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MINUTES OF THE STATE HEALTH PLANNING BOARD MEETING

Thursday, May 5, 2016

Members Present:

Susan Olszewski, ChairpersonJudy Donlen (via phone)Dr. Joseph BaroneMichael GrossMichael BakerDr. Poonam AlaighAlison Gibson (Representing Commissioner O’Dowd, Department of Health)Margaret Springer (Representing Commissioner Velez, Department of Human Services)Susan Brewen-Alvino (Representing Commissioner Blake, Department of Children & Families)

Excused Absent:

Catherine AinoraHenry Kane Connie Bentley McGheeJon Brandt

Staff:

John CalabriaJamie HernandezMichael Kennedy, DAG

CALL TO ORDER

Susan Olszewski, Chairperson opened the meeting at the Department of Health, Market and Warren St., H&A Bldg., 1st Floor, Auditorium, NJ on Thursday, May 5, 2016.


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MOTION SUMMARY

1. Approval of February 4, 2016 minutesMotion – Ms. Olszewski, Second – Mr. Gross

2. Approval of Certificate of Need Application for the Partial Transfer of Ownership of Hoboken University Medical Center Motion – Dr. Donlen, Second – Dr. Barone


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May 5, 2016

VOTING RECORDVOTING BOARD MEMBER ROLL 1 2

Dr. Donlen X Y Y

Ms. Ainora - - -

Mr. Kane - - -

Ms. Olszewski X Y Y

Ms. Bentley-McGhee - - -

Dr. Barone X Y Y

Mr. Baker X A R

Mr. Gross X Y Y

Dr. Alaigh X Y Y

Mr. Brandt - - -

Susan Dougherty (representing Mr. Conroy) – non voting member

X - -

Margaret Springer (representing Dr. Lind) – non voting member

X - -

Ms. Brewen-Alvino – non voting member

X - -

Total

Total Absent

9

5-Y

0-N

1-A

0-R

5-Y

0-N

0-A

1-R

KEY: Y=YES N=NO A=ABSTAIN R=RESCUE


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1 - - - - - - - - - - -X STATE OF NEW JERSEY

2 STATE HEALTH PLANNING BOARD DEPARTMENT OF HEALTH

3- - - - - - - - - - -X

4COMPUTERIZED TRANSCRIPT of the stenographic

5notes of the proceedings in the above entitled

6matter as taken by DENISE L. SWEET, a Certified

7Court Reporter and Registered Professional Reporter,

8at the DEPARTMENT OF HEALTH, Market and Warren

9Streets, H&A Building, First Floor, Auditorium,

10Trenton, New Jersey on Thursday, May 5, 2016, at

119:30 in the forenoon.

12

13BOARD MEMBERS:

14 Susan Olszewski, ChairwomanAlison Gibson

15 Suzanne Brewen-AlvinoMichael Kennedy

16 Dr. Joseph BaroneMichael Gross

17 Michael BakerDr. Poonam Alaigh

18 Dr. Judy Donlen (via speakerphone)

19 STATE DEPARTMENT REPRESENTATIVES: John Calabria

20 Susan Dougherty

21PUBLIC COMMENT:

22 Paul Hollander, Esq.

23APPLICANT REPRESENTATIVES:

24 Tom Kolb, Esq.Leslie Prizant, Esq.

25 Ann Logan


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I N D E X

1AGENDA: PAGE

2I. Call to Order 4

3II. Chairperson's Report 5

4 - Approval of April 9, 2015 minutes 5- Approval of February 4, 2016 minutes 6

5III. Commissioner's Report 6

6IV. Certificate of Need Application for the 7

7 Partial Transfer of Ownership of HobokenUniversity Medical Center

8A. Department Presentation 7

9 B. Public Comment on the Application 22C. Applicant's Presentation 36

10 D. Board Discussion and Vote 57

11 V. Other Business 59

12 VI. Adjournment 60

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14

15

16

17

18

19

20

21

22

23

24

25 CHAIRWOMAN OLSZEWSKI: We do have a


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1 quorum, so our meeting can begin.

2 MS. HERNANDEZ: This is a formal

3 meeting of the State Health Planning Board.

4 Adequate notice of this meeting has been published

5 in accordance with provisions of Chapter 231, Public

6 Law 1975, c-10:4.10 of the State of New Jersey

7 entitled Open Public Meetings Act.Notice was sent

8 to the Secretary of State who posted the notice in a

9 public place. Notices were forwarded to 12 New

10 Jersey newspapers, one New York newspaper, one

11 Philadelphia newspaper, three news organizations and

12 the NJTV.

13 I will now call role. Ms. Gibson?

14 MS. GIBSON: Here.

15 MS. HERNANDEZ: Dr. Lind? Ms.

16 Brewen-Alvino?

17 MS. BREWEN-ALVINO: Here.

18 MS. HERNANDEZ: Mr. Kennedy?

19 MR. KENNEDY: Here.

20 MS. HERNANDEZ: Ms. Ainora? Mr.

21 Kane? Ms. Olszewski?

22 CHAIRWOMAN OLSZEWSKI: Here.

23 MS. HERNANDEZ: Ms. Bentley-McGhee?

24 Dr. Barone?

25


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1 DR. BARONE: Here.

2 MS. HERNANDEZ: Mr. Gross? Mr.

3 Baker?

4 MR. BAKER: Here.

5 MS. HERNANDEZ: Dr. Alaigh?

6 DR. ALAIGH: Here.

7 MS. HERNANDEZ: Mr. Grant? Dr.

8 Donlen?

9 DR. DONLEN: Here.

10 MS. HERNANDEZ: We have seven

11 members present, which does constitute a quorum.

12 CHAIRWOMAN OLSZEWSKI: Okay. Thank

13 you. Dr. Donlen, you're on the agenda for the

14 Chairperson's report. Do you have a report?

15 DR. DONLEN: No.

16 CHAIRWOMAN OLSZEWSKI: Okay. The

17 first item was the approval of the April 9, 2015

18 minutes, but there's not enough people here for us

19 to do that, so we -- oh, we do now? Now there are.

20 Okay. Just a moment. So, could you please state

21 your name? I'm sorry. Mickey Gross has joined.

22 He's a member of the State Health Planning Board.

23 So, does Mickey vote on this one?

24 MS. HERNANDEZ: No.

25 CHAIRWOMAN OLSZEWSKI: Okay. So,


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1 we are going to table the approval of the April 9,

2 2015 minutes.

3 But, we can look at approving the

4 February 4, 2016 meeting minutes. Do I have a -- is

5 there any discussion?

6 MR. GROSS: Motion to approve.

7 CHAIRWOMAN OLSZEWSKI: I'll second.

8 MS. HERNANDEZ: Ms. Olszewski?

9 CHAIRWOMAN OLSZEWSKI: Yes.

10 MS. HERNANDEZ: Dr. Barone?

11 DR. BARONE: Yes.

12 MS. HERNANDEZ: Mr. Gross?

13 MR. GROSS: Yes.

14 MS. HERNANDEZ: Mr. Baker?

15 MR. BAKER: I'll abstain.


17 DR. ALAIGH: Yes.

18 MS. HERNANDEZ: Dr. Donlen?

19 DR. DONLEN: Yes.

20 MS. HERNANDEZ: We have five yeses.

21 Motion moved.


23 you. Next, do we have a commissioner's report,

24 Alison?

25 MS. GIBSON: We do not.


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1 CHAIRWOMAN OLSZEWSLI: No, we do

2 not.

3 MS. GIBSON: No, we do not.

4 CHAIRWOMAN OLSZEWSKI: Okay. Then

5 we will proceed to the business at hand, which is to

6 look at the Certificate of Need, Application for the

7 Partial Transfer of Ownership of Hoboken University

8 Medical Center.

9 Now, how we do this is, we start

10 with the Department presentation. Next, we have

11 public comment. Is there anyone from the public who

12 signed up to speak today? Just so you know, that's

13 up to an hour. Okay. One. Okay.

