Powerful Medicine: How George Norcross used his political muscle to pump up once-ailing Cooper Hospital

POSTED: March 25, 2012

In a city synonymous with failure, Cooper University Hospital is the grand exception.

Cooper’s new glass and metal pavilion rises 10 stories over downtown Camden. It cost $220 million.

The first class at its new $140 million medical school starts this summer. Nearby, rehabbed rowhouses on cobblestone streets create an oasis amid Camden’s burned-out buildings.

Behind it all is hospital board chairman George E. Norcross III, the insurance magnate who is now promoting Cooper with the same relentless focus that has made him very wealthy and arguably the top Democratic boss in New Jersey.

Born at Cooper, Norcross is unabashed in his enthusiasm for the hospital that he sees as performing vital medical, economic, and social roles. He also sees it as crucial to the rebirth of the city.

He adds: “I’ve come to see that Cooper’s interests and Camden’s are inseparable.”

But there’s something else that is inseparable — Norcross’ political muscle and Cooper’s agenda. In some ways, the hospital has become another piece of his political apparatus, to the mutual benefit of Democrats and Cooper.

In politics-drenched New Jersey, it’s not unusual for hospitals, with their big payrolls, big budgets, and big thirst for government money, to be political players. But few play the game as aggressively or with as much firepower as Cooper.

No other nonprofit hospital in New Jersey spends so much on lobbyists. In fact, it ranks among the top 25 nonprofit hospitals in America for lobbying expenditures according to national data.

With $775 million in annual revenue, Cooper is the largest hospital in South Jersey. And over the years, firms with ties to board members or those with a pattern of donations to Democrats in Norcross’ base of Camden County have won millions of dollars in hospital-related contracts, public records show.

Among those working at Cooper in recent years: Norcross’ insurance business and the law firm of his brother.

None of this is illegal. But the flow of campaign donations from firms doing business with the hospital has helped sustain Norcross’ Democratic organization, which over the last two decades has not only established control in towns and counties in South Jersey but has also become a driving force in the state capital.

At the same time, New Jersey Democrats have gone the extra mile for Cooper.

When Cooper wanted to stop another hospital from competing with it on a lucrative procedure, a phalanx of lawmakers lobbied on its behalf.

When Cooper challenged a rival’s ad campaign, a Democratic judge in Camden County ordered the competitor to pull its advertising — without hearing from the other hospital.

And when it comes to state funding, no hospital in the region and only a handful in the state have taken in as much as Cooper.

During a recent four-hour interview in the boardroom on the top floor of the new pavilion, Norcross said Cooper picked lawyers and other contractors “who are the best and brightest talents,” not for their connections, political or otherwise.

“Nobody’s making political contributions in return for business,” he said.

Any “inference there is some sort of pay to play is nonsense,” he said.

But he is unapologetic about using his clout to help Cooper. Asked, for instance, whether his power had spurred Gov. Jon S. Corzine in 2009 to give Cooper a medical school by executive order, he replied:

“I sure as hell hope so. Why wouldn’t it? I plead guilty. What else do you want to ask me?”

A Turnaround

In the late 1990s, Cooper University Hospital was just another down-and-out Camden institution.

Federal prosecutors had caught its vice president for finance and its controller looting the institution, siphoning out $22 million over eight years in what the hospital itself would later call “a massive crime wave.”

With Cooper suffering from record deficits, Norcross, then a top executive at Commerce Bank, helped bring the hospital back from the brink in 1999 when he arranged for the bank to lend it $8 million.

Since then, Norcross has put his imprint all over Cooper, from its lavish marketing, to its competitive fight to lure doctors, to its recent $450 million construction boom, to the political figures who work at Cooper and serve on its board.

Just as he was one of the first pols to spend heavily on television ads for lowly county races, Norcross was among the first to sell a hospital on TV, deploying Kelly Ripa as Cooper’s pitchwoman. As it happens, she’s the daughter of Joseph Ripa, the Democratic Camden County Clerk.

The milestones have been coming faster. The medical school, a must-have for any hospital with big ambitions, is finally gearing up. This year, work began on a $100 million cancer center.

Norcross, 56, a Rutgers-Camden dropout-turned-millionaire, runs one of the country’s largest insurance brokerages, Conner Strong & Buckelew, with clients from both the public and private sectors.

He’s also part of a group of wealthy investors seeking to buy Philadelphia Media Network, the parent company of The Inquirer, Daily News, and the Philly.com website. Conner Strong already provides insurance to the company and is a large advertiser.

Along with his political power, Norcross has backed Cooper with his own money. Late last year, he pledged$5 million to the hospital.

