerns?
21 MR. KOLB: Well, it's my belief
22 that it is. Nothing is going to change about the
23 management and operation, the access to care, the
24 quality of care, the type of care as a result of our
25 going from 9.9 to 25 percent. As someone described
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1 it as a financial, that’s really true.
2 DR. ALAIGH: And, John, if I may,
3 did we have any concerns from the Department point
4 of view around the governance structure --
5 MR. CALABRIA: No, none at all.
6 DR. ALAIGH: -- as this change is
7 evolved?
8 MR. CALABRIA: No, we've read every
9 word in every document that came to us and we're
10 comfortable with it, which is why we recommended
11 approval.
12 DR. ALAIGH: Okay. Excellent.
13 MR. KOLB: And let me just say one
14 last thing about the litigation.
15 DR. ALAIGH: That was my next
16 question.
17 MR. KOLB: Partners get in spats.
18 Leslie confirmed this. We have settled that
19 litigation. If asked by the Department, we would
20 have provided the detailed settlement agreement.
21 The lawsuit has been dismissed. That's a public
22 record and we are affirming all of the conditions,
23 including specifically the condition that the prior
24 2011 conditions will remain to be complied with.
25 DR. ALAIGH: The one other question
STATE SHORTHAND REPORTING SERVICE, INC.
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1 I have is, as you contemplate your option to
2 increase the ownership right within the hospital
3 entity, what's in it for the hospital? Is it just
4 an execution of the initial contract or --
5 MR. KOLB: That's correct.
6 DR. ALAIGH: -- or is this new
7 capital going to help them in certain circumstances?
8 MR. KOLB: Well, it's interesting,
9 because really what happened is this. When Opco
10 purchased the hospital back in the 2011 transaction,
11 MPT was its partner from a capital perspective. We
12 provided the funds for the real estate. We provided
13 another loan that remains outstanding to Opco and we
14 provided an additional amount of capital in the form
15 of a convertible note. So, that capital already was
16 invested. This is not new capital. This is taking
17 a portion of debt and converting it to equity to
18 take us up to 25 percent.
19 DR. ALAIGH: Okay. Right. So,
20 it's, basically, a debt reconciliation.
21 MR. KOLB: Correct. In a way, the
22 balance sheet has improved by taking debt and moving
23 it over into equity as was always contemplated.
24 DR. ALAIGH: Thank you.
25 MR. KOLB: You're very welcome.
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1 CHAIRWOMAN OLSZEWSKI: Michael,
2 questions? Mickey?
3 MR. GROSS: I’m satisfied.
4 CHAIRWOMAN OLSZEWSKI: Judy?
5 DR. DONLEN: Yeah, I do have a
6 question. Based on what you just said, you said as
7 was always contemplated. So, it was always your
8 intent to turn the promissory note into equity; yes?
9 MR. KOLB: Yes, it was a
10 convertible note from day one.
11 DR. DONLEN: I realize it was
12 convertible, but the intent was to make sure that it
13 converted. It wasn't just an option.
14 MR. KOLB: Well, it was an option,
15 but our intent was working through the required
16 State rules that we would, we wanted to receive.
17 DR. DONLEN: So, that's my
18 question. So, under the State rules and
19 regulations, it was more, it was easier to do it
20 this way, otherwise we would have seen this
21 transaction or we would have seen your ownership
22 back in '11 or '10 when this first went through.
23 MR. KOLB: Correct.
24 DR. DONLEN: Okay. That's all I
25 wanted to know.
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1 MR. KOLB: Sure.
2 DR. DONLEN: Thank you.
3 MR. KOLB: You're very welcome.
4 CHAIRWOMAN OLSZEWSKI: Thank you,
5 Judy. So, do you, a question from me, do you own,
6 in the 37 or however many other medical centers you
7 now have scattered across not only the United
8 States, do you, especially for the newer ones, do
9 you generally exercise an ownership clause like this
10 or have ownership in the operations?
11 MR. KOLB: Well, the change in the
12 law is relatively recent from the past few years.
