One of the last remaining private, for-profit hospitals in New York is selling itself to the city's largest not-for-profit hospital system, leaving no one at home to mind the state's trade group for profit-making hospitals.
The 31-hospital New York-Presbyterian Healthcare System is buying one of its affiliates, 205-bed Westchester Square Medical Center in the Bronx, for $11 million.
Shareholders of the hospital's private corporation will receive $4 million, and the remaining $7 million will go toward improving the building and enhancing services, officials of both groups said.
The move runs counter to the common theme of a struggling not-for-profit seeking out a for-profit savior to transfuse capital and keep it alive. But in the topsy-turvy New York hospital market, the state's stock of for-profit hospitals has been steadily shrinking for more than a decade, according to Alan Kopman, president and chief executive officer of Westchester Square.
Kopman should know. He is president of the New York Association of Private Hospitals, whose inactive membership stands at perhaps three other for-profit acute-care hospitals, he said.
"There is no one left to shut off the lights but me," Kopman said.
Most recently in August, Massapequa General Hospital, a 122-bed facility in Seaford on Long Island, shut its doors after a joint venture of Winthrop-South Nassau University Health System and Catholic Health Services of Long Island dropped plans to buy it.
A state law requiring for-profit hospitals to incorporate in New York apparently has been scaring off big out-of-state hospital chains for about 20 years, Kopman said. As a result, most of New York's for-profits--dubbed proprietary hospitals--are mom-and-pop operations, usually founded by a group of physicians.
Even Westchester Square, which was built in 1929, is somewhat of an anomaly in that it is owned by shareholders--most of them doctors--who have divided the business into 59,000 shares, Kopman said.
The dwindling supply of for-profits has created problems for small New York communities that depended on their tax revenue (April 19, 1999, p. 20). But the removal of Westchester Square from the New York city and state tax rolls will barely make a dent, although it will go a long way toward stabilizing the hospital's shaky finances, Kopman said.
In 1999, the hospital paid $1.8 million in property and sales taxes while losing $1.1 million on $55.6 million in operating revenue, Kopman said. This year the hospital will pay $1.3 million in taxes and is projecting a $50,000 loss on $57 million in operating revenue.
Struggling against "a tight financial market with the constant overhead of a tax burden," the choice was obvious, Kopman said. "We were not able to secure grants or initiate fund raising as a for-profit. Everything you establish becomes a for-profit revenue generator rather than a community service program. Now we will finally be on a level playing field with other institutions. "
Kopman said the hospital shopped for a buyer for about two years and attracted four suitors, including New York-Presbyterian. He declined to name the others.
The purchase, which has received state approval and awaits refinancing, is expected to close by year-end.