2011-11-11 / Top Stories

PHC-Revival Deal Includes Controversial Player

Crain’s: Owner’s Husband Had Run-Ins With Law Enforcement, Regulators
By Howard Schwach

Todd Miller, the CEO of PHC at a recent meeting. Todd Miller, the CEO of PHC at a recent meeting. Locals who believed that the Peninsula Hospital Center was out of the woods when it was taken over by Revival Home Health Care in September might have to look twice at the deal and what it means for the future of health care on the peninsula, according to a published investigative report in a recent issue of Crain’s New York Business, a prestigious business publication.

The for-profit corporation, owned and operated by Faye Zakheim, pledged $27 million to bail out the troubled hospital, which was then on the brink of closing its doors for good. A thousand jobs, many of them held by Rockaway residents, were saved and a vital health care institution was saved.

Crain’s, however, said that the rescue “came at a price.”

Zakheim, it reports, is married to Steven Zakheim, “a controversial health services entrepreneur who has had runins with law enforcement officials and regulators over the years.”

According to the report, Zakheim was considered so toxic by the State Department of Health that officials there required him to sign an affidavit in 2005 that stated he could have no involvement in his wife’s corporation or fi- nances – a commitment that is still in place.

Yet, the Crain’s report says, he has participated in recent months in hiring PHC’s new administrative team, has attended board meetings and “apparently is a source of financial backing for the hospital deal. “

The Crain’s investigative team reported, “Mr. Zakheim seems to be staging a comeback – not by violating any laws or past agreements, but by exploiting loopholes in state rules to help advance his plans for expansion in New York’s healthcare marketplace.”

Dr. Ronald Gade is a hospital restructuring expert who, in September, was offered a job to run PHC by Steven Zakheim. He turned it down and then spoke to Crain’s about his contact with Zakheim.

“His game plan, which he related to me, is to use the hospital and get it successful and integrate his resources to create a larger group of healthcare entities,” Gade told Crain’s reporters.

Zakheim reportedly told a Crain’s reporter who contacted him for comment on the PHC story, “I don’t think that I can help you. You’ve got your facts wrong and I’m not going to help you ruin my life.”

Repeated calls to the Revival office asking for comment from either Zakheim or his wife went unreturned.

Zakheim had his first brush with controversy in 2003, when 10 female employees of his company filed a sexual harassment lawsuit against him, a story that became a lurid “Village Voice” story in April of 2004. He settled the case.

In November of 2003, Zakheim was charged by the federal government with making $32,500 in campaign contributions, using his employees as “straw dogs” to subvert the campaign financing laws.

Two weeks later, he was slapped with a civil false claims lawsuit, alleging that he participated in a $32 million Medicare fraud scheme.

Shortly after the “Village Voice” piece made his legal history public, Crain’s says, he agreed to a plea deal with the U.S. Attorney’s office on the campaign fraud charges.

According to Crain’s, “The State Department of Health officials paid particular attention to the Medicare suit: that ambulance companies of which Zakheim had been president had charged Medicare tens of millions of dollars, with his knowledge and participation, for unnecessary ambulance trips and resorted to fraud in an effort to prove those trips were medically necessary.”

Last year, the ambulance companies paid the federal government $2.85 million to settle the civil false claims lawsuit.

Zakheim was not required to make any personal payments.

Crain’s says that the state’s Department of Health did not intervene in the PHC matter because Revival is now owned by Zakheim’s wife and state law demands that husband and wife be treated as separate individuals – even if one of them has legal problems.

“I don’t see what the grounds would be [to deny the wife’s company] unless [Steven] Zakheim had direct involvement,” a health department official said.

In addition, the state determined that the takeover was “an investment rather than a change in operator.” As a result, no official review by the state’s Department of Health was necessary, sources say.

The report also says that Todd Miller, the new CEO of Peninsula Hospital Center, is a “longtime associate” of Steven Zakheim.

“[The board at PHC] grabbed the lifeline to provide an $8 million dollar line of credit and to assume liabilities of up to $27 million, in exchange for control of the hospital,” the Crain’s story says. “[CEO Todd] Miller said that the affiliates are separate entities from Revival Home Health Care. There is no record that Mr. Zakheim has a legal tie to either affiliate.”

Miller now directs all of the hospital’s activities for a monthly salary of $30,000, the report says.

Miller insists that Steven Zakheim is not involved in Peninsula’s affairs.

“Steve’s wife, Faye, is the owner and is the investor,” he said. “He has no role here at the hospital. He has no decisionmaking authority as it relates to this institution.”

Gade, however, tells Crain’s reporters another story.

“I met with Steve Zakheim,” Gade says. “He offered me any title I wanted. He told me that he’s financing the purchase of the hospital, that he’s a principal.”

Miller admitted that Zakheim has attended meetings at PHC, including board meetings.

“He has been there where there have been meetings with various people,” Miller admitted.

Crain’s reporters asked Miller why Zakheim would be at the meetings if he wasn’t actively involved with running PHC.

“I guess it’s all in how you define active. I know his wife is relying in his opinion for certain matters, and that’s a credit to her.”

Two weeks ago, there were 50 layoffs at the hospital.

Last week, The Wave reported that hospital officials were forcing out a special education program hosted by the Addabbo Family Health Center, a program that has run at PHC for ten years.

While many believe that the layoffs are necessary to bring the hospital back to fiscal health, some employees are not sure about the new owners.

“Revival is not the savior they are trying to make the community believe they are,” wrote an employee who asked not to be identified for fear of retribution. “They have lied to the staff and to patients. They have made layoffs and then hired their own people to take those jobs. The former staff is being cut and patient care is being compromised. Their myth of a community hospital is a joke.

The new people they are hiring are from their own community, and they are ruthless and heartless. I was once a dedicated employee, but now I think that I will have to get out of there very soon.”

Miller issued a statement to The Wave on Wednesday morning.

It read, “The article in Crain’s reported nothing new. We are doing our best to turn the hospital around to provide quality care for the community and save jobs. Thus far, we have had great cooperation from both the NYS Department of Health and 1199 SEIU. We plan on staying the course and making Peninsula Hospital Center the best community hospital it can be.”

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