14 MS. HERNANDEZ: I have a list here.

15 CHAIRWOMAN OLSZEWSKI: Was there a

16 list? Okay. And the applicant's presentation and

17 then we'll have Board discussion and vote.

18 So, if we can start with the, okay,

19 yes, we do have Paul Hollander. Okay. That's you,

20 but we will start with the Department presentation.

21 So, John, you're up.

22 MR. CALABRIA: John Calabria,

23 C-A-L-A-B-R-I-A. Thank you and good morning to the

24 members of the Board. Today we're here to review

25 with you the application submitted for the partial


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1 transfer of Hoboken University Medical Center. The

2 ownership interest of the applicant will increase

3 from 9.9 percent to 25 percent and that goes over

4 the 10 percent threshold that we have for review of

5 all kinds of applications. I will, as is practice,

6 go over the Department's reasons for approval right

7 now and go over with you the conditions that we're

8 recommending be placed on such approval.

9 In the staff recommendations, based

10 on the documentation of proposed compliance with

11 regulatory and statutory criteria, Department staff

12 recommends approving the partial transfer of

13 ownership of HUMC Opco to MPT of Hoboken for the

14 following reasons and with the conditions noted

15 below.

16 First reason, this transfer is

17 expected to result in the continued promotion of the

18 sharing of services and administrative efficiencies

19 among Hoboken University Medical Center, CarePoint

20 Health, Bayonne Medical Center and CarePoint Christ

21 Hospital.

22 In March of 2012 MPT of Hoboken

23 acquired a 9.9 percent ownership interest in HUMC

24 Holdco. Subsequent to this change of ownership

25 interest, the overall occupancy rate for all


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1 maintained beds has remained relatively stable from

2 2012 through 2015.

3 Number three, applicant assures the

4 Department that MPT of Hoboken, a taxable Real

5 Estate Investment Trust subsidiary, will not and

6 cannot, as prohibited by IRS regulations,

7 participate in the management of the business and

8 operations of HUMC Opco and HUMC.

9 HUMC has operated in the region

10 traditionally serving the same primary and secondary

11 service areas and no data exists to suggest that

12 this partial transfer of ownership will change the

13 hospital's relationship with other Hudson County

14 hospitals or adversely impact the healthcare status

15 of the community.

16 Number five, the applicant assures

17 the Department that there will be no impact on the

18 number and work status of the current professional

19 and nonprofessional employees of the hospital and

20 clinic employees as a result of this transaction.

21 Six, the applicant has complied

22 with the Department's general transfer of ownership

23 criteria. There is a willing buyer and seller. The

24 buyer has presented a financially feasible project

25 and the buyer does not have any identifiable track


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1 record violations sufficiently serious to warrant

2 denial of the application.

3 The application and its attachments

4 shall be incorporated and accepted as conditions of

5 licensure.

6 Number eight, the applicant has

7 stated that HUMC Holdco, MPT of Hoboken and HUMC

8 Opco, in accordance with regulation, will not deny

9 admission to any patients on the basis of their

10 inability to pay or source of payment.

11 I'll go into conditions and there

12 have been changes that were sent to the Board

13 yesterday in the original submission by the

14 Department. These were at the request of the

15 applicant due to concerns that some of you had

16 originally that could imply or hint at that they had

17 some operational control of the hospital, which is

18 not the case.

19 So, the conditions, number one,

20 HUMC Opco shall file a licensing application with

21 the Department's Division of CN Licensing to execute

22 the proposed partial transfer of ownership of HUMC

23 Opco to MPT of Hoboken.

24 In accordance with regulation, HUMC

25 Holdco and MPT of Hoboken shall provide prior


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1 notification in writing to the Division of any

2 change in their respective ownership interests in

3 HUMC Opco.

4 MPT of Hoboken, number three, MPT

5 of Hoboken must meet with the Department to discuss

6 its plans before taking any extraordinary action as

7 identified in section 3.14(a) of the LLC agreement.

8 Before MPT of Hoboken takes any

9 extraordinary action identified in section, of

10 sections of that agreement, except with respect to

11 the marketing of the hospital for sale, it shall

12 submit an application for a CN to the Division in

13 accordance with statute and regulation and obtain a

14 CN from the Department.

15 Provision number five, for the

16 initial five years following the transfer of

17 ownership, the following reports shall be submitted.

18 HUMC Opco shall submit annual reports to the

19 Division detailing an annual accounting of any long-

20 or short-term debt or other liabilities incurred on

21 the hospital's behalf and reflected on HUMC Opco's

22 balance sheet, and also a list of completed capital

23 projects itemized to reflect both the project and

24 its expenditure. Finally, the members of HUMC Opco

25 shall submit reports to the extent such member has


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1 made an investment in HUMC during the previous year

2 Number six, HUMC Opco’s annual

3 audited financial statements shall be posted on the

4 hospital's website within 180 days of the close of

5 the hospital's fiscal year and shall ensure that the

6 hospital's quarterly unaudited financial statements

7 are posted on the website within 60 days of the

8 close of the hospital's fiscal quarter. All annual

9 and quarterly statements shall be prepared in

10 accordance with generally accepted accounting

11 principles. With respect to the posting of

12 quarterly unaudited financial statements, HUMC Opco

13 may include disclaimer language regarding the

14 unaudited nature of the quarterly financial

15 statements on its website where such statements are

16 posted.

17 Number seven, within 60 days of

18 posting its audited annual financial statements to

19 its website, HUMC Opco shall hold an annual public

20 meeting in New Jersey pursuant to statute and shall

21 make copies of those audited annual financial

22 statements available at the annual public meeting.

23 HUMC Opco shall develop mechanisms for the meeting

24 that address the following: A, an explanation in

25 layperson's terms of the audited annual financial


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1 statement; B, an opportunity for members of the

2 local community to present their concerns to HUMC

3 Opco regarding local healthcare needs and hospital

4 operations; C, a method for HUMC Opco to publically

5 respond in layperson's terms to the concerns

6 expressed by community members at the annual public

7 meeting; and, D, HUMC Opco shall develop these

8 methods, A through C above, within 90 days of the

9 date of this approval letter and provide them to the

10 Division.

11 Number eight, HUMC Opco shall

12 maintain compliance with the United States

13 Department of Health and Human Services standards

14 for Culturally and Linguistically Appropriate

15 Services in Health and Healthcare. Compliance shall

16 be documented and filed with the Division with the

17 annual licensing renewal.

18 Number nine, in regard to contracts

19 with insurers, HUMC Opco shall on its, shall post on

20 its website the status of all insurance contracts

21 related to patient care between the hospital and

22 insurance plans. HUMC Opco shall provide notices to

23 patients concerning pricing and charges relating to

24 coverage during termination of plans. B, HUMC Opco

25 shall notify the Department within 48 hours of the


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1 status of notices concerning any HMO or commercial

2 insurance contract that will expand out-of-network

3 service coverage. HUMC Opco shall meet with

4 representatives from the Department and the

5 Department of Banking and Insurance to discuss the

6 intent to terminate any such contract, willingness

7 to enter into mediation and shall document how it

8 will provide notice to patients and providers, as

9 well as the impact that such action is reasonably

10 expected to have on access to healthcare.

11 Ten, HUMC Opco shall remain

12 obligated to comply with all conditions contained in

13 the Department's 2011 CN approval letter. That was

14 the original transfer of the hospital from the

15 municipality of Hoboken.

16 11, all these conditions shall

17 apply to any successor organization to HUMC Opco who

18 acquires HUMC within five years from the date of

19 this CN approval.

20 And, finally, number 12, MPT of

21 Hoboken shall not interfere with HUMC Opco's

22 compliance with the preceding conditions, as well as

23 any conditions contained in the Department's 2011 CN

24 approval letter, to the extent as a member MPT has

25 any power to do so.


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1 That's the rationale for our

2 recommendation for approval. Again, this is an

3 approval to go from 9.9, already 9.9 percent to 25

4 percent. I'll be happy to try to respond to any

5 questions anybody may have.

