N.Y. hospitals call for $2.5 billion bailout for struggling facilities

Brooklyn hospitals in the borough's poorest neighborhoods have teetered on the edge of collapse for years, requiring hundreds of millions of dollars in state subsidies to continue acting as the safety net for some of New York City's most vulnerable residents.

Among them is Kingsbrook Jewish Medical Center in East Flatbush, where 87% of patients pay for care through Medicare and Medicaid. Those government-financed programs haven't kept pace with the growth of hospital expenses, said Dr. Linda Brady, Kingsbrook's president and chief executive.

“That's a structural gap that's almost impossible to solve on your own,” she said.

For that reason, Kingsbrook has been looking for a potential partner to help it survive. But attracting one of the city's powerful health systems, even with Kingsbrook's improving patient-satisfaction scores, has proved elusive. The hospital's balance sheet showed debts outweighing assets by $29.5 million at the end of 2014.

“Most people are not stepping their foot into central Brooklyn,” Brady said. “I haven't seen a mad rush.”

Last week, the state Department of Health made public a “watch list” of 28 hospitals that find themselves in a similar situation, kept open thanks to their ­safety-net status, government help and political pressure but considered undesirable by would-be acquirers.

Besides Kingsbrook, three others are in Brooklyn—Brookdale University Hospital and Medical Center, Interfaith Medical Center and Wyckoff Heights Medical Center—and one is in Queens: St. John's Episcopal Hospital. All have only as many as 15 days' cash on hand.

The state has propped up these facilities for years. In 2015, New York shelled out almost $325 million to the 28 hospitals, and Gov. Andrew Cuomo's budget recommends an additional $450 million in the fiscal year that begins April 1.

Kenneth Raske, chief executive of the Greater New York Hospital Association, offered a more permanent solution at a state budget hearing last week: Pay the wealthiest hospital systems $2.5 billion over five years to “adopt and adapt these facilities to the new world.”

Mount Sinai Health System, New York-Presbyterian, NYU Langone Health System and Northwell Health want to expand their presence in Brooklyn. Some have already bought physician practices or opened branches in the borough. In 2015, NYU Langone merged with Lutheran Medical Center in Sunset Park, and Northwell Health signed an agreement with Maimonides Medical Center in Borough Park that could lead to a merger.

“Many systems are interested in those hospitals,” said James Smith, a health care consultant at GE Healthcare Camden Group. “If they had better balance sheets and [the systems] didn't have to take on all the risks associated with past decisions, they would be interested in taking those opportunities on.”

The money is there, though it's not quite the $500 million-a-year-for-five-years Raske is seeking. Cuomo's proposed budget includes $195 million in funding for restructuring not only hospitals, but also clinics, nursing homes and home care agencies. There's also a separate $1.2 billion Capital Restructuring Financing Program from an earlier budget for health care renovations and an additional $700 million earmarked for transforming medical facilities in central and east Brooklyn.

Insurers don't like the idea of the big systems getting even bigger. A spokeswoman for the New York Health Plan Association called Raske's plan a ­taxpayer-funded bailout of hospitals. Facilitating these mergers would give the state's sprawling health systems more leverage in negotiations.

“We certainly object to allocating health care dollars—which are stretched thin to begin with—to already profitable hospitals that are looking to strengthen market power through consolidation,” she said.

That's not the only way health systems are challenging insurers. The shift toward managing patients' health rather than treating them when they're sick has also motivated systems to start offering insurance products, such as Northwell Health's CareConnect, making mergers and partnerships more likely so a network can better control costs.

Still, with systems interested in growing, Kingsbrook's Brady believes Raske's plan might be the catalyst that could finally help the hospital find a suitor.

“Places like central Brooklyn that don't have the more attractive payer mix are in a position where it's more of a challenge to get a larger system interested,” she said. “This is exactly why the governor put this in his budget proposal, and it's why Ken Raske is advocating for this.”

"Hospitals call for $2.5 billion bailout of struggling facilities" originally appeared on the website of Crain's New York Business.



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