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St. Vincent’s Is the Lehman Brothers of Hospitals

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Richard Daines contends that straitened times put healthy pressure on providers to tighten their operations. As in other industries, he believes, incentives should flow from performance. In his view, hospitals should be rewarded by the state for keeping infection rates down and patient-satisfaction scores up and punished for having patients return for further treatment after being discharged. If a hospital has a record of proven success in performing bariatric surgery, it might snag the Medicaid contract to set up a bariatric-surgery center; if its outcomes on breast-cancer surgery are middling, it might lose the ability to be reimbursed by the state for that service. To avoid becoming the next St. Vincent’s, hospitals ought to scour their books to ferret out inefficiencies, Daines says. “How many nursing hours are you using, how many housekeepers per square foot, how many food-service people per meal delivered? Hospitals need to drill down on those costs every day.”

A few hospitals are already headed in that direction. Montefiore has invested heavily in primary and preventive care across the Bronx; it employs most of its physicians; above all, it has taken steps to change the way it does business with insurance companies, establishing its own managed-care company that takes a percentage of insurers’ premiums in exchange for covering all the health-care needs of its customers, instead of billing them for individual services. With one of the least favorable payer mixes in the city—nearly 80 percent of its patients are on Medicaid or Medicare—Montefiore has nonetheless managed to eke out a 1 percent profit margin.

However efficient such new models may be, critics contend they’re bound to affect the quality of care. Many hospital managers say they have long ago trimmed the fat from their budgets and worry that further cost-cutting can only lead to rationing of services and jeopardize patients’ health. Less staff coupled with a greater resistance to ordering expensive tests and performing high-end procedures, they say, will threaten to transform hospitals into huge, one-size-fits-all health-care warehouses.

The megahospital model, critics say, will also leave whole communities, especially in low-income areas, without local care, and contribute to overcrowding at facilities throughout the city, most of which are already operating at or near full capacity. Queens is already down to 1.7 hospital beds for every 1,000 members of its population, about 40 percent less than the national average. Early in 2009, after the state allowed two members of St. Vincent’s former Catholic network—Mary Immaculate in Jamaica and St. John’s in Elmhurst—to go under, Jamaica Hospital, perched beside the Van Wyck Expressway in southeastern Queens and endowed with one of the poorest patient populations in New York (65 percent on Medicaid or uninsured), was left to take up the slack. Its ER, built to accommodate 60,000 patients annually, saw 131,000 cases last year. The chairman of emergency medicine at Jamaica, Geoffrey Doughlin, says Jamaica loses an average of $325 on every patient it sees in the ER and that the volume of patient traffic there has crippled the hospital’s ability to schedule nonemergency services with which it might recoup some of its losses. Jamaica has long been considered among the most critical, high-quality safety-net hospitals in New York, but it lost $13.5 million in 2009.

If Jamaica were to go the way of St. Vincent’s, other facilities would be forced to take on its patients and the accompanying financial burdens. The weakest of those hospitals could in turn be forced to close and shuttle their patients off to other vulnerable facilities, and so on in an accelerating downward spiral.

Daines, who speaks of the capacity of “the creative-destruction cycle of capitalism” to remake the hospital marketplace, says, “The state has an obligation to ensure health-care access to the communities of New York—but that’s very different from access to particular hospitals, and it doesn’t always mean the same traditional services in the same neighborhoods delivered the same ways. The idea that we help a community by preserving the current number and use of hospital beds is not necessarily true. And the public has to keep in mind that if you’re asking for more generous financial support of hospitals, well, you’re asking to pay for it.”

A few miles east of Jamaica and a world away, North Shore–LIJ has established one of the few bright spots in the otherwise forlorn world of New York hospitals. Its president and CEO, Michael Dowling, has won a reputation as one of the area’s most innovative and successful hospital executives by unapologetically championing a centrally controlled, relentlessly entrepreneurial, bottom-line-focused approach to his business—tradition be damned. When programs in his hospitals underperform, he closes them. When doctors complain about having to see patients in off-site clinics rather than in the hospital, he insists they do it whether they like it or not. “Some hospitals will hold on to tradition even when they’re dying,” Dowling says. “On their deathbed, they’ll still believe the way they did things was right.” Last year, North Shore–LIJ generated close to $5 billion in revenues. With a profit margin of 2 percent, it was the envy of the city’s hospitals. Aside from good management, the system enjoys another big advantage over most of its peers: Only 18 percent of its patients are on Medicaid. In New York hospitals, it helps to be smart, but it helps, above all, not to cater to the poor.

Last summer, not long after St. Vincent’s went under, Dowling gave his assessment of the meaning of its closure and of the prevailing philosophical and economic realities of health care in New York today. “An awful lot of people believe that government will always come in and protect you,” he said. “That there’s a safety net. That the government won’t let you fail. You’ve got to be kidding.”


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