6 CHAIRWOMAN OLSZEWSKI: John, I'd

7 like to just start, because I'm the Chair today, I

8 guess. Judy, you'll have your chance.

9 This seems, I'm reading it to be,

10 basically, a financial, it's just, it's, basically,

11 a financial type of change and doesn't truly,

12 because of the agreement, because a REIT is

13 involved, doesn't seem to impact and, actually, by

14 IRS regulation and by contract between the parties,

15 can't deal with the day-to-day operations of the

16 hospital. So, are we, as the State Health Planning

17 Board, we're, basically, to treat this as a

18 financial operation?

19 MR. CALABRIA: Well, it is,

20 essentially, that. I think you're correct in that

21 and you're correct in your description of the IRS

22 and how Real Estate Investment Trusts and the IRS

23 handles that and so forth. But, this is a CN,

24 because we have, as I mentioned in the beginning,

25 you know, if anything less than 10 percent, even if


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1 it’s not a CN licensing transfer, if it’s less than

2 10 percent it’s a notification to the Department.

3 If it's something that just needs a licensing

4 application, once you hit 10 percent, then you file

5 a licensing application or for something that it's

6 like a CN with a hospital, then you have to come to

7 the Department and come through the CN process so

8 the public has some knowledge of what's going on and

9 they can express any concerns they may have. But,

10 essentially, your statements are correct.

11 CHAIRWOMAN OLSZEWSKI: Okay.

12 Because, it was difficult for me to contemplate

13 reasons not to approve this, because, you know,

14 we're most concerned about access to care in the

15 State and that's truly not, it doesn't appear to be

16 an issue here as long as we ensure in the conditions

17 that a separation exists between day-to-day

18 operations and coverage.

19 MR. CALABRIA: As indicated by our

20 recommendation for approval, we are, as the staff

21 and the Department, very comfortable with what you

22 just said. That is entirely correct.

23 CHAIRWOMAN OLSZEWSKI: Okay. Okay.

24 The one thing I would ask you, and it does involve

25 operations, when I was looking through the material


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1 provided, it looks like clinic visits have dropped

2 dramatically in Hoboken by, like, 50 percent since

3 2011. And I don't know, the staff didn't mention

4 that. It probably isn't an issue here, but --

5 MR. CALABRIA: Well, I know when, I

6 understood that you asked that question, I did look

7 back, because if you look at the, it's in your

8 report, the maintained beds, and you'll see there's

9 fluctuations in occupancy, fluctuations in numbers

10 of beds, occupancy down low, as a result of that

11 beds came down. So, clinic visits are probably just

12 a reflection of fluctuations in utilization of the

13 hospital as a whole.

14 We have not been informed of any

15 complaints to the Department that there is a lack of

16 access to clinics that they're supposed to have. We

17 did, with the applicant in the review process,

18 confirm that they have, they do have clinics for all

19 patients, all the services for staffing these beds.

20 CHAIRWOMAN OLSZEWSKI: Okay. I

21 think we all know having served on this committee

22 for years and know the environment around that you

23 could have, you could have the clinic and the hours,

24 you can discourage patients from coming in,

25 potential patients from coming in. So, that just


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1 raised a flag for me.

2 MR. CALABRIA: I just want to

3 assure you and the Board that we do hear about that.

4 We either --


6 MR. CALABRIA: -- I will call the

7 hospital myself or we'll submit it as for a

8 complaint investigation, if that doesn't work or

9 there's some other concern.

10 CHAIRWOMAN OLSZEWSKI: That's good.

11 Okay. One last thing, I know that we do the

12 insurance, the contracts with the insurance

13 companies. Now, we've learned from the past

14 experience to put that as conditions in here and

15 since the takeover of HUMC Opco in 2011, 2012, has

16 there been any issues, real issues with insurance

17 coverage?

18 MR. CALABRIA: Not that I'm aware

19 of.


21 No. That's good. That's all for me. Anyone else

22 around the table? Oh, actually, Judy, would you

23 like to have some questions? Do you have questions?

24 DR. DONLEN: I have questions.

25 I'll wait and see if anybody else asks them. It's


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1 harder to hear them from me, so if mine are answered

2 now I'll wait.

3 CHAIRWOMAN OLSZEWSKI: Oh, we can

4 hear you just fine. But, okay. Anyone else,

5 questions?

6 DR. BARONE: To add to it, it seems

7 like we already have approved the 25 percent

8 threshold. So, they started at 9.9. We're just

9 allowing them to do what, essentially, has already

10 been agreed to.

11 MR. CALABRIA: Yes, between the

12 buyer and the seller it has already been agreed to.

13 CHAIRWOMAN OLSZEWSKI: Okay. Dr.

14 Alaigh?

15 DR. ALAIGH: So, thank you again

16 for explaining the reason why we're here today. And

17 so, you know, it makes perfect sense to have sort of

18 a discussion to the rationale. And the one thing I

19 wanted to find out was, what was the financial

20 reason for increasing the ownership of, to 25

21 percent? Was there a revenue issue, a stream issue

22 for the hospital finances, or were there concerns

23 around needing more capital and that's why changing

24 that ownership order?

25 MR. CALABRIA: I think it was a


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1 couple years back when they had the convertible

2 promissory note and that promissory note between the

3 applicant and the hospital was that they could

4 convert that to ownership interest up to 25 percent.

5 So, they took the first step a couple years back and

6 did 9.9 percent and now they're taking a step to go

7 up to with what they had agreed to. So, that was

8 the financing arrangement between the two parties.

9 DR. ALAIGH: From a Department

10 perspective, are there any concerns around the

11 financial health of the hospital that requires

12 additional capital infusion?

13 MR. CALABRIA: Not at this time,

14 no, there's not.

15 DR. ALAIGH: And then the one

16 rationale, number eight that you talked about, is

17 that, it's number eight or number seven or somewhere

18 in there, but it's pretty clear that the applicant

19 has no role in the operations of the hospital.

20 MR. CALABRIA: It's not just us

21 either. It's the IRS. They, in this regard,

22 they're much more powerful than we are.

23 DR. ALAIGH: Do they have a seat on

24 the Board or governance in any way? Are you aware

25 of that?


23

1 MR. CALABRIA: The applicant is

2 going to be a part of the ownership and the

3 governance board. The applicant can tell you that.

4 That wasn't something we looked into in any detail.

5 When the applicant is up, they can, you can ask

6 them.

7 DR. ALAIGH: And do the conditions

8 ensure that the services are, the clinical services,

9 are going to be maintained?

10 MR. CALABRIA: Yes, I believe they

11 do. It's not just the conditions that are here.

12 Remember, one of our last couple conditions says you

13 have to meet the conditions we placed on them in

14 2011 also and those conditions do have that.

15 DR. ALAIGH: Okay. That's all.

16 CHAIRWOMAN OLSZEWSKI: Mr. Baker?

17 MR. BAKER: I'm good.

18 CHAIRWOMAN OLSZEWSKI: Mr. Gross?

19 MR. GROSS: I'm good.

20 CHAIRWOMAN OLSZEWSKI: Okay. Judy?

21 DR. DONLEN: My questions wind up

22 being for the applicant, so I'll wait.


24 So, no more questions for the staff? Thank you,

25 John.


24

1 MR. CALABRIA: Thank you.

2 CHAIRWOMAN OLSZEWSKI: Okay. Now

3 it's time for public comment. So, Paul Hollander

4 signed up. When you come forward, could you please,

5 for the minutes here, state your name and spell it?

6 MR. HOLLANDER: Good morning. My

7 name is Paul Hollander, H-O-L-L-A-N-D-E-R. I'm an

8 attorney with the firm Okin, Hollander LLC and I'm

9 here representing the City of Hoboken this morning.

10 I'd like to thank the Board members

11 for affording us this opportunity to make some

12 comments on this Certificate of Need application and

13 trust that the Board members are aware that the City

14 did submit a letter dated April 20 providing certain

15 written comments to the MPT CN application and we'd

16 like to expand, not expand, but sort of reinforce

17 some of the comments that were made in that letter.

