Mohamed Abuelenen, a 55-year-old construction worker, was having trouble breathing when he showed up at St. Vincent’s Hospital in the West Village a bit before seven in the morning on April 30. He was admitted to the emergency room, where his vital signs were taken and his chest was examined. A heart attack was ruled out. So was asthma. Before long, Abuelenen was diagnosed with nothing more than a bad cold. His visit was entirely routine, in fact, but for one detail: He was St. Vincent’s last patient.
By the time Abuelenen left the ER, an hour after arriving, the hospital had closed shop. Before that day, it had treated more than 50,000 people per year and seen hundreds of thousands more in its clinics and other outpatient facilities. But now workers were boarding up windows and doors, boxing up supplies, and dismantling equipment. St. Vincent’s was $1 billion in debt and had for some time been losing an additional $10 million a month. The once-unfathomable idea that a high-profile hospital in an affluent Manhattan neighborhood would be allowed to close had become reality. The hospital’s venerable history—over 160 years, it had treated victims of the Titanic, the Triangle Shirtwaist factory fire, the AIDS epidemic, and 9/11—had not saved it. Nor had its location as the only hospital on Manhattan’s West Side below 59th Street. St. Vincent’s failure left 3,500 employees jobless and 200,000 New Yorkers without their nearest hospital.
St. Vincent’s plight has been portrayed by public officials and the media as a story of local misfortune—a community losing a vital piece of its infrastructure and a centerpiece of its identity to a combination of mismanagement, the recession, and bad luck. The truth, though, is considerably more alarming. St. Vincent’s collapse is only the most visible symptom of an ongoing financial emergency facing the city’s five dozen remaining hospitals and threatening those they serve. In a sense, St. Vincent’s is the Lehman Brothers of the local hospital industry: an institution whose dramatic disappearance, once unthinkable, raises dire questions about the viability of the entire system.
The financial health of New York City’s hospitals has been deteriorating for years and appears to be nearing a critical juncture. Within weeks of St. Vincent’s demise, Lenox Hill, the boutique hospital of choice for Upper East Siders, long saddled with operating losses and debt, bowed to economic pressure and agreed to a takeover by North Shore–LIJ, the state’s largest private-hospital system. A month later, North General, for 30 years a pet project of Harlem’s political elite, announced that it was shutting down. That made seventeen hospital closings in the city since 2000. Last year, a pair of hospitals in Queens closed suddenly, just before the outbreak of H1N1, causing overflow conditions in the emergency rooms of nearby facilities, one of which set up a triage area on a loading dock. The year before, Brooklyn and Queens had each lost a hospital, and Manhattan had lost two.
Unlike St. Vincent’s shuttering, most of these closures took place in neighborhoods with little political clout or public visibility, and few people outside the affected communities appeared to notice. That is unlikely to remain the case. The financial distress of New York hospitals is not evenly distributed, but it is nearly universal. Even the largest and most prestigious institutions—New York–Presbyterian, Mount Sinai, and the like—get by with thin margins and significant piles of debt. Some presumed high-quality hospitals, like Beth Israel and Roosevelt, operated by the Continuum Health Partners consortium, have a legacy of steep losses and indebtedness, and are considered precarious. In New York’s many community hospitals, which provide an essential first line of defense in the effort to safeguard public health, the danger of failure is particularly acute. Combine growing costs, decreasing revenues, and high debt loads, and you can’t dig out. Then what happens? “If you’ve accumulated any reserve over time,” an executive at a major local hospital says, “the first thing you do is eat it up. Then you cut costs on staffing and support services, sometimes below levels you know are safe. Then you stop spending money to keep your physical plant and equipment up to date. The condition of the physical plants of many New York City hospitals is staggering. Then, when there’s nothing else you can do, you declare bankruptcy. That’s the life cycle of a New York hospital.”
The bottom line is sobering: In 2008, local hospitals spent $3 billion more delivering care than they took in. Overall, they operated at a 6 percent loss—an average that masks much deeper red ink at the worst-performing places. In contrast, hospitals nationwide have earned average profits of about 4 percent over the past decade. Within the hospital industry, a 3 percent surplus is considered necessary just to keep a hospital in decent working order. The only way unprofitable hospitals can do that is to enter a vicious cycle of indebtedness. New York’s hospitals carry twice as much debt in relation to their net assets as hospitals around the country, a fact that constrains their ability to continue borrowing money. When they do manage to find willing lenders, they are forced to pay high interest rates. “There is a cost to being poor, and it only makes you poorer,” says Sean Cavanaugh, director of health-care finance at United Hospital Fund, a nonprofit health-care-research group.