The head of New York City's public hospital system said he asked his management team to devise a strategy to exit all of its leases and convert empty hospital areas to office space.
Dr. Mitchell Katz, president and CEO of NYC Health + Hospitals, told the finance committee of the health system's board about his plans Tuesday after its scheduled meeting had concluded. He said more concrete information about the money needed for renovations would come later. It will take three to five years for some leases to expire and he will look to terminate others early.
"I've set a challenge for leadership to get us out of all rental space," Katz said. "My question is, why are we renting office space when we have empty hospitals? Hospital empty space actually works pretty well as offices because they don't require extensive renovation. We're here to stay, and when you're here to stay, instead of renting you buy."
The plan is one part of Katz's strategy for reducing the health system's anticipated $1.8 billion deficit in fiscal 2020, which starts July 1, 2019, along with improving its insurance billing practices and reducing its reliance on consultants. Katz described those plans during a Crain's forum on Tuesday morning, alluding to his planned shift in real estate policy.
Katz said at the event that the health system spends about $7 million a year on office leasing. Later at the board meeting he noted the potential benefits of moving more administrative employees into its hospitals.
"Connecting people to hospitals or clinics, when that's what you do, is a very positive thing," Katz said.
He cited Metropolitan Hospital in East Harlem and Bellevue Hospital in Midtown as two locations with available space. Metropolitan, in particular, has experienced declines in the number of patients it treats. Its patient discharges fell 16% in the nine-month period through March, according to data shared at the board meeting.
But Katz said at the Crain's forum he has no intention of closing hospitals and thinks the facility can be viable serving about 220 patients even though its top floors are empty. The vacant areas of the hospital are not staffed and do not drive up the system's operating costs, Katz said.
"I'll decrease my rental space, I'll no longer have empty hospitals and I'll have a much more viable fiscal plan," he said.
"No more rented offices for city hospitals, chief says" originally appeared in Crain's New York Business.