Federal Monitor: N.J. Medical School’s Compliance 'Deficient’

A federal monitor’s final report released yesterday on the University of Medicine and Dentistry of New Jersey applauds policy changes made by the institution since wide-ranging fraud was disclosed there in 2005, but said the work of its compliance office is “deficient.” UMDNJ has roughly $710 million of outstanding long-term debt. Moody’s Investors Service rates the school’s revenue bonds Baa2 and its certificates of participation Baa3. Standard & Poor’s assigns its BBB rating to the bonds. Both agencies give the university a negative outlook. Fitch Ratings does not rate the school. The university has yet to announce any definite borrowing plans now that the review is done, but it could issue bonds through the New Jersey Educational Facilities Authority in the future. The agency lists a “possible refinancing and various capital projects” deal for UMDNJ on its forward calendar. Sizing and timing of the deal has yet to be determined. “The status right now is just that it’s on hold,” said NJEFA spokeswoman Sheryl Stitt. Yesterday’s report suggests that officials conduct a nationwide search for a strong candidate to head the university’s ethics and compliance office and expand the department’s staff as it takes on 42 investigations it inherited from the federal monitor and whatever future issues that may arise. “We have not been satisfied by the progress being made to independently investigate claims being brought to the compliance offices attention,” according to the report. “Our investigators have worked side-by-side with the compliance office and consider the compliance office’s work deficient.” The report follows a two-year federal oversight of the university that ended on Dec. 31. after U.S. attorney Christopher Christie last month agreed to end the federal monitoring process and allow the UMDNJ to govern itself. Christie had the option to extend the oversight for an additional year.Since December 2005, former federal judge Herbert J. Stern has served as the school’s monitor. That oversight has uncovered more than $400 million of fraudulent and abusive practices, according to the report, including improper Medicaid reimbursements. To help get the university on better ethical footing, officials increased UMDNJ’s board of trustees to 18 members from six. The governor and legislative leaders appoint board members. In addition to ending lax policies and political patronage, the school’s compliance office now reports directly to the board of trustees. Previously, the office existed within the school’s legal department. The total financial fallout of UMDNJ’s mismanagement remains to be seen. While fiscal 2006 reports indicate the school allocated $59.7 million for settlements, “this is not likely to cover the full costs of the federal investigation because the monitor has highlighted potential liabilities of up to $84 million for certain billing and anti-kickback law violations,” according to a Moody’s press release. “While the monitorship has ended, and I would view that as ... a positive for the university and its credit ratings, there’s still a significant amount of uncertainty until those other investigations and the financial impact is finalized,” said Moody’s analyst, Roger Goodman.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER