Governance / Not for Profit

Situation: Client separating from larger health care system

Three hospital health care system disaffiliating
Client was smallest of three entities, disproportionately reliant on parent organization
Constituent organizations built and maintained joint data center and technology platform, which needed to be divided to enable disaffiliation
Parent organization insisted upon payment of outstanding inter-company indebtedness
All negotiations made more complex because some negotiations were among former health system entities, and some were between the former health system and its chosen outsource vendor

Former parent effectively threatens ongoing viability of client’s IT infrastructure and potentially its ability to provide patient care
Client need to negotiate division of assets and phase out of existing IT infrastructure and support from former parent organization
Need to negotiate with vendor to outsource data center operations
Negotiations were made more complex because some negotiations were adversarial among the disaffiliating partners
Client needed to independently replace hardware and software platform, including
license clinical, financial, radiology, laboratory and departmental systems
Need to negotiate with parent transitional arrangements pending cut over to negotiated systems pending go-live of its new IT infrastructure
System transition could not impair patient care or ability of client to bill and collect for its services

Collaborate with health system team on negotiation of replacement outsourced data center meeting all IT needs
Negotiate with outsource vendor for specific client needs
Negotiate with software providers for clinical and financial IT licenses on an urgent basis to implement new platform
Negotiate with former parent organization for temporary continuance of access to former data and support platform during transition to new platform

Successful implementation of new IT infrastructure

10-year-old GL claim being defended by hospital’s former GL carrier
Transition in hospital’s risk management department resulted in loss of institutional memory and records regarding claim
Client unaware that hospital excess carrier disclaimed coverage
Client unaware that insurance counsel lost trial as to liability
Insurance counsel contacted hospital for at end of damages trial — and on the day before a holiday weekend — to obtain client funds for settlement
Based upon available information, client refused to provide funds; attorney lost damages trial, resulting in $15M exposure

Need to reassert active oversight of matter through engagement of experienced trial and insurance coverage counsel
Need to persuade excess coverage carrier of their inability to disclaim coverage in order to reduce client exposure

Reconstruct claim history
Engage new counsel and develop legal strategy
Address excess carrier’s untenable position and convince all of client’s inability to contribute to settlement

Update governance documents, including bylaws and investment policies
Resolve outstanding citations and real estate tax exemption issues
Recruit team and create strategy to redevelop property so it can both house client’s mission and provide a sustainable income stream to client
Reach out to potential funders

Project ongoing.

Limited ability to raise capital through usual means (e.g. bonds)
Received multiple New York City Council capital allocations, which remained unfunded

Inefficient City processes delayed urgently-needed capital funding for years
Regulators required client to own and possess equipment prior to drawing funding
Interim unsecured equipment financing required
Acquisition and equipment maintenance agreements required

Anticipate City needs and rigidly organize all submissions to proactively address NYC concerns
Negotiate equipment acquisition, financing and support agreements with vendor
Ensure that vendor needs were met by initially securing the loans and client needs met by an early release of lien in order to satisfy City