State Demands PHC ‘Clarification’
The state’s Department of Health, which originally vetted the takeover of the Peninsula Hospital Center by a for-profit corporation, Revival Home Health Care, is now taking a second look in the wake of published reports that the non-profit hospital is being groomed to become a for-profit and that the Revival board is really in control of the hospital rather than the local community board of directors.
The state agency has maintained all along that it did not need to approve the plan because 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, state sources say. Now, however, in the light of a report in Crain’s New York Business, the state is looking at the way the troubled Rockaway hospital is being run and who has control over the hospital – the public board that survived the takeover, or the Revival board.
“The Department of Health has requested clarification of the governance process at Peninsula, including the ongoing role of the current board and Revival in managing the day-to-day operations,” Peter Constantakes, a spokesperson for the state agency, told The Wave on Tuesday.
The for-profit Revival, 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.
“[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 [PHC and Peninsula Center for Extended Care and Rehabilitation] are separate entities from Revival Home Health Care.” Miller now directs all of the hospital’s activities for a monthly salary of $30,000, the report says.
The first is the contention that Revival intends to turn the hospital into a for-profit corporation as soon as it is stabilized.
Constantakes says that for-profit hospitals are allowed in New York State, but that the hospital’s ownership has to go through a long and detailed process to become for-profit.
The Certificate of Need (CON) program is a review process, mandated under state law, which governs the establishment, ownership, construction, renovation and changes in service of health care facilities, hospice programs and home care agencies in New York State.
Health care providers are required to submit a CON application and obtain approval from the New York State Department of Health or the Public Health and Health Planning Council before new facilities, hospice programs, or home care agencies are established, new facilities are built, or existing facilities are renovated, before facilities, hospices or home care agencies acquire major medical equipment, or add or delete services, before home care agencies or hospices modify their service area, or before ownership of a facility, hospice, or home care agency is changed or transferred.
State sources say that it is often difficult for for-profit corporations to convert an existing non-profit facility, especially if there is controversy over the for-profit corporation.
And, in Revival’s case, sources say, that controversy exists.
Faye Zakheim, Crain’s reports, is married to Steven Zakheim, “a controversial health services entrepreneur who has had run-ins 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 finances – 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.
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 when 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.”
Constantakes says, “The NYS DOH has no specific issues or complaints regarding Steven Zakheim at this time, so DOH is not investigating [his involvement with PHC].”
Local attorney Joe Mure has been on the Peninsula Hospital Center board for many years. He says that he is still on the board and that a subcommittee of the board makes decisions for the center.
“We are still in existence and still making decisions for the hospital,” Mure told The Wave. “We have a subcommittee that works closely with Miller. Revival came forward and had the money and a strong interest in keeping the hospital alive. We are still excited about our relationship with Revival.”
That subcommittee, Mure said, consists of himself, Lou Caucig, Steve Greenberg, George Greco, all locals, and Lenny Tarder, who Mure says is “a health care expert from outside the neighborhood.”
Mure says he has not been contacted for the state probe.
He adds that he has met Steve Zakheim and that “he seems like a nice guy.”
He says that Zakheim has not been present at the PHC board’s meetings.
“With the hand we were dealt, the hospital should have closed,” Mure concluded. “Renewal came in and went to work. We are still open, and that is the bottom line.”