National accounting firm to examine West Jefferson hospital’s books after lease deal inaccuracies surface _lowres

Advocate staff photo by SHERRI MILLER -- West Jefferson Medical Center in Marrero on Thursday, Dec. 18, 2014.

When consultant Joshua Nemzoff agreed to help Jefferson Parish lease its public hospital in Marrero to a private operator last year, he offered to provide his services for a flat fee of $625,000.

However, the parish is going to end up paying Nemzoff more than $1 million before the 45-year deal to lease West Jefferson Medical Center to the firm LCMC Health — for $225 million in payments and $340 million in capital improvements — is completely done, officials admitted at a Parish Council meeting Wednesday.

It appears the parish has only itself to blame.

Initially, council members intended to pay Nemzoff his flat fee when he was brought on board for the lease negotiations. A contract was drawn up and Nemzoff signed it last June, getting to work on the lease deal immediately.

The council, though, never placed its signature on the paperwork.

Weighing in on Nemzoff’s contract, Jefferson Parish Inspector General David McClintock said the language in the flat-fee arrangement lacked discernible milestones by which the parish could track the consultant’s progress. With the goal of increasing accountability, McClintock suggested that Nemzoff be paid by the hour and be required to supply detailed invoices each month.

Nemzoff, a hospital acquisitions and mergers specialist, advised the council not to do that, he said Wednesday. It wasn’t easy for him to come up with a fair hourly fee, he said, and his clients don’t usually ask him to do that.

But, at McClintock’s suggestion, the council insisted on paying Nemzoff an hourly rate of $650 instead of his flat fee. Nemzoff ultimately agreed; a new contract was drawn up in September, and this time, both sides signed it.

What the parish didn’t foresee was locking itself into an arrangement that would cost about $400,000 more than the old one.

As of Wednesday, in the year he has spent working on the complex hospital deal, Nemzoff has billed the parish for 1,385 hours of work — about 26.6 hours a week.

His total billings for the work, at the hourly rate the parish preferred, amount to about $900,000, he said.

Deputy Parish Attorney Edward Rapier said all of Nemzoff’s hours had been billed properly. No one has suggested that he has ever billed the parish for work he hasn’t done.

While the council approved the deal to lease West Jefferson to LCMC in February, it still has not been finalized. It won’t close until the state Attorney General’s Office finishes conducting a review of the deal, which could be a few more weeks.

After closing, the deal will undergo a “true up” process in which all of the costs associated with it are adjusted as needed, officials said. That process could take up to six months.

The entire situation came to light as the council debated the merits of extending Nemzoff’s contract, which was set to expire Wednesday. By a 4-3 vote, the council extended the contract through at least Sept. 5, but the members had some directions for Parish Attorney Deborah Foshee.

The council instructed Foshee’s office to explore the possibility of capping payments to Nemzoff at a certain amount while keeping his contract in effect until the “true up” process is done.

Council members Chris Roberts and Elton Lagasse balked at keeping Nemzoff on any longer. Lagasse said taxpayers already have paid too much to Nemzoff, and Roberts said he no longer is interested in hearing a Pennsylvania-based consultant tell Jefferson Parish what its priorities should be.

Speaking in support of extending Nemzoff’s contract, Councilman Paul Johnston said he thinks Jefferson is getting its money’s worth out of a consultant who is on the brink of consummating a $565 million deal for the parish.

Johnston offered that endorsement even as he conceded that Nemzoff’s forceful personality has rubbed some people the wrong way, perhaps because he is “from up north” and doesn’t have the “Southern way.”

McClintock drew verbal fire from some council members for his original suggestion that Nemzoff be paid hourly, which they said increased the consultant’s cost exponentially. McClintock countered that he’s fine with the council paying Nemzoff a flat rate as long as the language of his work agreement details what milestones he must meet and when he must do what.

Roberts, Lagasse and Ricky Templet voted against extending Nemzoff’s contract. Johnston, Ben Zahn, Cynthia Lee-Sheng and Mark Spears voted in favor.

Afterward, Nemzoff bristled at some council members’ statements that he is overpaid.

“A $1 million fee on a $500 million transaction is not at all considered a large fee,” said Nemzoff, who noted that the parish paid him by the hour against his advice. “It’s actually considered a small fee, by industry standards.”

Nemzoff — who was out of town and was interviewed by phone — also said he would be reluctant to add a payment cap to his contract unless the parish provides him with a description of precisely what it wants him to do until the deal is finalized.