Officials in Nassau County in suburban New York have asked state lawmakers to help them cut their public hospital free of bureaucratic restrictions while preserving its public accountability.
They want to create a public benefit corporation with an independent board to run Nassau County Medical Center, a 575-bed tertiary facility in Hempstead, along with a county-owned nursing home and perhaps the county health department.
Similar to a public authority, a public benefit corporation should preserve public ownership but permit the operational flexibility to respond to the highly fluid market conditions in the New York area, county officials said. They also hope to receive a more favorable reimbursement rate on Medicaid.
Westchester County Medical Center, a 638-bed hospital in Valhalla, north of New York, is working on a similar plan.
"We believe the public benefit corporation is the right vehicle given the dramatic changes occurring in the healthcare field in the near future," said David Vieser, spokesman for Nassau County Executive Thomas S. Gulotta.
Joseph R. Erazo, executive director of the Nassau County hospital, said: "I think it makes good sense. It's a good-government package. It says hospitals, in order to survive in this difficult competitive environment, need flexibility to compete and reinvent and re-engineer themselves. As you know, government does not permit that process to go through that smoothly."
Nassau officials had hoped the bill would pass in the recent session of the New York Legislature. However, the protracted budget debate stalled the bill, and it passed in the Senate but not the General Assembly. "They didn't have time to study the legislation," Vieser said. "We're very hopeful that at the next session of the Legislature, it will be taken up again. We're going to give it another try in early fall."
Surprisingly, the hospital employees' union favors the switch. Tony Giustino, president of Local 830 of the Civil Service Employees Association, said the hospital needed to be more efficient. That might cost some pain in the short run, but in the long run it offers greater opportunity "to survive as a hospital and serve the public, and most important to me, retain the jobs of our employees."
According to data from HCIA, a Baltimore-based healthcare information company, Nassau County Medical Center's occupancy rate declined to 64% in 1994 from 74% in 1992. Acute-care admissions are riding a descending curve, to 16,384 in 1994 from 17,107 in 1993 and 18,283 in 1992. Medi-caid patients account for 59% of acute-care admissions.
The hospital's operating profit margin was -19% in 1992, -13% in 1993 and -10% in 1994. Revenues for those years totaled $196 million, $206 million and $218 million, respectively.
Nassau County's effort is part of a trend to change the status of government-owned healthcare facilities across the country. State and local officials are making use of such devices as public benefit corporations, public authorities, merger with private not-for-profit hospitals or outright sale or lease to free their hospitals from the shackles of operating in the public domain.
Anne B. Camper, a lawyer for the National Association of Public Hospitals and co-author of a monograph on reforming the governance of safety-net health systems, listed a variety of reasons driving public hospitals out of their traditional homes. Their money line, in the form of Medicaid reimbursements and disproportionate-share funds for treating large numbers of poor people, is being shrunk, handed over to managed-care plans, or phased out.
Facing such financial threats, many private hospitals merge, affiliate or vertically integrate. "Public providers are often legally incapable and practically incapable of doing this," Camper said. "There are state constitutional prohibitions against mingling of public and private funds."
Furthermore, private partners are often unwilling to pair up with the publics because they are afraid of being subjected to open meetings laws, open records laws and intense scrutiny (July 29, p. 11).
And sometimes labor issues get in the way. The public-sector institutions are heavily unionized, and some unions carry great political clout.
In a public hospital, the decision chain typically can stretch to the county council, mayor or county executive, Camper said. Decisions that should be made on a clinical or business basis are victims of political arm-twisting.
In today's industry, the fast eat the slow. But in public hospitals nothing happens fast. At A. Holly Patterson Geriatric Center, an 889-bed nursing home run by Nassau County, the civil service procedure to hire a nurse takes weeks. "At the (Nassau County) hospital, the procurement of a basic commodity, for instance, paper towels, still has to go through a fairly extensive amount of red tape because they are part of the government," Vieser said.
Erazo, the county hospital director, thinks the state Legislature and the governor "are quite sensitive to these issues. And the leadership of this county has been extraordinarily helpful."
The bill's passage should be eased by the lack of union opposition. "Without casting aspersions on other union presidents," Giustino said, "I think it's time for unions to not just be reactionary, not just knee-jerk to new methods of operating, but rather to analyze every situation and determine what is the best opportunity for employees."