Hoboken University Hospital chief executive received $600K severance package weeks before bankruptcy filing

Wednesday, August 10, 2011 - Star Ledger

Less than three weeks before the operator of the city-owned Hoboken University Hospital filed for bankruptcy — putting millions of dollars in taxpayer money and union pension funds at risk — the hospital’s chief executive received a six-figure payout, records show.

Spiros Hatiras, 46, stepped down as chief executive on July 16 after two years on the job with a severance package that includes $600,000 in compensation and full medical benefits for a year, according to records obtained under the Open Public Records Act.

Hatiras did not return phone calls seeking comment Monday.

The severance agreement and bankruptcy filing are part of a flurry of activity surrounding the hospital in recent weeks as the city finalizes a deal to sell the financially ailing facility to a group that owns the Bayonne Medical Center. The sale has bitterly divided the community.

A physical therapist who rose through the hospital’s ranks, Hatiras was earning a $400,000 a year and incentive bonuses at the time of his resignation, records show; his contract was set to expire in five months, and called for a severance payment only in the event the hospital terminated the contract.

The package was negotiated by Hudson Healthcare Inc., the current operator of the hospital that filed for bankruptcy protection, and was approved by the Hoboken Municipal Hospital Authority.

Doug Petkus, a spokesman for the authority, said officials "cannot" comment on the issue.

The lucrative severance package stands in stark contrast to the bleak financial picture Hudson Healthcare painted in its bankruptcy filing. It claims it does not have enough money to cover $1.9 million in city-related bills or the $1.45 million it owes to employees’ pension and health funds.

Overall, the organization says it has accumulated as much as $50 million in debt that it cannot pay, which means city taxpayers and unions funds may only see a small fraction of what they are owed.

At the same time, the city is requiring the prospective buyers to honor at least 80 percent of Hatiras’s severance package.

"Personally, I think it’s a disgrace that they are giving out a golden parachute while people like nurses are not getting paid," said Beth Mason, a Hoboken City Councilwoman and one of the most vocal opponents of the sale.

Susan Cleary president of District 1199J, which represents nearly 500 technicians, aides and social workers at the hospital, said the severance payment shows that hospital’s priorities are "clearly out of whack."

Cleary said employees nearly lost their health benefits on Aug. 1 after the hospital failed to make its health insurance payments.

Hatiras will be paid in installments, records show, with $120,000 up front and $15,000 a month until a balloon payment of $390,000 no later than Jan. 1, 2012.

The timing of such a large payment within weeks of a bankruptcy filing may prompt legal challenges from creditors hoping to void the agreement, legal experts said yesterday. Yet as part of the severance agreement, records show the hospital authority also agreed to pay any of Hatiras’s legal expenses stemming from the agreement.

When the Bayonne Medical Center emerged from bankruptcy in 2008 as a for-profit facility, creditors were never fully repaid. The prospective operators also plan shed Hoboken hospital’s nonprofit status, and critics are concerned that its commitment to community care will diminish.

The group has agreed to pay about $91 million for the hospital, with more than half of the proceeds to go toward paying off a $52 million bond the city guaranteed when it bought the hospital.

Mary O’Dowd, commissioner of the Department of Health and Senior Services, is expected to issue a final ruling on the sale by the end of the month.