18 Now, the City is appreciative of

19 what it views is the efforts on the part of the

20 Department of Health staff to incorporate and

21 address in the original set of conditions some of

22 the concerns that the City expressed in its letter

23 in terms of including conditions that would make

24 more certain that the applicant couldn't have any

25 management or active day-to-day role in the


25

1 operation of the hospital. I'm a little bit

2 concerned having learned this morning that some of

3 those conditions have been rewritten and I would ask

4 if it was possible for a black-lined copy of the new

5 conditions to be provided so that we can see exactly

6 what impact it might have on and how they differ

7 from the original conditions. Certainly changes to

8 condition three and four are very much of concern to

9 the City.

10 But, putting that matter aside,

11 what the City's primary concern is, at this point,

12 assuming that all of the conditions hopefully are

13 acceptable, is that I assume the Board is aware that

14 there was litigation between the applicant and the

15 owner of the hospital. Thank you very much. And in

16 that litigation, the applicant and the owner took

17 diametrically opposed and conflicting views about

18 what the corporate governance documents of the

19 hospital were intended to provide and they were very

20 sharp disputes. It's part of the CN application,

21 the pleadings before the Chancery Court in Delaware

22 of the party's perspective positions and they were

23 quite different in terms of what role MPT believed

24 it had. And as also part of the CN application in

25 answers to completeness questions, there's


26

1 indications that there’s been an agreement in

2 principal to settle those disputes and to settle

3 that litigation, but although the Department was

4 told about that in March of 2015, the actual

5 documentation pursuant to which those disputes have

6 been settled, and whether or not the settlement of

7 those disputes has resulted in any changes in either

8 the LLC operating agreement or any other corporate

9 governance documents have, to my knowledge, never

10 been provided to the Department of Health. And

11 unless people are afforded, the Department of Health

12 and the staff and the Board members, an opportunity

13 to understand what the definitive, final

14 documentation of that settlement is, we don't have

15 any way of knowing of what other changes, if any,

16 have been made in the LLC agreements or the

17 operating agreements or whether the conditions that

18 have been imposed or at least recommended by the

19 Department of Health staff --

20 CHAIRWOMAN OLSZEWSKI: I'm sorry,

21 continue.

22 MR. HOLLANDER: -- would continue

23 to be applicable to the extent these documents have

24 been revised.

25 So, for example, in condition three


27

1 and four of the original staff recommendations, they

2 dealt with issues of major default, removal events

3 and extraordinary actions under the original 2012

4 LLC agreement. Okay. And imposed, as we think it's

5 quite appropriate, requirements that notice be given

6 to the Department, consultation be had with the

7 Department and, in certain instances, actual CN

8 approvals be obtained before certain of these

9 actions were taken.

10 But, quite frankly, if the LLC

11 agreement hasn't been changed in any way so that

12 these provisions have been altered, it's difficult

13 for either, I believe, the Department or an

14 interested party, such as the City, to understand

15 whether those conditions would continue to be

16 equally effective and applicable to a revised LLC

17 operating agreement or any other corporate

18 governance document that the parties may have

19 entered into in connection with the settlement of

20 the Delaware litigation.

21 So, in our letter we asked that the

22 applicant be required to come forward and disclose

23 the actual definitive agreements so that -- I'm

24 sorry.

25 CHAIRWOMAN OLSZEWSKI: I'm sorry.


28

1 I should have started off with this and I'm taking

2 over the Chair today, so I neglected to mention at

3 the beginning of the meeting, but we did, the State

4 staff did receive yesterday morning a copy of the

5 updated agreement, the limited liability agreement,

6 and that was provided to us via, to the staff and

7 the Planning Board members last night, via e-mail.

8 So, we do have a copy of that and that was, as I

9 understand it, part of the information that was used

10 in whether the conditions were altered.

11 Okay. So, I'm sorry. So, just so

12 that you, I understand you do not have a copy of

13 that, but --

14 MR. HOLLANDER: Yes, although

15 somebody from the Department staff, I think, handed

16 up a black-lined copy of the conditions. So,

17 although I haven't yet had a moment to read them --


19 MR. HOLLANDER: -- but, aside from

20 the matters that I think go to the heart of the

21 corporate governance concerns that a number of the

22 Board members expressed, condition, the original

23 condition ten of the staff's recommendation was that

24 all of the terms of the original CN approval back in

25 2011 continued to be adhered to. And one of the,


29

1 condition number nine of the original 2011 CN

2 approval letter, mandated that the hospital would

3 establish a functioning board of trustees to provide

4 institutional management for the hospital.

5 Now, if anybody has had, been awake

6 at night and couldn't fall asleep and read the

7 Delaware pleadings, you would see that that was a

8 big bone of contention between MPT and the hospital

9 in the Delaware litigation as to whether or not it

10 was appropriate to have an actual functioning board

11 of trustees that had real powers. And the applicant

12 took the position that having such a board of

13 trustees was a derogation of certain of their

14 contractual rights and, again, perhaps maybe if the

15 staff had the chance to review the LLC agreement --

16 CHAIRWOMAN OLSZEWSKI: We did.

17 MR. HOLLANDER: -- I don't know how

18 that issue, it was clearly a disputed issue in the

19 Delaware litigation, and we don't know how that

20 particular issue was resolved.

21 So, those were really, and I

22 started out trying to keep to my three-minute limit.

23 I appreciate that you've allowed me to go over.

24 CHAIRWOMAN OLSZEWSKI: Well, you

25 are, I think, our only public speaker, so I wanted


30

1 to give you time. You came a long way and the City

2 has an important role here.

3 MR. HOLLANDER: I thank you and I'm

4 sure the Mayor and the citizens appreciate that.

5 But, I think that it's in everybody's interests,

6 okay, that, assuming that the Board elects to

7 approve this, that the conditions match up with the

8 current operating agreement. So that once this is

9 approved, at least a starting point, you know that

10 conditions have been properly adapted so that

11 there's no slippage and so that what seems to be a

12 common agreement of both the Board members that have

13 spoken and from what I've read from the applicant

14 that MPT has no intention of becoming involved in

15 any aspect directly or indirectly in the management.

16 Although, I think, for example, one

17 of the Board members brought up a very good question

18 as to what voting rights MPT has in this

19 reconstituted governance arrangement, which

20 presumably is reflected. And I think it was an

21 excellent question. It goes to the heart of many of

22 the concerns that were expressed and, yet, the fact

23 that that isn't clear from, I assume it's not clear,

24 from the operating agreement, because otherwise I

25 think somebody would have been able to state that,


31

1 that's troubling to the City that we still don't

2 have a full and complete understanding as to what

3 this governance structure is.

4 And I don't want to bring up straw

5 men and try to create fear, but we're looking at

6 this in the context where for many months there was

7 litigation between these parties in Delaware going

8 to the heart of the issues that are now before this

9 Board on the CN process and what had to be disclosed

10 to the Department of Health and whether disclosures

11 that were proposed were being handed and fulsome and

12 full of disclosure. So, that, in that history, all

13 right, and when the Mayor and other members of the

14 administration in the City saw that those disputes

15 were being litigated, in effect, behind, although it

16 was in the public proceeding, but nobody was aware

17 of that, it sort of heightened their concern that

18 these issues really need to be pinned down in a way

19 that people can walk away with a high level of

20 comfort.

21 CHAIRWOMAN OLSZEWSKI: Thank you.

22 Thank you. Are there any questions?

23 DR. BARONE: Counselor, are there

24 any concerns from the Mayor or the City about the

25 quality of healthcare services being provided by the


32

1 institution? Has there been any change? Is there,

2 because it seems the root of this is that you're

3 concerned that the hospital may not be able to

4 provide the types of services that the citizens of

5 the City require. So, I'm not trying to put you on

6 the spot, but it doesn't appear that, to us, that

7 there's been a change or a slippage. I just want,

8 what is your feeling, what is the City's feeling?

