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Does not address ECMC's historic financial and operational turnaround

Buffalo, NY Jan. 7, 2008 - Erie County Medical Center Corp. officials today said they found little of significance in a politically motivated audit by the Erie County Comptroller's Office performed over the last four months.

The comptroller's motives for the audit should be called into question because his query mirrored those of a competitor's Freedom of Information Law filing seeking data about the hospital's operations and practices. The audit is clearly adversarial and political, rather than professional and helpful, hospital officials said.

For instance, Comptroller Mark C. Poloncarz criticizes in the audit an agreement between the county and ECMC that he publicly praised two years ago; and, his audit fails to consistently use Generally Accepted Government Audit Standards.

"This isn't a performance audit; it's a headline hunt that the comptroller chose to release at a particularly sensitive time in the negotiations to form a new health-care model for this region. Why is the comptroller trying to make ECMC look bad at this particular time?" said hospital spokesman Thomas Quatroche. "We trust questions will be asked of the comptroller about his motivation and timing."

In the audit itself, for instance, auditors found answers to some of their questions in their own backyard.

In one case, auditors alleged that the hospital did not file certain financial reports. They subsequently verified on-time filings, however, with receipts issued by his own office. In another case, the Comptroller's Office misunderstood the law involving formation of a "public benefit corporation" for ECMC in citing a supposed failure to file a report.

 "This audit is motivated by politics and the agenda of ECMC's competitors and does not speak to the financial success of ECMC over the past three years," said Quatroche. "It is troubling, to say the least."

"We see actions like this audit as attempts by some county officials to distract attention from decisions they've made that would not sit well with taxpayers."

For instance, Poloncarz's audit criticizes a "consent decree" signed by the county and ECMC that the Erie County Legislature approved, after Poloncarz endorsed it. His office issued a news release Jan. 9, 2006 that said:

"Poloncarz noted that while he had only received a copy of the Agreement on Wednesday, he attended the Legislature's Majority Caucus and legislative session on Thursday to answer questions from legislators.  . . . ‘The Legislature acted responsibly in approving the proposed consent decree with ECMCC,' said Poloncarz. ‘If the County's past damages and future financial obligations had been decided at trial, the County's costs almost certainly would have been higher based upon New York State Supreme Court Justice Joseph Makowski's ruling of December 30, 2005.' "

Audit follows golf outing with competitor's CEO

ECMCC, with revenues up 18 percent in the first three quarters of 2007 compared to 2006, is in discussions with Kaleida Health to form a new regional health-care entity. Under the auspices of the state Department of Health, the two sides, the University at Buffalo and five community board members are devising a combined operation that would create a new non-profit corporation delivering improved health care to patients of both organizations.

It is not clear, therefore, why the comptroller audited the former county hospital in the midst of these discussions and released it right after the Dec. 31, 2007 deadline for agreement. ECMC spun off from Erie County in 2004, as a public benefit corporation.

What is clear is that on June 11, 2007, the comptroller played in the charitable golf tournament of an ECMC competitor - at a private country club at a cost to someone of $1,250 for the comptroller's entry - in a foursome with the competitor's CEO. The audit was officially initiated on August 31, 2007.

Further, a search of campaign records for the period did not find any recording of the $1,250 contribution.

 "Our track record demonstrates that ECMCC now operates as a business, and we have no intention of going back to operating like a government," said Quatroche, ECMC's vice president of marketing and planning. "The hospital is full; its bottom line is the healthiest it's ever been. That's what an audit should be focused on - results. But government and politicians often do not focus on results, rather they focus on process.

"As we look to the future of health care in Western New York, we recognize that a benchmark audit can be a useful tool. That is why we have our own outside auditors - adhering completely to Generally Accepted Government Audit Standards - examine our books each year and why we print our financials in our annual report.

"The comptroller of the county, with which we have a changed corporate relationship, chose to audit our operations anyway, and poorly" said Quatroche. "Where's the taxpayer benefit?"

Why an audit, why now?

"Despite spending many hours, and requiring a great deal of research by our staff, the audit returned minor findings that in some cases were just confused and incorrect," he said.

For instance, in a comptroller memo dated Oct. 9, 2007, the audit alleged ECMCC's failure to file certain financial reports. ECMCC responded by producing receipts signed by an employee of the Comptroller's Office for March 29, 2005, March 30, 2006 and April 27, 2007 providing that information for each year on time and as required.

The comptroller's office also criticized ECMC's robust cash reserves, as if that were something to be ashamed of. ECMC earmarked reserves for pending projects awaiting state approval. These are projects that directly relate to better health care for Western New Yorkers and help reverse ECMC's undercapitalization by the county for 20 years.

The audit also focused on advertising costs and others related to regular business operations. However, the report failed to recognize that these investments, over the past three years, helped the hospital realize approximately $100 million in increased revenues and unprecedented patient growth.

The comptroller charged that ECMC was unethical in some of its advertising. As the auditors know, there is a legitimate and fully ethical paper trail regarding this advertising. No one at ECMC did anything unethical. The worst part is that Poloncarz knows that and chose to make the charge anyway.

These are also the auditors' requests for information that so closely mirrored those of the competitor's freedom of information request. Who generated the audit, the county or the competitor?

In April, ECMCC CEO Michael A. Young released audited financial results for the 2006 fiscal year showing the hospital had a $7.5 million operating surplus, after paying all expenses. That was the hospital's first such operating surplus in recent history and represented a $36 million improvement in operating margin in two years.

In 2006, Erie County contributed $20 million to the hospital's operation. In recognition of that support, the hospital returned to Erie County taxpayers $3 million of the operating surplus and invested the remainder in improvements at ECMC. Most importantly, in 2008, there will be no Erie County support for operations.

Recently, ECMC earned high honors from one of the top health-care accreditation organizations in the nation. The medical center earned the Joint Commission's Gold Seal of Approval by demonstrating compliance with the commission's national standards for health-care quality and safety, after an unannounced, on-site evaluation in August. The Joint Commission accreditation is recognized worldwide as a symbol of quality that reflects an organization's commitment to meeting certain performance standards.

MORE ABOUT ERIE COUNTY MEDICAL CENTER:

Erie County Medical Center is known for its life-saving Regional Trauma Center; also excellent heart, kidney, burn, psychiatric and orthopedic programs; and a superior physician and nursing staff. In an April 2007 report, the hospital announced that operating revenues increased by $66 million, or 24 percent, over the past two years, as costs were contained and more patients selected ECMC for services they knew were excellent. From 2005 to 2006 revenues increased 16 percent, or $47 million, to total $338 million.

NEWS CONTACT: Tom Quatroche at 716-898-5503 or TQuatroc@ecmc.edu

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1/7/2008

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