Msgr. Michael Doyle, the activist priest of Sacred Heart Church in South Camden, says he hopes Norcross is writing a fresh chapter in the grim Camden story.

“Cooper lifts the name of Camden,” he said. “It’s not people focusing on the murder rate, but on something positive.”

While critics worry about Norcross’ power, Doyle said his connections and ambition have been an asset.

“George has a lot of know-how, and a city like Camden needs know-how.”

An Economic Powerhouse

With its heavy capital spending and big operating budget, Cooper has become an economic powerhouse. It throws off millions in fees and contracts.

Consider Cooper’s heavy borrowing to pay for all that expansion. In the last decade, Cooper’s bond sales have generated $5.1 million in fees to a variety of law firms, title companies, and financial advisers. On top of that, the hospital has handed out big-ticket contracts for other legal work, such as malpractice defense, its public disclosures show.

Many of those who received work via Cooper are major political donors, giving across the state to both parties. But they have been especially generous in Camden County, Norcross’ home base.

During the last decade, firms involved with Cooper have given more than $1.5 million to Camden CountyDemocrats.

As an example, lawyers at Cozen O’Connor, a Philadelphia firm that worked on four Cooper bond issues, have given Camden Democrats $115,060 since 2002. That represented more than 70 percent of its local political contributions in . A Cozen spokeswoman said all donations reflected candidates’ merits.

In interviews, Norcross conceded he had input into who was selected to work on hospital bond issues, managed by state and local authorities.

“Have I made recommendations of quality firms?” he said. “Absolutely.”

But he insists that firms are selected solely on ability and that political donations were irrelevant.

“These people have been making major, sizable donations to the Democratic Party in this region long before any bond issue,” he said.

Lawyers offer Varying Explanations for their Giving.

Attorney Steven Weinstein, formerly with the Philadelphia firm of Blank Rome, has given steadily to South Jersey Democrats over the years, public records show. His giving hit a peak, in 2004 when he gave $30,000to the Camden County Democratic Committee.

The following year, Blank Rome was named one of four law firms to work on a $135 million Cooper bond issue, representing the investment firm Goldman Sachs.

In the six years since, Weinstein’s donations to Camden County Democrats came only to $2,850.

Weinstein said his donations had no connection to Blank Rome.

But David Lebor, another former Blank Rome partner who joined Weinstein in making Camden County donations in 2004, said the firm would sometimes request that lawyers make specific contributions. Lebor said he didn’t know the firm’s motives for making requests. “I don’t ask those questions,” he said.

Blank Rome spokeswoman Melissa Volin said she was not aware of the donations, but the firm had a long relationship with Goldman Sachs.

“I think it would be our reputation with Goldman Sachs that gets us work with them,” she said.

A New Image

For years, Norcross stayed in the shadows.

He has held no official position with the Democratic Party since he stepped down as Camden County chairman almost two decades ago, though no one disputes that he’s in charge.

In one unwanted moment of scrutiny, in 2005 secretly recorded tapes of Norcross surfaced from an earlierState Police investigation into corruption and government contracts.

Norcross was never charged, but he was caught on the tapes cursing, plotting against enemies, and bragging that “the McGreeveys, the Corzines, they’re all going to be with me. Because not that they like me, but because they have no choice.”

In recent years, Norcross has increasingly embraced the spotlight. He’s speaking out not as a party boss, but as the (unpaid) chairman of Cooper.

“It’s something I should have done many years ago. Remaining in the background in many ways defined me in a caricature,” Norcross said.

For many in the public, he said, his image was of a political hack, someone who “had horns and smoked cigars.” (Norcross quit smoking cigarettes 15 years ago.)

Now, Norcross, who joined the Cooper board in 1990 and became chairman in 2006, often talks up Camden and the role Cooper could play in its recovery. He boasts of how he topped the new pavilion with a huge sign.

“I wanted people to see the sign when they are coming over the bridge from Philadelphia,” Norcross said.

He says the fate of Cooper hinges on the health of the entire city.

Thus, while Cooper’s 65-member security force and scores of cameras keep watch on the rehabbed neighborhood around its campus, Norcross has been selling a new strategy to hire more police. He wants to pay for it by cutting police labor costs.

He and Gov. Christie have also joined forces on a law to permit nonprofit organizations to open four new schools in Camden. The measure’s prime sponsor: State Sen. Donald Norcross, one of Norcross’ three younger brothers.

Sparking a furor, Norcross and Christie have also proposed merging Rutgers-Camden with Rowan University, putting Cooper’s new medical school in the middle of what Norcross hopes will one day be an elite research university.