9 And that seems to be part of the concern.

10 MR. HOLLANDER: I think the,

11 certainly the Mayor and the City's concern is that

12 they're constantly looking at the ability of the

13 hospital to serve the needs of the citizens,

14 including the needs of all the citizens and retirees

15 and family members that the City insures and which I

16 think makes up a significant part of the population

17 and the admissions to the hospital.

18 Now, I'm going to bring up what I'm

19 sure is everybody's favorite target or subject is

20 that the City's probably greatest concern on a

21 day-to-day basis has to do with managed care related

22 issues and assuring that its employees, their family

23 members and retirees are able to get access to

24 in-network benefits. The City has, obviously, great

25 concerns about changes in terms of the new proposed


33

1 network or the Omni Care product and the fact that

2 the City was extremely upset that Hoboken Municipal

3 Hospital was put in Tier II.

4 So, I think to try to answer your

5 question as well as I'm able, I think the Mayor

6 probably every day is concerned about that aspect of

7 the environment and how, you know, the managed care

8 contracts and wants to do what is possible to ensure

9 that as many of both the employees, family members

10 and retirees have access to in-network services and

11 that, very disturbed about the fact that the

12 hospital was put in Tier II and what long-term

13 impact that could have on the viability of the

14 hospital, you know, is a major focus of her

15 administration and wanting to ensure that the

16 hospital remains viable, remains a full service

17 general hospital serving the 50 some odd thousand

18 residents of the City of Hoboken.

19 So, but I recognize that that

20 obviously gets off into a whole different area that

21 you can spend days, if not weeks, getting comments

22 on. So, the City is acutely and keenly aware of

23 wanting to do whatever is within its power to make

24 sure that the hospital remains viable and remains

25 committed to remaining a general hospital, which was


34

1 the whole premise of the 2011 CN approval, the whole

2 premise of the sale process, pursuant to which

3 Holdco was allowed to purchase the hospital and I

4 think that's the best way --

5 DR. BARONE: Thank you.

6 MR. HOLLANDER: -- that I can

7 answer that question.


9 you. Yes. Mickey?

10 MR. GROSS: Counselor, just so we

11 have it on record here, would it be correct to say

12 that at the present time the application in front of

13 us, the City of Hoboken is against this application?

14 MR. HOLLANDER: No, I don't, I

15 think what in our letter, our point was that we

16 wanted to make sure that this application didn't

17 become a vehicle by which there was a creeping

18 change of control and a creeping fundamental change

19 in who was operating the hospital and what the

20 objectives, many of which were set forth in the

21 original 2011 CN. That is sort of the expectation

22 that the City had when the City's Hospital Authority

23 sold the hospital. And, in a very simple letter, I

24 think the City wants to ensure that it gets the

25 benefit of what it thought the Department of Health


35

1 had recommended at that time, that, you know, that

2 the ownership structure, the corporate governance

3 structure, remains the same. I mean, obviously, we

4 are aware that in this environment hospitals do get

5 bought and sold, okay, and that's something that we

6 would, obviously, the City would have to address at

7 the time.

8 But, no, we're not vehemently

9 opposed. What we're more interested in is making

10 sure that everybody lives up to what we understood

11 and what we think the Department of Health

12 understood to be the original arrangement and that

13 through going from 9.9 percent to 25 percent that

14 there isn't some slippage. And, of course, when we

15 got the CN application and started reading all the

16 exhibits and finding out what had gone on in the

17 State of Delaware in the Chancery Court there and

18 all of the disputes relating to the governance of

19 the hospital, it sort of heightened the City's

20 concern that they just can't sit in the back row and

21 be a bystander. They have to try to get actively

22 involved.

23 And, as far as we're concerned, I

24 think we tried to do it in a constructive way. We

25 want this hospital to survive. We want it to


36

1 survive as a full service hospital and, but, part of

2 that is the structure where MPT is really a

3 financing arm and there is a very fixed wall, I was

4 going to say a Donald Trump wall, but I think that

5 would be a poor choice of words, but a wall between

6 their financial interests and the operation of the

7 hospital and how that impacts all of the Department

8 of Health's responsibilities and objectives.

9 And I think that's the way the City

10 views it and that's the way the City wants to see it

11 continue and that's why, you know, we want to make

12 sure that as this all gets documented it fully

13 reflects whatever changes have taken place in the

14 corporate governance documents so we don't wind up

15 coming back here in two or three or four years and

16 find out that the conditions that you imposed were

17 well intentioned and designed based upon the

18 original governance documents, but no longer serve

19 the same purpose if those documents have undergone

20 some changes that would impact them.


22 MR. HOLLANDER: Is that -- I didn't

23 mean to dodge the question.

24 MR. GROSS: That's fine. That's

25 fine.


37

1 CHAIRWOMAN OLSZEWSKI: Other

2 questions? Judy, do you have questions for the

3 City?

4 DR. DONLEN: No, not now. I think

5 I'm waiting for questions to ask the applicant, but

6 I'm okay for now.


8 Thank you so much.

9 MR. HOLLANDER: Thank you very

10 much.

11 CHAIRWOMAN OLSZEWSKI: John, did

12 you have anything you wanted to say from that

13 speech, from that profer? I'm sorry. You have more

14 on the list? I thought we only had one speaker.

15 Thomas Kolb?

16 MS. DOUGHERTY: Madam Chairperson,

17 he's part of the applicant.

18 CHAIRWOMAN OLSZEWSKI: You're part

19 of the applicant. You're not allowed to speak.

20 That's what I thought. Okay. Everyone else is MPT,

21 CarePoint Health. I think they're all, they're all

22 okay.

23 So, proceed with the applicant's

24 presentation. You have ten minutes.

25 MR. KOLB: Thank you very much.


38

1 CHAIRWOMAN OLSZEWSKI: You’ll need

2 to state your name and spell it for the court

3 reporter.

4 MR. KOLB: Sure. Tom Kolb,

5 K-O-L-B. Good morning, everyone. I appreciate the

6 opportunity to talk with you this morning. I'm a

7 lawyer. I represent MPT of Hoboken, TRS, LLC, the

8 applicant, which is an affiliate of Medical

9 Properties Trust, Inc., a publically traded Real

10 Estate Investment Trust. Here with me in the back

11 is Steve Hamder, the chief financial officer of

12 Medical Properties Trust, Inc., and sitting with me

13 here are a representative of CarePoint, Leslie

14 Prizant, in-house counsel.

15 MS. LOGAN: And I'm Ann Logan. I'm

16 the chief operating officer.

17 CHAIRWOMAN OLSZEWSKI: You need to

18 state your name.

19 MS. PRIZANT: Leslie Prizant,

20 L-E-S-L-I-E, last name, P-R-I-Z-A-N-T. I'm the

21 general counsel.

22 MS. LOGAN: Ann Logan, A-N-N,

23 L-O-G-A-N. I'm the chief operating officer.

24 MR. KOLB: Medical Properties

25 Trust, as I was saying, is a publically traded Real


39

1 Estate Investment Trust, or REIT, listed on the New

2 York Stock Exchange, headquartered in Birmingham,

3 Alabama and its business is primarily focused on

4 owning hospital real estate and leasing it to acute

5 care and specialty hospital operators throughout the

6 US, England and Western Europe. Although the

7 ownership and leasing of the real estate is our

8 primary focus, the IRS allows MPT to own an interest

9 in the operations of the hospital, such as

10 CarePoint, but provided we comply with rigorous IRS

11 rules that basically say we cannot take any role in

12 the day-to-day management or operations of the

13 hospital. We have to be entirely passive.

14 The application before you today,

15 as has been discussed, we currently own 9.9 percent.

16 We're asking that it be increased to 25 percent.

17 But, to address some of the things that have been

18 said already, we had an original convertible note of

19 five million. We converted 9.9, because within your

20 rules we're permitted to do that as a minority

21 owner. We then, pursuant to that same $5 million

22 note, have now asked to increase it up to the

23 originally contemplated 25 percent.