13 CHAIRWOMAN OLSZEWSKI: Okay.
14 That's why I said the newest ones.
15 MR. KOLB: But, again, it's been
16 lobbied for by the REIT lobby for years, because,
17 again, sometimes economically when you're fixing a
18 bond type return in the lease, sometimes that puts
19 you in a pickle and we want to do the best job for
20 our investors. And so when that occurred, we have
21 oftentimes, and we've done some large portfolio type
22 transactions, so we do take interests from time to
23 time, but --
24 CHAIRWOMAN OLSZEWSKI: So --
25 MR. KOLB: -- many times we do not.
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1 CHAIRWOMAN OLSZEWSKI: Okay. So,
2 this is not, it’s not unusual for you, but it’s also
3 not a hundred percent of the time you do this.
4 MR. KOLB: Correct.
5 CHAIRWOMAN OLSZEWSKI: Okay. I
6 think, anyone else have questions? We're okay?
7 Okay. Thank you so much.
8 DR. ALAIGH: Thank you.
9 MS. DOUGHERTY: Madam Chairwoman?
10 CHAIRWOMAN OLSZEWSKI: Yes.
11 MS. DOUGHERTY: I'm Susan Dougherty
12 from the Department of Health. I just had one
13 request that someone from Opco confirm that the
14 conditions that relate specifically to Opco and
15 commitments by Opco, that they confirm those on the
16 record.
17 CHAIRWOMAN OLSZEWSKI: Okay.
18 DR. DONLEN: It's Judy. I was
19 under the impression that we were going to hear from
20 Opco. I wasn't believing that that was the last
21 presentation we were going to get on this. So, if I
22 was wrong, then I still have quite a few questions.
23 CHAIRWOMAN OLSZEWSKI: Okay.
24 MS. PRIZANT: Okay. Leslie
25 Prizant, general counsel for Opco, and I do confirm
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1 that Opco will comply with the conditions as set
2 forth recommended by the Department.
3 CHAIRWOMAN OLSZEWSKI: Okay. Could
4 you, while you're there, could you, my question
5 about clinic visits and they were a fairly dramatic
6 drop, could you address that issue?
7 MS. LOGAN: This is Ann Logan,
8 chief operating officer. There was some shift in
9 volume and there was, my understanding, I've been
10 with the company since December of 2013, there was
11 also an additional services provided within the
12 county that expanded their capability and there was
13 some shifting patient volume there. We run a very
14 robust clinic. We see hundreds of patients,
15 thousands a month, which it's a very, very robust
16 program. We extend our hours one day a week into
17 the evening. We have an on-site clinic in the
18 hospital that are a part of our network health
19 center and right now with the huge capital
20 investment into our health center we're doing a full
21 renovation, partly because of Sandy and partly
22 because we need to do it. It's a very robust
23 program. I can attest to it being a very busy
24 program.
25 CHAIRWOMAN OLSZEWSKI: Okay. Thank
STATE SHORTHAND REPORTING SERVICE, INC.
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1 you.
2 MS. LOGAN: You’re welcome.
3 CHAIRWOMAN OLSZEWSKI: Okay. Judy?
4 DR. DONLEN: I keep putting it on
5 mute, so if my dogs bark you don't hear them.
6 I have a question about the last
7 letter, the attestation that came in the third set
8 of questions about the Medicare violations that had
9 been identified. Am I still on?
10 CHAIRWOMAN OLSZEWSKI: Yes.
11 MS. HERNANDEZ: Yes.
12 DR. DONLEN: Okay. I love it when
13 I get dead silence. But, the attestation says that
14 there was three hospitals that had had Medicare,
15 Medicaid --
16 CHAIRWOMAN OLSZEWSKI: That's a
17 question for MPT, Judy. So, wait a minute. We're
18 getting counsel to answer that.
19 DR. DONLEN: You weren't going to
20 be involved in operations. I thought this would be
21 going to Opco. So, whoever can answer it.
22 CHAIRWOMAN OLSZEWSKI: Okay.
23 DR. DONLEN: It's an operations
24 question, but they should have the information about
25 this. Medicare, Medicaid, they were yours in other
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1 areas, right, they were yours in other states, so
2 there were three Medicare, Medicaid problems,
3 noncompliance, and they have all been resolved.