The plan has met with bitter protest from Rutgers-Camden students, faculty, and alumni, some of whom view it as little more than a power grab by Norcross. But Norcross says the merger would be a boon for the region.

“South Jersey for the first time will get its fair share of higher-education dollars,” he said.

Government Largesse

Late last year, the Delaware River Port Authority, its once-vast development kitty finally running dry, approved its last round of project spending. Among the lucky few recipients: Cooper University Hospital. It got $6 million for the cancer center.

No other hospital in New Jersey or Pennsylvania has ever received DRPA assistance, the authority says.

The DRPA money was one of many ways in which Cooper has benefited from government action during the Norcross era. This year, Cooper received $52 million in state funding, more than any hospital in South Jersey — and in the top five for all 72 New Jersey hospitals.

And U.S. Rep. Rob Andrews (D., Camden) has set aside $640,000 in federal earmarks for Cooper over the last decade, the most of any hospital in his district. Another Camden hospital, Our Lady of Lourdes, received nothing.

And up until this year, Cooper also benefited from a state law that sent it extra money for charity care.

To see how it worked, consider Cooper and a hospital six miles away: Kennedy University Hospital in Cherry Hill.

According to figures used to give state aid last year, both Cooper and Kennedy had about the same percentage of uninsured patients: about 10 percent.

Yet when the state provided money to cover that care, Kennedy received 67 cents on the dollar, while Cooper received 95.

Under a 2004 state law written by Assemblyman Louis Greenwald (D., Camden), hospitals generally got paid more for treating a higher proportion of uninsured patients.

But Greenwald also included a provision mandating that one hospital in each of the state’s 10 poorest cities got the top rate automatically, regardless of its uninsured-patient load.

Last year, the only hospital that benefited was Cooper.

In an interview, Greenwald, whom Norcross recruited to run for office, said the Cooper chairman had nothing to do with the bill.

Greenwald said his measure was aimed at protecting hospital access for the urban poor. “It was never designed to help one hospital,” he said.

The exemption ended last year after Christie revised the formula to streamline the funding process.

In the interview, Norcross said the extra money for Cooper made sense given its high total number of low-income patients.

“Our cost and our burden and our responsibility is so much higher than a suburban hospital,” Norcross said.

David Knowlton, president of the N.J. Health Care Quality Institute, said assessing Cooper’s political clout required a nuanced analysis.

“There are some hospitals who get extra money politically because they exert influence,” Knowlton said.

“At the same time, Camden is one of the most impoverished cities in the country. Cooper is an anchor part of making that city right. It’s a complicated picture.”

Narrow Margins

With its large number of low-income patients, plus its heavy spending on expansion, Cooper walks a delicate financial line.

As John P. Sheridan Jr., Cooper’s chief executive officer, puts it, the 5,370-employee hospital operates on a “razor thin” margin.

And that “profit” margin has been getting thinner. In 2008, Cooper’s revenue exceeded expenses by 5 percent. Last year that edge had shrunk to just 1 percent.

And Cooper’s bond rating is one level above junk status.

In 2008, Cooper took a financial hit when it agreed to pay $3.8 million to the U.S. Treasury to settle a lawsuit alleging that it had improperly inflated Medicare bills.

This allegation was leveled against Cooper and 15 other hospitals in a civil suit brought by hospital consultant Anthony Kite in concert with the U.S. Justice Department.

After studying Cooper financial data, Kite said Cooper had doubled its inpatient Medicare charges earlier in the decade, though its costs went up just 10 percent. As a result, Kite said, Cooper saw its Medicarepayments explode by more than $50 million over three years.

“They gamed the system,” Kite said recently.

Cooper didn’t admit wrongdoing and said it settled to avoid lengthy litigation. The feds also went after other U.S. hospitals, many of which settled for much larger amounts.

While Cooper had done a lot to raise its profile in the region by focusing on high-end services like cardiology and neurosurgery, its location in Camden remains a heavy burden, experts say.

“They’ve moved up,” said Jerry Katz, a health-care consultant and former top executive at Hospital of theUniversity of Pennsylvania. But high numbers of “Medicaid and no-pay patients will hit the bottom line.”

Flood the Zone

Cooper’s ability to fight for political dollars is unmatched in New Jersey.

Its lobbying effort is a $500,000-a-year operation, involving outside firms in Trenton and Washington, as well as a group of in-house staffers, not to mention Norcross and Sheridan.

The sum includes money spent on community relations and public relations, the hospital says.

Sheridan’s old law firm, Riker Danzig Scherer Hyland & Perretti L.L.P., has been a paid lobbyist for Cooper for at least a decade. More recently, the hospital put another firm on its roster.

It didn’t look far to make the hire.