24 The entity HUMC Opco that owns the

25 hospital is a manager managed Delaware Limited


40

1 Liability Company. The management is vested in HUMC

2 Holdco and as described in the application,

3 clarified in the LLC amendment that's been

4 circulated, we cannot and will have no ability to

5 manage the day-to-day operation of the hospital.

6 The hospital continues to be managed and operated as

7 it has in the past. MPT agrees with the proposed

8 approval conditions that were read here today and

9 agrees that any future changes, any extraordinary

10 actions, we'll come meet with the Department and any

11 changes in that governance and management will

12 follow New Jersey rules and regulations, notice,

13 meeting and submitting of the necessary CN

14 approvals.

15 What we're focused on is investing

16 in hospitals. The fact that we have an opportunity

17 to invest in operations with those constraints,

18 that's what we want to do. We don't buy hospital

19 property to reconfigure it or redevelop it into

20 anything else. We're a healthcare Real Estate

21 Investment Trust. We've got a long history of

22 providing capital assistance like CarePoint and we

23 look forward to the hospital continuing to serve the

24 Hoboken community as it has for many years to come.

25 Now, just preemptively some


41

1 questions that have been raised here today, we're

2 affirming all those original conditions. We will

3 not interfere. That those will go on as they have

4 been. To the extent that our LLC agreement

5 amendment has not been reviewed by everyone

6 carefully, I invite them to do so, because I think

7 what it does is punctuate again and again how we're

8 subject to the authority of the Department of Health

9 and not going to do anything to disturb that. And

10 if we even begin to think about doing it, we'll come

11 visit Susan Dougherty.

12 So, having said that, I invite any

13 questions.

14 CHAIRWOMAN OLSZEWSKI: Just let me

15 start, because Dr. Alaigh had asked, could you

16 explain why MPT would want to exercise the ability

17 to take the 9.9 and up to the 25 percent interest in

18 the operations of the hospital? What does that give

19 you?

20 MR. KOLB: Well, it gives us more

21 economic return. The thing about Real Estate

22 Investment Trusts, if I could digress for just a

23 moment, years ago REITs were limited to receiving

24 rent or mortgage interest. Well, a public company

25 looking out for its investors, that's a bond. It


42

1 doesn't change. It doesn't fluctuate. All of a

2 sudden, the IRS allows us to diversify and get an

3 interest that perhaps increases our return.

4 And so as part of our original

5 investment to buy the hospital real estate back when

6 the transaction took place in 2011, we bargained

7 for, within the rules, that increased equity return,

8 but we had to structure it so that we would be

9 compliant with IRS rules. And the fact is, we're a

10 company that buys hospital real estate pursuant to

11 absolute net leases where the tenant does

12 everything, because we're passive. We're clipping

13 coupons. That's what the public stockholders

14 expect. But, again, it's a, sort of a nice plum for

15 us to have for the benefit of our stockholders to

16 get an increased economic return.

17 CHAIRWOMAN OLSZEWSKI: You actually

18 get, if there's a distribution of profits each year,

19 you get a proportion of that 25 percent?

20 MR. KOLB: That's correct. That's

21 correct.


23 you. That was important to know. Questions for,

24 we'll go around, questions for MPT? Dr. Alaigh?

25 DR. ALAIGH: So, thank you for


43

1 being patient and explaining all that. I have a few

2 questions.

3 MR. KOLB: Sure.

4 DR. ALAIGH: So, you said

5 repeatedly in your opening remarks about having a

6 stake in operations, but not day-to-day operations.

7 How do you distinguish the two?

8 MR. KOLB: What I'm really, I

9 probably should have said that better, but we are a

10 member of the limited liability company that owns

11 Hoboken Hospital. We receive distributions. Their

12 profit in that entity from the operation of the

13 hospital, we share in our percentage. We have, as

14 is typical, if you think about a minority owner of

15 an entity that's passive, that is not managing or

16 controlling it, but we have certain consent, limited

17 consent rights. We don't really have an active

18 vote. We have limited consent rights in narrow

19 situations and then we have what you might think

20 that a large creditor might have that had loaned

21 money to the entity. We have things that, what

22 happens if we're not paid our rent or we don't

23 receive our return, we have extraordinary rights,

24 but those extraordinary rights, every single one of

25 them, we would never exercise. What we've committed


44

1 to in one of these conditions is that we won't do

2 anything without coming down and meeting with the

3 Department. And if what we propose to do in that

4 worst case scenario, which, believe me, we do not

5 want to occur, where, as in the exercise of those

6 rights, we think that, look, there needs to be

7 perhaps a change, we would do it in accordance with

8 the letter and spirit of your laws, as we say.

9 DR. ALAIGH: Let me understand this

10 better. So, you own the real estate?

11 MR. KOLB: Correct.

12 DR. ALAIGH: And now you're, with

13 this application, you're wanting to own 25 percent

14 of the hospital?

15 MR. KOLB: Of the entity HUMC Opco

16 that owns the hospital operations.

17 DR. ALAIGH: Okay. Now, so as, so

18 you're an investor; correct?


20 DR. ALAIGH: So, there is a part of

21 it which is your return on investment that you're

22 getting.

23 MR. KOLB: Right.

24 DR. ALAIGH: As you get a bigger

25 share, obviously your revenue goes up, right, based


45

1 on how the hospital performs?


3 DR. ALAIGH: So, are you then, and

4 maybe the way to ask that question is, what is your

5 role in governance and in the voting, in the voting

6 of the decisions that come up to the governance of

7 the hospital? So, you can leave the real estate

8 piece out.

9 MR. KOLB: Sure. Well, with

10 respect to many of the questions that were asked

11 today about the clinic usage, et cetera, we can't

12 have any role in making those decisions. REITs are

13 viewed as passive entities and they really aren't

14 allowed to get involved in sensitive operational

15 issues.

16 DR. ALAIGH: But, you're a 25

17 percent owner.

18 MR. KOLB: We are.

19 DR. ALAIGH: So, then you do have a

20 stake in the performance and the accountability of

21 how the hospital is doing.

22 MR. KOLB: We do, right, but the

23 way Delaware law works, you form a limited liability

24 company in Delaware and you state whether that is

25 manager managed or member managed. This is a


46

1 manager managed entity, which means the members

2 themselves, except to the extent it is reflected in

3 the operating limited liability company agreement,

4 the amendment of which was circulated here, you

5 really don't have any rights except very, very, very

6 narrow rights that the Delaware LLC Act gives you,

7 which are negligible or as are set forth in that

8 limited liability company agreement. And in that

9 limited liability company agreement, it basically

10 says that HUMC Holdco is the exclusive manager of

11 everything, makes all the decisions.

12 DR. ALAIGH: Let me ask you another

13 question. How many board members are there? How

14 many seats do you have on the board?

15 MR. KOLB: We are a member. The

16 LLC agreement names HUMC Holdco as the manager,

17 general manager, and unless an event occurs, for

18 instance, selling of the company, I don't have a say

19 so.

20 DR. ALAIGH: So, you're not on the

21 board.

22 MR. KOLB: I'm a silent member with

23 limited consent rights.

24 DR. ALAIGH: Do you have a voting

25 right on the board?


47

1 MR. KOLB: Not, I mean, in

2 substance, no. If there was a specific decision

3 that came down the pike, Leslie would have to call

4 me up and say, well, we want, we want to do this, an

5 extraordinary thing, such as sell the company, let's

6 say, and I would have a limited okay, that's, I'm

7 fine with that. But, almost everything of concern

8 to the City of Hoboken, patient care, staffing,

9 quality of care, access to care, we have no role in

10 that.

11 DR. ALAIGH: Okay. But, again, I'm

12 not asking what comes to the governing board. I'm

13 asking just a very simple question. Is there a

14 governing board for Hoboken, the hospital?

15 MR. KOLB: There is a board of

16 trustees --

17 DR. ALAIGH: Okay.

18 MR. KOLB: -- of the hospital and

19 there is a member agreement between MPT of Hoboken

20 TRC, which is a member, and HUMC Holdco, which is

21 the other member.

