SCI: CarePoint owners received $157M in management fees from their Hudson hospitals

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The three owners of CarePoint Health received $157 million in management fees from their Hudson County hospitals via a handful of limited liability companies that they own a majority stock in, according to a report compiled by the New Jersey Commission of Investigation.

Hoboken University Medical Center. Photo via carepointhealth.org.

By John Heinis/Hudson County View

The 32-page report, released yesterday, zeroes in on the business practices of the three principal owners of CarePoint: Vivek Garipalli, James Lawler and Jeffrey Mandler.

CarePoint owns the Bayonne Medical Center, Hoboken University Medical Center and Christ Hospital in Jersey City, and the report begins by commending the three entrepreneurs for helping save those bankrupt entities in 2008, 2011 and 2012, respectively, though the report takes a drastic turn from there.

“Although these three individuals have provided services to the three CarePoint Health hospitals, the extent of the services leading to more than $157 million in management fees and allocations for a four-year period is unclear,” the report says, though later saying this does not necessarily mean any improprieties were committed.

CarePoint spokeswoman Jennifer Morrill emphasized that the organization has done a lot of good in the community.

“In addition to saving the hospitals and thousands of jobs, CarePoint has paid over $22 million in local property taxes and has contributed more than $2 million to local non-profits and community organizations,” she said.

However, the investigation and subsequent report mainly focuses on IJKG Opco, LLC; which owns the Bayonne Medical Center, Sequoia Healthcare Management, LLC; which provides management services to each hospital, and CarePoint Health Management Associates, LLC – another management services company.

” … IJKG had approximately $1.9 million and $1.2 million in expenses in 2015 and 2016, respectively, despite having been credited over $27 million (2015) and $13 million (2016) in management fees and allocations from Bayonne Medical Center,” wrote SCI Commissioners John Scancarella, Robert Burzichelli and Rosemary Iannacone.

“In any event, DOH should evaluate any and all management services to the CarePoint hospitals and determine if those services are being provided at a reasonable cost,” later pointing out that CarePoint laid off 90 employees in 2016.

According to their probe of CarePoint’s business dealings, a similar situation exists when evaluating the relationship between Sequoia and Christ Hospital, as well as the Hoboken University Medical Center.

“Christ Hospital paid/owes an entity identified as Sequoia Healthcare Management, LLC approximately $30 million in related-party management fees,” the SCI reports.

“Hoboken University Medical Center, meanwhile, paid/owes an estimated $28.8 million in
related-party management fees. Hoboken University Medical Center’s audit reports completed prior to 2018 refer to, but do not identify, a “healthcare management organization” providing services, but the SCI has determined that this entity is also Sequoia Healthcare Management.”

Furthermore, the report indicates that neither IJKG or Sequoia were paid by any clients besides the three CarePoint hospitals.

To that end, CPHMA made over $59 million, collectively, between the three CarePoint hospitals, even though the organization was only obligated to cover 30 percent of their operating costs ($65.6 million in 2015), the SCI determined.

While CarePoint was the focal point of the investigation into the DOH’s practices, the report does further state that some of the blame lies within the regulations set by the state Department of Health.

“Based on the SCI’s inquiry, it has become apparent that DOH has faced administrative challenges, and DOH does not, at least currently, have an adequate system to track ownership information,” the SCI said.

“Accordingly, DOH should create an ownership tracking database containing all levels of hospital ownership. Without such information, disclosures of ownership and related-party information will not be useful.”

Other recommendations the SCI made to the DOH include making hospitals produce all financial statements, disclosures of annual trust agreements, requiring documentation for management services and clarifying necessary procedures for hospital ownership changes.

Morrill added that the report confirms that CarePoint has acted in accordance with the current guidelines the DOH has established for healthcare providers.

“This report confirms CarePoint has acted in good faith within the state’s rules and regulations regarding transparency. Transparency is an integral part of CarePoint Health’s mission to provide high-quality care,” said Morrill.

“We support the report’s suggestions and have offered our commitment to the Department of Health to share additional information and to help craft supplemental reporting requirements beyond the extensive ones that are already in place.”