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Another bankrupt Brooklyn hospital

Interfaith Medical Center to file for Chapter 11 this week

Crushed by long-term debt and expenses that far outstrip revenue, Interfaith Medical Center will file for bankruptcy this week, making the Brooklyn facility the 11th city hospital or health system since 2005 to go belly up.

Behind that grim statistic is a common story: New York City hospitals on the financial ropes can no longer count on a bailout from Albany. For years, the state helped community hospitals struggling with low reimbursements because their poverty-level patients were either underinsured or uninsured. But the recession and a shift from inpatient care ended the handouts.

Bleeding cash

The restructuring of Interfaith, the largest employer in Bedford-Stuyvesant, will give it more time to stay afloat while it pursues a likely merger with the Brooklyn Hospital Center, an outcome that was long the preference of the Cuomo administration. It's unclear what a restructuring would mean for Interfaith's 1,516 full-time workers.

The hospital's largest secured creditor is the Dormitory Authority of New York State, which backed Interfaith's bonds.

The program covers 65% of Interfaith's patients, and with few commercial insurance contracts to make up for the losses, the hospital began to hemorrhage. By 2010, after ending with a $57 million loss, its net worth was a negative $126 million. Its long-term debt per hospital bed was $517,000—more than double the $210,000 median for Brooklyn hospitals and three times the statewide median, according to a November 2011 report issued by a Brooklyn health care work group convened by the state's Medicaid Redesign Team.

In October 2011, Interfaith Chief Executive Luis Hernandez laid off some 200 workers as part of a plan to cut $10 million. The move was a mere Band-Aid. The hospital ended that year with a $33 million loss and stopped making debt payments to the Dormitory Authority.

Begging for a bailout

In a Dec. 15, 2011, letter to senior state Department of Health officials, Interfaith Chairman Nathan Barotz began pleading for a bailout, warning that financial decisions made in the coming weeks were critical to "the survival of the hospital." In subsequent letters, he argued that Interfaith's disproportionately high Medicaid population made it particularly vulnerable to cuts from Medicaid, the government health program for the poor and disabled. In a Feb. 6 letter to Lora Lefebvre, a top-ranking state Health Department official, Mr. Barotz asked the state for a bridge loan and higher rate adjustments to cancel out the 2010 Medicaid cuts. "Without the state's immediate financial help, Interfaith will not be able to continue to operate," he wrote.

Mr. Barotz maintained pressure on Ms. Lefebvre, warning again in a Feb. 22 letter that the health of the local Brooklyn community was in jeopardy if Interfaith were to go into bankruptcy.

His theory will be tested this week.
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