22 DR. ALAIGH: So, 75 percent of the

23 board seats are HUMC Holdco and 25 percent is your

24 group?

25 MR. KOLB: It wouldn't be accurate


48

1 to look at that. I mean, if Opco is holding a board

2 of trustees meeting, let's say, or is a liaison with

3 a community advisory group, we're not there. We're

4 not getting those, that meetings or even

5 participating.

6 DR. ALAIGH: So, is it fair to say

7 this still has to shape out? It seems like you're

8 still, with the increased ownership and interest in

9 the entity, the rules may evolve or would it stay

10 the way it has, nothing will change?

11 MR. KOLB: It will stay the way,

12 nothing will change. Nothing. This is simply

13 working with the requirements of your statute that

14 requires when you go above 9.9 percent that you go

15 through this process. That's what we've done here.

16 DR. ALAIGH: So, to alleviate the

17 concerns of the City of Hoboken, are we comfortable

18 with what their concerns are and is your governing

19 structure ensuring that we're going to be

20 comfortable with their concerns?

21 MR. KOLB: Well, it's my belief

22 that it is. Nothing is going to change about the

23 management and operation, the access to care, the

24 quality of care, the type of care as a result of our

25 going from 9.9 to 25 percent. As someone described


49

1 it as a financial, that’s really true.

2 DR. ALAIGH: And, John, if I may,

3 did we have any concerns from the Department point

4 of view around the governance structure --

5 MR. CALABRIA: No, none at all.

6 DR. ALAIGH: -- as this change is

7 evolved?

8 MR. CALABRIA: No, we've read every

9 word in every document that came to us and we're

10 comfortable with it, which is why we recommended

11 approval.

12 DR. ALAIGH: Okay. Excellent.

13 MR. KOLB: And let me just say one

14 last thing about the litigation.

15 DR. ALAIGH: That was my next

16 question.

17 MR. KOLB: Partners get in spats.

18 Leslie confirmed this. We have settled that

19 litigation. If asked by the Department, we would

20 have provided the detailed settlement agreement.

21 The lawsuit has been dismissed. That's a public

22 record and we are affirming all of the conditions,

23 including specifically the condition that the prior

24 2011 conditions will remain to be complied with.

25 DR. ALAIGH: The one other question


50

1 I have is, as you contemplate your option to

2 increase the ownership right within the hospital

3 entity, what's in it for the hospital? Is it just

4 an execution of the initial contract or --

5 MR. KOLB: That's correct.

6 DR. ALAIGH: -- or is this new

7 capital going to help them in certain circumstances?

8 MR. KOLB: Well, it's interesting,

9 because really what happened is this. When Opco

10 purchased the hospital back in the 2011 transaction,

11 MPT was its partner from a capital perspective. We

12 provided the funds for the real estate. We provided

13 another loan that remains outstanding to Opco and we

14 provided an additional amount of capital in the form

15 of a convertible note. So, that capital already was

16 invested. This is not new capital. This is taking

17 a portion of debt and converting it to equity to

18 take us up to 25 percent.

19 DR. ALAIGH: Okay. Right. So,

20 it's, basically, a debt reconciliation.

21 MR. KOLB: Correct. In a way, the

22 balance sheet has improved by taking debt and moving

23 it over into equity as was always contemplated.

24 DR. ALAIGH: Thank you.

25 MR. KOLB: You're very welcome.


51

1 CHAIRWOMAN OLSZEWSKI: Michael,

2 questions? Mickey?

3 MR. GROSS: I’m satisfied.

4 CHAIRWOMAN OLSZEWSKI: Judy?

5 DR. DONLEN: Yeah, I do have a

6 question. Based on what you just said, you said as

7 was always contemplated. So, it was always your

8 intent to turn the promissory note into equity; yes?

9 MR. KOLB: Yes, it was a

10 convertible note from day one.

11 DR. DONLEN: I realize it was

12 convertible, but the intent was to make sure that it

13 converted. It wasn't just an option.

14 MR. KOLB: Well, it was an option,

15 but our intent was working through the required

16 State rules that we would, we wanted to receive.

17 DR. DONLEN: So, that's my

18 question. So, under the State rules and

19 regulations, it was more, it was easier to do it

20 this way, otherwise we would have seen this

21 transaction or we would have seen your ownership

22 back in '11 or '10 when this first went through.


24 DR. DONLEN: Okay. That's all I

25 wanted to know.


52

1 MR. KOLB: Sure.

2 DR. DONLEN: Thank you.

3 MR. KOLB: You're very welcome.

4 CHAIRWOMAN OLSZEWSKI: Thank you,

5 Judy. So, do you, a question from me, do you own,

6 in the 37 or however many other medical centers you

7 now have scattered across not only the United

8 States, do you, especially for the newer ones, do

9 you generally exercise an ownership clause like this

10 or have ownership in the operations?

11 MR. KOLB: Well, the change in the

12 law is relatively recent from the past few years.


14 That's why I said the newest ones.

15 MR. KOLB: But, again, it's been

16 lobbied for by the REIT lobby for years, because,

17 again, sometimes economically when you're fixing a

18 bond type return in the lease, sometimes that puts

19 you in a pickle and we want to do the best job for

20 our investors. And so when that occurred, we have

21 oftentimes, and we've done some large portfolio type

22 transactions, so we do take interests from time to

23 time, but --

24 CHAIRWOMAN OLSZEWSKI: So --

25 MR. KOLB: -- many times we do not.


53

1 CHAIRWOMAN OLSZEWSKI: Okay. So,

2 this is not, it’s not unusual for you, but it’s also

3 not a hundred percent of the time you do this.


5 CHAIRWOMAN OLSZEWSKI: Okay. I

6 think, anyone else have questions? We're okay?

7 Okay. Thank you so much.

8 DR. ALAIGH: Thank you.

9 MS. DOUGHERTY: Madam Chairwoman?


11 MS. DOUGHERTY: I'm Susan Dougherty

12 from the Department of Health. I just had one

13 request that someone from Opco confirm that the

14 conditions that relate specifically to Opco and

15 commitments by Opco, that they confirm those on the

16 record.


18 DR. DONLEN: It's Judy. I was

19 under the impression that we were going to hear from

20 Opco. I wasn't believing that that was the last

21 presentation we were going to get on this. So, if I

22 was wrong, then I still have quite a few questions.


24 MS. PRIZANT: Okay. Leslie

25 Prizant, general counsel for Opco, and I do confirm


54

1 that Opco will comply with the conditions as set

2 forth recommended by the Department.

3 CHAIRWOMAN OLSZEWSKI: Okay. Could

4 you, while you're there, could you, my question

5 about clinic visits and they were a fairly dramatic

6 drop, could you address that issue?

7 MS. LOGAN: This is Ann Logan,

8 chief operating officer. There was some shift in

9 volume and there was, my understanding, I've been

10 with the company since December of 2013, there was

11 also an additional services provided within the

12 county that expanded their capability and there was

13 some shifting patient volume there. We run a very

14 robust clinic. We see hundreds of patients,

15 thousands a month, which it's a very, very robust

16 program. We extend our hours one day a week into

17 the evening. We have an on-site clinic in the

18 hospital that are a part of our network health

19 center and right now with the huge capital

20 investment into our health center we're doing a full

21 renovation, partly because of Sandy and partly

22 because we need to do it. It's a very robust

23 program. I can attest to it being a very busy

24 program.



55

1 you.

2 MS. LOGAN: You’re welcome.

3 CHAIRWOMAN OLSZEWSKI: Okay. Judy?

4 DR. DONLEN: I keep putting it on

5 mute, so if my dogs bark you don't hear them.

6 I have a question about the last

7 letter, the attestation that came in the third set

8 of questions about the Medicare violations that had

9 been identified. Am I still on?


11 MS. HERNANDEZ: Yes.

12 DR. DONLEN: Okay. I love it when

13 I get dead silence. But, the attestation says that

14 there was three hospitals that had had Medicare,

15 Medicaid --

16 CHAIRWOMAN OLSZEWSKI: That's a

17 question for MPT, Judy. So, wait a minute. We're

18 getting counsel to answer that.

