Closing the hospital is in order, said Stephen Berger, who last year headed a governor's task force on the financial problems plaguing Brooklyn's money-losing hospitals and inefficient health-delivery system.
"SUNY has to use this [audit] as an opportunity to refocus its efforts on providing medical education and getting out of the hospital business," Mr. Berger said last week. He favors a redesigned Brooklyn health care industry that would have existing hospitals like Maimonides Medical Center, Kings County Hospital Center and Lutheran Medical Center be the base for the practical training of Downstate's medical school doctors, instead of Downstate's antiquated University Hospital.
The Cuomo administration did not dispute the comptroller's findings, but it remained mum on what might happen if the hospital runs out of money. Downstate has already initiated some measures the comptroller recommended, like improving bill collections and better monitoring expenses.
The report represented a clear setback for Brooklyn legislators and community activists. They had asked the comptroller to audit Downstate in the belief that the hospital had been unfairly saddled with administrative and operating expenses incurred by its academic parent, SUNY.
"We ask that you restore state funding to Downstate and provide a bridge loan ... until a successful restructuring plan is developed," legislators wrote the comptroller on Aug. 9 when they asked for the audit.
But the audit tactic backfired.
The comptroller's report blamed decisions by Downstate's past management for much of the financial distress. There was no mention of SUNY's wrongly assigning expenses. Instead, it described a "very bleak" financial picture. To remain open would require massive layoffs or another cash infusion from the state. That appears unlikely to happen. The state advanced the medical center $75 million in June 2011. It was gone in three months. Losses continued at a pace of $3 million a week. That translates into an expected $200 million shortfall when 2012 operations are fully counted.
The hospital's most conspicuous bad expenditure: acquiring Long Island College Hospital from Continuum Health Partners, a deal that was made possible with the help of a state grant. According to the audit, Downstate bought a property worth $143 million but assumed $170 million in liabilities. The hospital refutes that number, saying that the property is worth far more and that the liabilities are only $30 million.
The auditors cited a report from Pitts Management Associates, a Louisiana consultancy hired by the hospital with state approval, that recommended Downstate lay off another 175 employees. The center has laid off nearly 500 people whose salaries were about $50,000 each, but the audit questioned the hospital's decision to employ 15 administrators, each making more than $290,000.
As is often the case in hospital turnarounds, Pitts is making out just fine. It got $3.1 million to try to untangle hospital finances in 2011 and in December got the nod for a second, $5.6 million contract.
Downstate Medical Center's president, John Williams, said the hospital has agreed to look at those salaries, which he defended as typical for the health care industry.
"I'd never say the state would never close the hospital," said David Sandman, senior vice president of the New York State Health Foundation, but doing so would not mean losing the medical school, as some have feared. "There are plenty of medical schools, including Harvard and Duke, that train doctors without owning a hospital. A hospital is not supposed to be a jobs program."