In 2010, Cooper added Republican lobbyist Jeff Michaels to the team. In another lobbying venture, he is the partner of Norcross’ brother Philip.

The hospital has paid the firm solely operated by Michaels $180,000 over the last two years.

On top of the paid lobbyists, George Norcross has had a cadre of former or current politicians either on the hospital’s payroll or ready to pitch in when needed.

Some find work at the hospital, like Assemblyman Angel Fuentes, who has been a patient representative at Cooper since 1996.

Susan Bass Levin, who butted heads with Norcross as Cherry Hill mayor and later served as a cabinet member under three governors, is paid $292,000 yearly to run the Cooper Foundation, the hospital’s fund-raising arm.

Joking that at one time hospitals in Newark would have had “a ward leader as head of cardiology,” Norcross said he had hired on merit.

“There are always people who have former lives in government or politics who are extremely talented,” he said.

Dueling Ads

For other hospitals, competing against Cooper can feel like an uphill battle.

In 2009 Cooper and the Virtua health system, which operates hospitals in Camden and Burlington Counties, squared off in a bitter court battle about which one could claim it had the “most Top Docs,” based on magazine rankings.

In ads and a billboard on the Walt Whitman Bridge, Virtua said it had the largest number of “Top Docs” inSouth Jersey, a claim Cooper had been making for several years.

The struggle was nasty. In an e-mail later made public as part of the litigation, an advertising executive working on Virtua’s account said its campaign “rams it down Coopers throat.”

More than a month after Virtua launched its campaign, Cooper sued, claiming its rival’s ads were false.

On the morning of the day Cooper filed suit, its lawyer called Virtua’s 1-800 number at 7:55 a.m., leaving a message that the suit would be filed.

At a hearing a few hours later, Camden County Superior Court Judge Mary E. Colalillo ordered Virtua to stop its advertising. No lawyer from Virtua was present.

When Virtua’s lawyers finally got before Colalillo six days later, the judge said it could resume the campaign, provided it didn’t claim that its ads were based on an “independent study.”

Attorney Philip H. Lebowitz had seen enough. He moved the case to federal court.

“You don’t say ‘Why did you do this?’ to a judge,” Lebowitz said. “But we were concerned with going forward with the case in that court.”

Colalillo wouldn’t comment. During the first hearing, she described her ruling as “rare” but said the ads posed “a matter of life and death based on the decisions that are made.”

Colalillo is a former staff lawyer for the Camden County government and an assistant county prosecutor nominated to the bench in 1992 by then-Gov. James J. Florio. At the time of her nomination, an Inquirer news story described her as a Norcross political ally.

Gary Lesneski, Cooper’s general counsel, said it won the order on the strength of its case.

“Judges don’t enter temporary restraining orders because they like you,” he said.

In the end, the case was settled. Both hospitals switched to new pitches, each dumping their “Top Docs” campaign.

A Lucrative Procedure

In another bitter dispute with Virtua, Cooper again brought the heat.

Seven years ago, Cooper was fighting in court and in the capital to keep Virtua’s Marlton hospital from doing angioplasties. Cooper had already been doing the procedure, a known moneymaker.

According to documents and interviews, four New Jersey Democratic legislators wrote or called the state health commissioner to urge him to block Virtua from joining a national study that would have enabled it to do the procedures, which unblock blood vessels.

“It was very polite,” said Fred Jacobs, the former commissioner.

Those lobbying for Cooper included then-legislators John Adler, Joseph Roberts Jr., and Wayne Bryant, all Democrats from Camden County.

(Adler is now dead. Bryant is in prison on an unrelated federal corruption conviction. The new Cooper pavilion is named after Roberts, now retired from public office).

The fourth to lobby was then-Assembly Speaker Albio Sires, intervening far from his North Jersey district, sources said. Sires, now a Democratic congressman, didn’t return calls.

In the end, the campaign fell short. Jacobs wouldn’t budge and Virtua kept the right to do angioplasties.

‘Interested Persons’

In recent years, the granting of hospital business to insiders has come under increasing scrutiny, in Congressand among experts on nonprofits.

Uwe Reinhardt, an economics professor at Princeton University, has pushed for greater transparency at tax-exempt nonprofit hospitals to ensure that money is being spent properly.

“Over half of a typical hospital’s money is taxpayer money,” Reinhardt pointed out.

As Cooper has spent its millions, hospital insiders have frequently been on the receiving end.

From 2008 to 2010 Cooper paid more than $40 million to companies tied to the hospital’s board of trustees, according to public-disclosure documents the hospital filed with the IRS.