4 But, can you tell us what they actually were, what
5 kind of deficiencies they were, what kind, if they
6 were, just in general what they, what they meant,
7 what they represented?
8 MR. KOLB: Unfortunately, I can't
9 give you the detail, but when we talked with Susan
10 Dougherty yesterday, we immediately got in contact
11 with the tenant and indicative of what I'm saying,
12 we have to go back to the tenant and get that
13 detail. We know they were resolved and we've
14 already got that in process to get you that detail
15 immediately and I can't imagine it will be longer
16 than a couple of days.
17 DR. DONLEN: Okay. So, the
18 Department will have that as they're considering our
19 recommendation and you'll give that information to
20 the Commission.
21 MR. KOLB: Absolutely.
22 CHAIRWOMAN OLSZEWSKI: Yes. And
23 Susan Dougherty is shaking her head to say yes, that
24 is the case.
25 DR. DONLEN: That sounds reasonable
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1 to me. Sorry for mixing up who I should have
2 directed it to, but now I realize.
3 CHAIRWOMAN OLSZEWSKI: That's okay.
4 DR. DONLEN: And if I can just add,
5 the tenant, it's very reassuring to me in terms of
6 your not being involved in operations.
7 CHAIRWOMAN OLSZEWSKI: Okay. Judy,
8 did you have anymore questions of --
9 DR. DONLEN: No, I just feel like
10 what I did hear from them and the combination of the
11 IRS regulations that preclude them from being
12 involved in operations and the assurance that we
13 have to the conditions that anything, any time they
14 do take action that's available under the LLC
15 agreement they have to come to the Department, that
16 that should be all we can do to investigate or to
17 ensure what the issues that were raised by the City.
18 So, I'm pretty comfortable with that at this point.
19 CHAIRWOMAN OLSZEWSKI: Okay. Thank
20 you. Does anyone else have any questions for the,
21 for HUMC Opco? Okay. Thank you.
22 MS. PRIZANT: Thank you.
23 MS. LOGAN: Thank you.
24 CHAIRWOMAN OLSZEWSKI: Mr.
25 Hollander, I'm sorry, just a quick question. You've
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1 heard the comments back from our applicant. Did you
2 have, briefly please, a comment back, a concern of
3 that?
4 MR. HOLLANDER: The only thing I
5 would ask, Madam Chairperson, if we could have two
6 or three days to provide written comments to the two
7 documents. I tried to read them while listening to
8 counsel, but it really was not the best set of
9 circumstances. I see that they have put in certain
10 things that seek to be positive, but they also have
11 changed. And while there is a general manager
12 appointed, that general manager, under certain
13 circumstances, could be removed. And I think that,
14 in fairness, we would like, I'm sure we can get a
15 letter down here by Tuesday morning outlining what,
16 if any, issues that we have and what they are.
17 CHAIRWOMAN OLSZEWSKI: Here's what
18 I would suggest. I mean, we, as a Board, are
19 meeting today to discuss this. What we do is, we,
20 basically, we make a recommendation to the State
21 Health Commission. The State Health Commissioner
22 then, basically, makes the final determination on a
23 Certificate of Need. So, I would, I would suggest,
24 to this point, that we go on with what we, the
25 information we have today to make this decision, but
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1 that you are certainly welcome and encouraged to
2 file that brief or that, you know, letter with the
3 State Health Commissioner or the Department of the
4 State Health Commissioner that could be included by
5 them in their decision making.
6 MR. HOLLANDER: All right. You're
7 the deputy to the --
8 MR. KENNEDY: Yes.
9 MR. HOLLANDER: So, I can
10 coordinate with you?
11 MR. KENNEDY: Sure. We'll talk
12 after the meeting.
13 MR. HOLLANDER: Okay. Thank you
14 very much.
15 CHAIRWOMAN OLSZEWSKI: Okay. Thank
16 you so much. Okay. Discussion? Any to my left?
