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.

A consultant advising Jefferson Parish in its efforts to lease a public hospital in Marrero to a private operator has told parish officials that the hospital has been providing numbers that were inaccurate and overly positive about its financial condition, emails obtained Monday by The New Orleans Advocate showed.

West Jefferson Medical Center didn’t earn as much money last year as it initially estimated, and it lost more than $2.5 million in May after earlier indicating it had showed a profit that month, according to emails sent by the consultant to various parish officials.

Executives at the Marrero hospital, however, vehemently denied there is any reason to be concerned about its books or how they are kept.

They said Monday that preliminary financial figures such as those cited in the emails are commonly recalculated later on. Institutions of all kinds do such recalculations, especially in the course of audits, the officials said.

The emails were sent by parish consultant Joshua Nemzoff, who is working to help close out a deal that would lease West Jefferson Medical Center to LCMC Health for 45 years in return for $565 million in payments to the parish and capital improvements.

The emails said the preliminary financial statement that reported West Jefferson made more than $400,000 in May didn’t hold up. In fact, they said, the publicly owned hospital in Marrero actually lost more than $2.5 million that month and lost an estimated $3 million through the first six months of this year.

Further, the emails said, an audit completed early last month indicated that West Jefferson Medical Center generated about $9.5 million less in cash in 2014 than had been reported in preliminary financial statements provided to LCMC.

The Jefferson Parish Council approved the deal to lease the hospital to LCMC Health in February, but it hasn’t been finalized.

“West Jefferson Medical Center stands by its financial reporting during the ongoing lease negotiations with LCMC Health,” the hospital said in a prepared statement Monday. “There are no discrepancies in our accounting practices. The numbers reported by The Advocate have been grossly misrepresented. The original numbers quoted were preliminary figures given to Jefferson Parish’s consultant leading the lease negotiations.

“It was clearly stated and written to the negotiator that the numbers would be vastly different than the final numbers in the audit. In fact, the final numbers had not been presented (to) or approved by our hospital board.”

In response to the hospital’s statement, Nemzoff said, “At no time did (West Jefferson Medical Center CEO) Nancy Cassagne notify me in writing or verbally that the audit was incorrect. I only discovered that last week when I (first) saw the audit.

“If she has a copy of an email where she told me her audited financial statements were vastly different than the unaudited internal statements, I certainly would like to see a copy of it, but I never got it.”

To outsiders, it might appear that financial adjustments of millions of dollars could give LCMC second thoughts about the lease deal on the table. LCMC, though, downplayed the possibility of something like that occurring.

“LCMC Health continues to work collaboratively with Jefferson Parish and the West Jefferson Medical Center transaction team,” the firm’s CEO, Gregory Feirn, said in a statement. “This information does not impact our commitment to (West Jefferson), and we look forward to welcoming this great organization into the LCMC Health family.”

Parish officials will be glad to hear LCMC’s statement of commitment. The deal’s collapse could be disastrous for the Marrero hospital. Jefferson Parish sought to lease out the facility in the first place because it was using up its savings in an effort to offset declining revenue.

Nemzoff learned July 21 that a preliminary document misstated West Jefferson’s net income for May by more than $2.9 million, he said in an email to council members and others.

On June 8, he said, West Jefferson turned over financial statements covering the first five months of the year that said the hospital had made $402,000 in May. LCMC also received those statements. Then, on July 21, Nemzoff received financial statements through June that reflected a loss of about $2.54 million in May, he said in the emails.

An alarmed Nemzoff immediately alerted parish officials and LCMC, saying it concerned him that this had happened “weeks before closing.”

“Your management team has not only decided to change all of the numbers on the income statement, but they have changed the May numbers to the point of being of great concern,” Nemzoff wrote in a July 21 email to members of the Parish Council and Parish Attorney’s Office, among others. “I do not know what your monthly budget is, but if ... (Parish President) John Young had told you last month that you made $402,000 and then told you today that you actually lost $2,536,000, I suspect that he would have some explaining to do.”

The next day, in an email to hospital board Chairman Harry “Chip” Cahill, West Jefferson Chief Financial Officer Madeline Browning explained that the hospital in June had been asked to provide financial statements even though they had not been presented to the board for approval.

Browning said the statement from June that showed more than $400,000 in net income in May was a draft one. She said it did not take into account two items that the final statement approved by the board did, which reduced the hospital’s net income for May by more than $2.9 million.

“Going forward, the financials will not be released until approved by the board,” said the email from Browning, who in an earlier message had warned Cahill that a final version of the income statement might bring significant changes not reflected in the preliminary draft.

Separately, another Nemzoff email said LCMC believed through the end of last month that West Jefferson had brought in $15.1 million in cash in 2014. But that amount was unaudited. An audit completed June 4 revealed the hospital actually had brought in $5.6 million in cash, Nemzoff said in an email first sent to Deputy Parish Attorney Edward Rapier and then to others.

Nemzoff closed that email by saying that figures received recently showed West Jefferson had generated negative $3 million in cash this year through June. That put West Jefferson on pace to lose $6 million in cash in 2015.