Nassau County Condemns State’s Potential Power Grab of NUMC Board
(EAST MEADOW, NY) – Nassau County issued a letter today to New York State Governor Kathy Hochul, Senate Majority Leader Stewart-Cousins and Assembly Speaker Carl Heastie strongly opposing proposed state legislation that would illegally seize control of the Nassau University Medical Center (NUMC) Board of Directors, violating the County’s established governance rights and contractual obligations tied to over $300 million in bond guarantees.
In its letter, Nassau County argues that this hostile takeover would not only breach existing legal agreements but also undermine NUMC’s operational stability and financial integrity. Officials view the move as retaliation for a $1 billion Medicaid claim filed against the State and vow legal action if the bill proceeds. The text of the letter follows:
Dear Governor Hochul, Majority Leader Stewart-Cousins, and Speaker Heastie:
On behalf of Nassau County, I write concerning pending legislation that would attempt to improperly seize control of the Nassau University Medical Center (“NUMC”) Board of Directors from the County and transfer control to the State. If enacted, this legislation would violate the County’s substantial governance rights over NUMC, which the County relied on in guaranteeing at least $303,355,000 of bonds (“Bonds”) issued by Nassau Health Care Corporation (“NHCC”), NUMC’s parent entity, and would illegally interfere with existing contractual relationships between the County and NHCC.
As you know, NUMC is the sole public hospital in Nassau County. As a safety-net hospital, NUMC provides critical healthcare services to over 290,000 patients annually. New York Public Authorities Law § 3402 affords significant governance control to the County over NHCC and, by extension, NUMC. Principally, the Nassau County Executive has the authority to appoint three directors to the board, and the County Legislature has the authority to appoint four directors to the board. N.Y. Pub. Auth. Law § 3402(1)(b). Although the Governor has the authority to appoint the other eight members of the board, of those “two shall be appointed upon the recommendation of the county executive, three shall be appointed upon the recommendation of the majority leader of the county legislature, one shall be appointed upon the recommendation of the minority leader of the county legislature.” N.Y. Pub. Auth. Law § 3402(1)(c). Accordingly, the County appoints, directly or indirectly, thirteen of the fifteen directors. Additionally, the
County Executive has the authority to designate one of the fifteen voting directors as the chairperson of the board, who “shall preside over all meetings of the board and shall have such other duties as the voting directors may direct.” N.Y. Pub. Auth. Law § 3402(2)(a).
In reliance upon this governance control, the County entered into several contractual relationships with NHCC, including the County’s contractual guarantee of the scheduled payment of principal and interest on the Bonds.1 As the State knows, the County never would have guaranteed the Bonds without significant control rights with respect to the board. The County’s reliance is repeated throughout contracts between the County and NHCC. See, e.g., Successor Agreement at 2 (indicating that the County and NHCC entered into the Regulatory Agreement in order to “ensure the appropriate operation, regulation, and regulatory oversight of the Health Facilities”); see also Regulatory Agreement at 2 (“as a condition to the making of the Guaranty, the County requires NHCC to grant to the County additional oversight authority with respect to the affairs of the Project”).
These contractual relationships are proprietary interests held by the County and cannot simply be taken away by the State. Lynch v. United States, 292 U.S. 571, 579 (1934) (“Valid contracts are property, whether the obligor be a private individual, a municipality, a state, or the United States.”). Requiring the County to financially guarantee the Bonds while stripping the County of its authority to exercise corporate control is a fundamental impairment of that guarantee and risks depriving the County of its rights. It is frankly an absurd proposition.
There is more. Under Section 3412 of the Public Authorities Law, the State has “pledge[d] to and agree[d] with the holders of any bonds issued by” NHCC and “with those persons or public corporations who may enter into contracts with” NHCC that the State will not “alter, limit or impair the rights vested in” NHCC to “operate” the hospital, which was financed by the Bonds. N.Y. Pub. Auth. Law § 3412. Any attempt to change the fundamental way in which NUMC operates— from County control to State control—constitutes a violation of the State’s pledge. It also bears mention that the very land NUMC sits on came from the County, which conveyed the East Meadow (2201 Hempstead Turnpike) property to NHCC in 1999.
It does not escape the County’s notice that the State’s proposed legislation appears not long after NHCC filed claims against the State for depriving NHCC of approximately $1 billion in Medicaid funds. See NHCC d/b/a NUMC v. The State of New York, Claim No. 143067 (Dec. 27, 2024). This timing is more than suspect. The State’s proposed takeover is blatantly an improper attempt to blame the County and the Board for the State’s failure to pay the required funds to NHCC, which has significantly harmed NUMC. Put simply, this takeover is an attempt to put the fox in the chicken coop.
If the State chooses to proceed with this improper takeover, the County will have no choice but to vindicate its rights in court. Additionally, if the State seizes control of NUMC, the County will expect that the State will assume the County’s guarantee on the Bonds and return the property the County conveyed to NHCC.
Sincerely,
Matthew A. Schwartz
Sullivan & Cromwell LLP
1 In addition to the Bonds agreements, the County has other contracts with NUMC relating to the Department of Social Services, pre-employment physicals, jail medical services, juvenile detention medical services, rental arrangements for the Fire Police Academy, Veterans, Medical Examiner, Methadone Clinic, and Mental Health services. Indeed, Nassau is the only county in New York State that does not operate its own clinic because of these contractual relationships.