17 Looking to my right, any discussion on this?
18 Judy, did you have, actually --
19 DR. DONLEN: I think I've already
20 said, I'm in favor of approving this application. I
21 think that the things that were addressed in the
22 conditions, as well as the information we have for
23 the amendment for the LLC agreement gives me the
24 reassurance that I need and, obviously, issues
25 raised with the IRS regulations are pretty clear
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1 about it. So, I’m good. I’ll be a yes.
2 CHAIRWOMAN OLSZEWSKI: Okay. Does
3 that mean you would like to --
4 DR. BARONE: Is that a motion?
5 CHAIRWOMAN OLSZEWSKI: -- would you
6 like to make a motion?
7 DR. DONLEN: I would love to make a
8 motion. I would move that we approve the
9 application that is before us today with all these
10 papers in front of me and that we approve with the
11 conditions that have been put forward by the
12 Department for the transfer of 25 percent ownership
13 in the --
14 CHAIRWOMAN OLSZEWSKI: As --
15 DR. DONLEN: -- HUMC Opco by MPT.
16 CHAIRWOMAN OLSZEWSKI: Judy, as
17 amended and in the copy we received last night,
18 actually, the conditions as amended.
19 DR. DONLEN: Oh, yeah. I'm sorry.
20 The conditions as amended. The ones that we
21 received by e-mail that are on the table there in
22 front of all of you. Yes.
23 CHAIRWOMAN OLSZEWSKI: Okay. Thank
24 you. Do I have a second?
25 DR. BARONE: Second.
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1 MS. HERNANDEZ: Ms. Olszewski?
2 CHAIRWOMAN OLSZEWSKI: Yes.
3 MS. HERNANDEZ: Dr. Barone?
4 DR. BARONE: Yes.
5 MS. HERNANDEZ: Mr. Gross?
6 MR. GROSS: Yes.
7 MS. HERNANDEZ: Mr. Baker?
8 MR. BAKER: Until Ms. Prizant was
9 introduced, I was going to vote on the application.
10 But, having spent 45 minutes watching our annual
11 ethics video last night, I realized that I have a
12 matter where I'm adverse to Ms. Prizant, not
13 specifically these applicants, but because they
14 always urge caution in that very long video and I'll
15 abstain.
16 MS. HERNANDEZ: Dr. Alaigh?
17 DR. ALAIGH: Yes.
18 MS. HERNANDEZ: Dr. Donlen?
19 DR. DONLEN: Yes.
20 MS. HERNANDEZ: We have five yeses,
21 one abstain. The motion moves.
22 CHAIRWOMAN OLSZEWSKI: Thank you,
23 all. Is there any other business before we adjourn?
24 DR. ALAIGH: I just have one. I
25 want to welcome Alison to our State Health Planning
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1 Board and congratulate her on her new role as Deputy
2 Commissioner and I know the State’s going to be well
3 served with her taking on this role starting this
4 week.
5 CHAIRWOMAN OLSZEWSKI: Okay. Thank
6 you. Welcome. And do I have a move to adjourn?
7 DR. BARONE: So moved.
8 CHAIRWOMAN OLSZEWSKI: Okay. All
9 in favor?
10 UNANIMOUS BOARD: Aye.
11 CHAIRWOMAN OLSZEWSKI: Thank you.
12 We're adjourned.
13 (Meeting adjourned at 10:45 a.m.)
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1 C E R T I F I C A T E
2
3 I, DENISE L. SWEET, a Certified
4 Court Reporter and Registered Professional Reporter,
5 do hereby certify that the foregoing is a true and
6 accurate transcript of the testimony as taken by and
7 before me at the time, place and on the date
8 hereinbefore set forth.
9 I DO FURTHER CERTIFY that I am neither a
10 relative nor employee nor attorney or counsel of any
11 of the parties to this action, and that I am neither
12 a relative nor employee of such attorney or counsel,
13 and that I am not financially interested in the
14 action.
15
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17 C:\TINYTRAN\Denise Sweet.bmp
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23 DENISE L. SWEET, CCR, RPR
24 DATED: May 26, 2016
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