2011-12-16 / Front Page

Situation At PHC Foggy

State Probes Management, CEO Says Out Of Bankruptcy By Spring
By Howard Schwach

Mayor Martin Oliner, seen here at a recent Lawrence town meeting, is a member of the PHC board of directors. Mayor Martin Oliner, seen here at a recent Lawrence town meeting, is a member of the PHC board of directors. I n the wake of the refusal of the federal bankruptcy court to sign off on the Debtorin Possession (DIP) loan deal offered by Revival Home Health Care as part of its plan to take over Peninsula Hospital Center, the hospital’s board has turned down a deal offered by a new white knight, this one a longtime board member at the bankrupt hospital, which, Crain’s New York Business newspaper says, is running low on cash and may not be able to make payroll on December 16.

Todd Miller, the new Chief Executive Officer (CEO) for the hospital, however, tells another, far different story.

“We have no problem with meeting payroll,” he told The Wave on Wednesday. “We have taken out a mortgage on the nursing home, which has provided us with $1.5 million in operating capital, and we expect that on Friday, the bankruptcy court will approve a $3 million DIP loan from Revival. The hospital is meeting all of its obligations as a practical matter and there was never a payroll problem for this week. The Crain’s story was just plain wrong, and I don’t know where they got the information for their story.”

Miller says that he expects that the hospital will soon have an agreement with Local 1199 of the Healthcare Union and that the hospital will be in and out of bankruptcy by the spring.

“The union is mindful of what the alternate settlements can be in relation to those with other struggling hospitals,” Miller said. “They are not resistant to talking, and we are in negotiations with them, but we have not settled as yet.”

Miller said that he wants to dispel the fears of the community.

“There have been lots of rumors in the community,” he said. “We have no current plans to turn the hospital into a for-profit, nor do we plan to close the emergency room. In fact, we are moving ahead with plans to improve and expand the emergency services. We are simply focused on a situation where our expenditures do not exceed our cash receipts. We expect to be able to break even by spring.”

He adds that patients are coming back to the hospital after several months of uncertainty, where locals were not sure if the facility was open or closed and when many services and supplies were in short supply.

“We now have about 100 patients a day in our ER and about 80 patients receiving our services,” Miller said. “The ER is the key to our success because of geography and demographics. It is a vital service to the community. We just have to find a way to do it without losing our shirt.”

He added that he foresees no further layoffs and said that a number of the employees who were laid off last month are being retrained for jobs in the growing sectors of the hospital. Why can the hospital now be a success when it failed so badly in the past?

“The model we are employing is vastly different than what went before,” he said. “We have a can-do attitude and we have already begun to make the necessary changes and to bring in the experienced team of administrators to make it work.” Not everybody has such a rosy picture of the future of the institution, however.

Martin Oliner, an international business attorney with lots of experience, he says, in “workouts and restructuring of troubled businesses and institutions,” and the mayor of nearby Lawrence, Long Island, led a group of his associates who offered last week to lend $5 million to the Rockaway hospital following serious conflict-of-interest allegations raised by the United States trustee against an affiliate of Revival, which had stepped in to rescue the hospital in September.

At a meeting early this week, the board turned down his offer, reportedly because there were too many conditions attached to the deal.

Oliner, who spoke to The Wave from his Lawrence office on Tuesday, says that he is not sure why the board turned down the offer, which he put together.

“I just don’t understand it,” he said. “We all believe that the hospital has to be kept going, its survival needs to be assured, for the benefit of the community, the patients and the employees. We have a fiduciary responsibility to do that, and I don’t think the current board has the expertise to do that, or else they never would have turned to MediSys in the first place.”

MediSys operated Peninsula Hospital Center for more than two years, up until September, when it was taken over by Revival.

Oliner added that all the members of the operating committee are “bright and concerned,” but that they have “little experience in bankruptcy” and are “getting bad advice from their advisors.”

“I don’t see them as the villain of the piece,” he added. “In the third act, I’m not sure that the villain has revealed himself yet. I do know that there is a great lack of sophistication on the part of the board when it comes to dealing with a bankruptcy and the negotiating process that comes with it.”

“There are two questions,” he said. “The first is that we don’t want to kill the baby and we don’t know if Revival can save it. The second is, can the board find a way to save the baby without Revival? [The board members] seem to have shut the door to all the other proposals but Revival’s.”

When asked if he had a problem dealing with Revival in light of the questions that have arisen about its control of the hospital, Oliner said, “That is beyond the scope of what I know. I’m impressed with Miller, and if he represents what Revival is, then I hope they keep the hospital running.” Oliner says that he has been on the board for more than eight years, but had not attended many meetings until recently, when the hospital ran into financial problems. He then began to make meetings, but has not gone recently because, “I can’t say that they’re a waste of time, but they don’t get to the point, to the focus they need to get to. The only place where meaningful discussion is going on is in [Federal] Bankruptcy Court. I told them in September that the Revival deal was not workable, that it would not be accepted by the court. They didn’t listen. They keep getting advice from Revival, and it is bad advice and I can’t think of any other reason except that Revival wants to keep control.”

As reported in last week’s Wave, the court-appointed trustee overseeing the bankruptcy, whose role in the proceedings is to insure fairness for the creditors who have claims against the troubled hospital, maintains that Peninsula’s board and management are not in control of the hospital, and that Revival holds the reins. The trustee also claims that the Revival DIP package favors Revival over other creditors. The attorneys for Peninsula deny those allegations.

Peninsula and its creditors went back to court last Monday. At that hearing, bankruptcy Judge Elizabeth Strong refused to let the trustee’s allegations linger for long. With the hospital’s cash running low, she denied Peninsula’s request to wait a week to hold a hearing on appointing a Chapter 11 trustee. The next day Peninsula’s board voted to accept an examiner.

Following Monday’s court hearing, Oliner said it was clear to him that fighting the trustee’s objections was “a battle we were going to lose.”

The hospital has hired a high-end public relations firm, Harbor Group Communications, to spin the information that goes to the media and then to the public and to burnish the reputation of both the hospital and Revival’s leadership.

The Wave learned this week that board members, particularly those on the fiveman operating committee, have been admonished by lawyers not to speak with the press until the court makes its final decision.

Calls to several Rockaway residents who sit on the board have gone unreturned or garnered a “No comment” response.

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