The payments included:

$1.6 million to Norcross’ Marlton insurance brokerage, Conner Strong and Buckelew.

$1.8 million to the Parker McKay law firm, where Philip Norcross is the firm’s chief executive.

$4.6 million to the former Commerce Bank and its successor, TD Bank. Norcross and a former Cooper board member were top executives at Commerce.

$277,000 to Riker Danzig, where Sheridan was once a law partner.

But of the millions in payments, the largest share — $33 million — went to a joint venture between international construction giant Turner Construction and HSC Construction and Builders in Exton.

Former board member Edward Viner’s son, Jim, serves as president of HSC.

Most of the money was passed through to subcontractors and the joint venture was paid $2.8 million in fees, Cooper said.

In 2008 and 2009, the last years for which regional data were available, Cooper initially reported more of what the IRS calls “Interested Persons” transactions than any hospital in the Philadelphia area.

In those same years, Philadelphia’s three largest hospital groups reported varying degrees of deal-making with firms tied to their boards.

The largest, Penn Medicine, reported $1.1 million in such contracts. Children’s Hospital of Philadelphiareported $19.3 million — stemming mostly from money paid to the CVS pharmacy chain, where one of its board members at the time served as an executive.

Thomas Jefferson University Hospitals reported no contracts with insiders.

After The Inquirer began working on this article, Cooper amended its 2009 IRS disclosure report, reducing the reported insider dealings by 94 percent.

Lesneski told The Inquirer that “as a result of your inquiries,” Cooper reexamined its past forms.

This prompted Cooper to remove many contracts from its disclosure, such as the large contract to Turner/HSC, he said.

Cooper concluded that the stake of Viner’s son in the construction joint venture was less than the 5 percent ownership threshold that triggers reporting, Lesneski said.

Legal interpretations of what hospitals should report vary, said Jill Manny, executive director of New York University’s National Center on Philanthropy and the Law.

The IRS rules “aren’t perfectly clear,” she said. “The accountants are the ones that make the decision on what to report and not report.”

Hospitals often try to avoid having attorneys and other professionals whom they do regular business with on their boards, said Sally Roslow, vice president of development with the N.J. Hospital Association.

“You can’t untangle that,” said Roslow, who was not speaking specifically about Cooper. “Usually in good ethical conscience, a lawyer will step down [from a hospital board] while that law firm is there.”

Cooper officials say the hospital followed all IRS rules governing disclosure of these transactions and, in those cases where there was a potential conflict, board members recused themselves from voting.

Cooper declined to provide details about its various contracts, such as the figures for competing bids. That said, there is no indication that anyone got a sweetheart deal.

A Showdown

For decades Camden officials — including Norcross’ own father, a Cooper board member before him — had pushed for a medical school for Cooper.

But it was George Norcross who got it done with his trademark mix of bluster, determination, and political juice.

In his campaign to win the school, Norcross took the Cooper helicopter to the Newark offices of theUniversity of Medicine and Dentistry of New Jersey to confront the man he saw as standing in his way.

Norcross believed that William F. Owen Jr., then UMDNJ’s president, had secretly backed away from his public support for a Camden medical school.

Norcross described the session bluntly:

“He was confronted. It was apparent that he had got caught lying, not only to us but to everyone he had pledged this medical school to.

“I’m sure it was a less than pleasant meeting for him. I don’t threaten people — I’m sure I called him a liar. He was a liar. He is a liar. He was an incompetent leader of UMDNJ.”

Owen declined to talk about the meeting, beyond issuing a brief statement saying he never had the power to authorize a medical school.

However, Richard J. Codey, New Jersey’s governor at the time, said Owen told him that he had been shocked by the episode.

Owen, according to Codey, “said he had never had a conversation like that in his life, that he [Norcross] comes in a helicopter and says: ‘This is what we’re doing, whether you like it or not. This is what’s coming down.’ ”

Norcross was right in his forecast. In June 2009, Gov. Corzine, who had succeeded Codey, issued an executive order setting aside millions in state money to open the medical school at Cooper.

In one stroke, Corzine bypassed the Legislature, angering North Jersey lawmakers.

“The way it was done was cloak-and-dagger,” Codey said recently. “This was all behind the scenes, and the timing was on purpose, ensuring the Legislature couldn’t take a look at it.”

For Norcross, though, it was another case of him besting the “Northern barons,” the people with “historic hostility to anybody who resides south of Exit Six of the turnpike.”

“Now when you do that, you are going to get some folks angry.”

Contact James Osborne at 856-779-3876 or jaosborne@phillynews.com.

Former staff writer Chelsea Conaboy contributed to this article.


(c) 2012 The Philadelphia Inquirer

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