19 DR. DONLEN: You weren't going to

20 be involved in operations. I thought this would be

21 going to Opco. So, whoever can answer it.


23 DR. DONLEN: It's an operations

24 question, but they should have the information about

25 this. Medicare, Medicaid, they were yours in other


56

1 areas, right, they were yours in other states, so

2 there were three Medicare, Medicaid problems,

3 noncompliance, and they have all been resolved.

4 But, can you tell us what they actually were, what

5 kind of deficiencies they were, what kind, if they

6 were, just in general what they, what they meant,

7 what they represented?

8 MR. KOLB: Unfortunately, I can't

9 give you the detail, but when we talked with Susan

10 Dougherty yesterday, we immediately got in contact

11 with the tenant and indicative of what I'm saying,

12 we have to go back to the tenant and get that

13 detail. We know they were resolved and we've

14 already got that in process to get you that detail

15 immediately and I can't imagine it will be longer

16 than a couple of days.

17 DR. DONLEN: Okay. So, the

18 Department will have that as they're considering our

19 recommendation and you'll give that information to

20 the Commission.

21 MR. KOLB: Absolutely.

22 CHAIRWOMAN OLSZEWSKI: Yes. And

23 Susan Dougherty is shaking her head to say yes, that

24 is the case.

25 DR. DONLEN: That sounds reasonable


57

1 to me. Sorry for mixing up who I should have

2 directed it to, but now I realize.

3 CHAIRWOMAN OLSZEWSKI: That's okay.

4 DR. DONLEN: And if I can just add,

5 the tenant, it's very reassuring to me in terms of

6 your not being involved in operations.

7 CHAIRWOMAN OLSZEWSKI: Okay. Judy,

8 did you have anymore questions of --

9 DR. DONLEN: No, I just feel like

10 what I did hear from them and the combination of the

11 IRS regulations that preclude them from being

12 involved in operations and the assurance that we

13 have to the conditions that anything, any time they

14 do take action that's available under the LLC

15 agreement they have to come to the Department, that

16 that should be all we can do to investigate or to

17 ensure what the issues that were raised by the City.

18 So, I'm pretty comfortable with that at this point.


20 you. Does anyone else have any questions for the,

21 for HUMC Opco? Okay. Thank you.

22 MS. PRIZANT: Thank you.

23 MS. LOGAN: Thank you.

24 CHAIRWOMAN OLSZEWSKI: Mr.

25 Hollander, I'm sorry, just a quick question. You've


58

1 heard the comments back from our applicant. Did you

2 have, briefly please, a comment back, a concern of

3 that?

4 MR. HOLLANDER: The only thing I

5 would ask, Madam Chairperson, if we could have two

6 or three days to provide written comments to the two

7 documents. I tried to read them while listening to

8 counsel, but it really was not the best set of

9 circumstances. I see that they have put in certain

10 things that seek to be positive, but they also have

11 changed. And while there is a general manager

12 appointed, that general manager, under certain

13 circumstances, could be removed. And I think that,

14 in fairness, we would like, I'm sure we can get a

15 letter down here by Tuesday morning outlining what,

16 if any, issues that we have and what they are.

17 CHAIRWOMAN OLSZEWSKI: Here's what

18 I would suggest. I mean, we, as a Board, are

19 meeting today to discuss this. What we do is, we,

20 basically, we make a recommendation to the State

21 Health Commission. The State Health Commissioner

22 then, basically, makes the final determination on a

23 Certificate of Need. So, I would, I would suggest,

24 to this point, that we go on with what we, the

25 information we have today to make this decision, but


59

1 that you are certainly welcome and encouraged to

2 file that brief or that, you know, letter with the

3 State Health Commissioner or the Department of the

4 State Health Commissioner that could be included by

5 them in their decision making.

6 MR. HOLLANDER: All right. You're

7 the deputy to the --

8 MR. KENNEDY: Yes.

9 MR. HOLLANDER: So, I can

10 coordinate with you?

11 MR. KENNEDY: Sure. We'll talk

12 after the meeting.

13 MR. HOLLANDER: Okay. Thank you

14 very much.


16 you so much. Okay. Discussion? Any to my left?

17 Looking to my right, any discussion on this?

18 Judy, did you have, actually --

19 DR. DONLEN: I think I've already

20 said, I'm in favor of approving this application. I

21 think that the things that were addressed in the

22 conditions, as well as the information we have for

23 the amendment for the LLC agreement gives me the

24 reassurance that I need and, obviously, issues

25 raised with the IRS regulations are pretty clear


60

1 about it. So, I’m good. I’ll be a yes.

2 CHAIRWOMAN OLSZEWSKI: Okay. Does

3 that mean you would like to --

4 DR. BARONE: Is that a motion?

5 CHAIRWOMAN OLSZEWSKI: -- would you

6 like to make a motion?

7 DR. DONLEN: I would love to make a

8 motion. I would move that we approve the

9 application that is before us today with all these

10 papers in front of me and that we approve with the

11 conditions that have been put forward by the

12 Department for the transfer of 25 percent ownership

13 in the --

14 CHAIRWOMAN OLSZEWSKI: As --

15 DR. DONLEN: -- HUMC Opco by MPT.

16 CHAIRWOMAN OLSZEWSKI: Judy, as

17 amended and in the copy we received last night,

18 actually, the conditions as amended.

19 DR. DONLEN: Oh, yeah. I'm sorry.

20 The conditions as amended. The ones that we

21 received by e-mail that are on the table there in

22 front of all of you. Yes.


24 you. Do I have a second?

25 DR. BARONE: Second.


61

1 MS. HERNANDEZ: Ms. Olszewski?


3 MS. HERNANDEZ: Dr. Barone?

4 DR. BARONE: Yes.

5 MS. HERNANDEZ: Mr. Gross?

6 MR. GROSS: Yes.

7 MS. HERNANDEZ: Mr. Baker?

8 MR. BAKER: Until Ms. Prizant was

9 introduced, I was going to vote on the application.

10 But, having spent 45 minutes watching our annual

11 ethics video last night, I realized that I have a

12 matter where I'm adverse to Ms. Prizant, not

13 specifically these applicants, but because they

14 always urge caution in that very long video and I'll

15 abstain.


17 DR. ALAIGH: Yes.

18 MS. HERNANDEZ: Dr. Donlen?

19 DR. DONLEN: Yes.

20 MS. HERNANDEZ: We have five yeses,

21 one abstain. The motion moves.

22 CHAIRWOMAN OLSZEWSKI: Thank you,

23 all. Is there any other business before we adjourn?

24 DR. ALAIGH: I just have one. I

25 want to welcome Alison to our State Health Planning


62

1 Board and congratulate her on her new role as Deputy

2 Commissioner and I know the State’s going to be well

3 served with her taking on this role starting this

4 week.


6 you. Welcome. And do I have a move to adjourn?

7 DR. BARONE: So moved.

8 CHAIRWOMAN OLSZEWSKI: Okay. All

9 in favor?

10 UNANIMOUS BOARD: Aye.

11 CHAIRWOMAN OLSZEWSKI: Thank you.

12 We're adjourned.

13 (Meeting adjourned at 10:45 a.m.)

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1 C E R T I F I C A T E

2

3 I, DENISE L. SWEET, a Certified

4 Court Reporter and Registered Professional Reporter,

5 do hereby certify that the foregoing is a true and

6 accurate transcript of the testimony as taken by and

7 before me at the time, place and on the date

8 hereinbefore set forth.

9 I DO FURTHER CERTIFY that I am neither a

10 relative nor employee nor attorney or counsel of any

11 of the parties to this action, and that I am neither

12 a relative nor employee of such attorney or counsel,

13 and that I am not financially interested in the

14 action.

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17 C:\TINYTRAN\Denise Sweet.bmp

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23 DENISE L. SWEET, CCR, RPR

24 DATED: May 26, 2016

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