2011-12-02 / Top Stories

PHC Bankruptcy Hearing Set For Monday

State Has Governance Questions In Revival Takeover
By Howard Schwach

On Monday, December 5, the parties involved in the bankruptcy petition for Peninsula Hospital Center will go before a judge in federal court.

Some of them will argue that the petition be granted. Others will argue against the petition. And, while all that is going on, officials of the state’s Department of Health will be watching to see if they can unravel the question of who actually runs the troubled Rockaway hospital.

Inside sources told The Wave on Wednesday that the hospital’s creditors, including the Local 1199 of the Healthcare Workers Union and Medi- Sys, the healthcare organization that operated Peninsula Hospital until August, are opposing the deal, in which the hospital’s board accepted a $27 million bailout from Revival Acquisitions Group and its affiliates, including an $8 million cash infusion of operating capital. State officials deemed the move an investment in the hospital rather than a change of control that required government review, even though the deal gives the investor complete oversight of the management and operations of the hospital.

After articles in The Wave and other publications that indicated that Revival was indeed taking part in the day to day operations of the hospital, including appointing the new CEO, Todd Miller, and sitting in at board meetings, the state questioned the governance of the hospital.

A state spokesperson said that if Revival had taken over the hospital rather than just investing in it, a management services contract between Peninsula and Revival would have been mandated.

No such contract exists presently, the state said.

Published reports in Crain’s New York Business, which has been closely following the story, said that Richard Cook, a deputy commissioner for the state agency, asked Miller about the governance.

The paper said that Miller admitted that Steven Zakheim, the controversial husband of Faye Zakheim, who owns Revival, is serving as one of his advisors.

“Steve Zakheim is providing unpaid consulting services to the management of Peninsula, but he is not a member of the board of directors, or its operating committee,” Miller reportedly told Cook. Yet board member Joseph Mure told The Wave last week that “Zakheim has been sitting in on board and operating committee meetings.”

Zakheim is forbidden to be involved with Revival business after it was learned that he had failed to disclose a misdemeanor conviction on a previous application to acquire a nursing home.

Joel Miele Sr., the longtime local board president, told Crain’s that his board was “not in full control” of the hospital because of an agreement they signed to get the money from Revival.

Miele said that the immediate action that would come from not signing the agreement would have been the closing of the hospital.

Local sources pointed out that the board had no authority, for example, in hiring a new CEO in the wake of the resignation of Bob Levine (who has since been hired by MediSys as the COO of Flushing Hospital).

The board hired Miller as a requirement of the deal to get the Revival money. That agreement gave Miller control over management hiring and firing.

That agreement also required every board member to submit a letter of resignation in September that would become effective immediately if the bankruptcy deal was approved by the court. The bankrupt hospital is paying Miller $360,000 a year, money that goes back to Revival, because Miller is still on the Revival payroll, Crain’s reported.

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