“HPAE put the backgrounder together to raise the questions that we thought were either overlooked or minimized by the advisory committee,” said Jeanne Otersen, the group’s policy director.
One major area of concern is the financial aspects of the proposal, on which the UMDNJ Advisory Committee was silent.
The white paper lists $664 million in bond debt held by UMDNJ and $40 million in debt service payments last year, and concludes that “the majority of the debt is difficult to parse out” since more than half of it is considered “systemwide.”
Under the advisory committee’s proposal, supported by Gov. Christie, Rutgers would take over Robert Wood Johnson Medical School – founded in 1961 as Rutgers Medical School, but later affiliated with UMDNJ – as well as the School of Public Health and the Cancer Institute of New Jersey. The medical school’s debt is $58.3 million, and the Cancer Institute’s is $89.6 million. The lion’s share, $349 million, was considered systemwide.
The Moody’s credit-rating agency issued a “special comment” last month after the release of the UMDNJ Advisory Committee’s report. In it, the agency stated that “at least a portion of UMDNJ’s outstanding debt would have to be paid off or defeased.” Moody’s also noted that the university, which it has been given a negative outlook that means a downgrade is likely, has loaned University Hospital in Newark $85 million.
Last week, the Rutgers Board of Trustees heard from the university’s chief financial officer about the debt. Several trustees reportedly were unhappy with the lack of information available, including how much of the debt the university would assume and how it would affect Rutgers’ credit rating. Rutgers has hired a financial-consulting firm to help sort out questions regarding bonds and debt.
Greg Trevor, a Rutgers spokesman, said the issue involved not only UMDNJ bonds, but also more than $900 million in Rutgers bonds.
“These issues are significant but solvable,” he said. “Rutgers will continue to work with our consultants, UMDNJ, and state officials to address these issues.”
UMDNJ, whose remaining schools would be known collectively as the New Jersey Health Sciences University, doesn’t have any answers yet, either.
“We are not yet aware of what would happen to the debt,” said Jeffrey Tolvin, a UMDNJ spokesman.
Michael Drewniak, Christie’s spokesman, said officials from Rutgers, UMDNJ, the governor’s office, and the office of the secretary of higher education have been meeting weekly on the transfer of the three UMDNJ units to Rutgers.
“During those meetings and conversations, a number of integration issues have been identified, including UMDNJ’s bonded indebtedness,” Drewniak said.
Otersen balked at the idea that the details of the implementation should be worked out behind closed doors.
“We believe instead that the New Jersey Legislature, community leaders, patients, faculty, and health professionals need to be engaged in the process,” she said, “to shape the future of these institutions.”
HPAE is one of 11 groups that have formed the Higher Education Healthcare Coalition to monitor the reorganization.
Debt is only one aspect of the reorganization that the advisory report shortchanged, Otersen said.
“It ignored the costs not only of implementation, but [also] the need to fully fund our schools and University Hospital,” she said. “The merger in some ways is really a split into three institutions and, we believe, can weaken Newark unless certain issues are addressed, like commitment for funding. The whole issue of private partnership is left vague: Is it a privatization scheme? Will there be oversight?”
Newark Mayor Cory Booker is among those concerned about how the reorganization could hurt the university and the hospital, which has 519 beds and is the major health-care provider for the city’s residents, including many who are low-income and receive charity care or are on Medicaid. The plan proposes a public-private partnership, likely with Barnabas Health, to operate the hospital.
A specific reorganization proposal remains elusive.
Christie said Tuesday that his chief counsel and the state Attorney General’s Office were reviewing an opinion by the Office of Legislative Services that the authority to put forth a reorganization plan rested with lawmakers and not the governor.
“We are still talking to the Legislature about the best, most effective way to accomplish this merger,” Drewniak said. “Meanwhile, the affected institutions have already begun planning.”
That may be true of Rutgers-New Brunswick, UMDNJ, and Rowan University, but not of Rutgers-Camden. The South Jersey portion of the reorganization would have Rowan absorb the state university’s Camden campus, a move opposed by students, faculty, and chancellor Wendell Pritchett.
Otersen said HPAE agreed that the reorganization should proceed through legislation and “cannot see how this ‘happening’ by July 1 is either possible or wise.”
