From Crain's by way of HANYS e-Clips Daily News:
Cabrini survival plan details unfold
Crain’s Health Pulse, 6/17/05
Cabrini Medical Center has refinanced its mortgage, after the loan was nearly paid off, Crain’s says. Crain’s calls the refinancing “part of a two-pronged approach to surviving the machinations of the hospital-closing commission,” because hospitals that have mortgages “are less likely to be candidates for closure.”
How unsurprising and how outrageous.
The "regulatory mindset" doesn't just exist in the minds of regulators. Its more insidious form exists in the minds of the regulated. It manifests in decisions that are designed solely to influence the regulatory system and are often otherwise unhealthy, even self-destructive. We've seen it with debt; we've seen it with indigent care subsidies; we've seen it with deliberately weakened balance sheets designed to become eligible for extra subsidies as "financially distressed hospitals."
And, by the way, which hospitals in New York don't have mortgages? They've been doing projects and taking on debt for decades in order to increase their cash flow from the reimbursement system (the excess of depreciation over amortization during the earlier years of mortgage life) as well as to protect themselves in exactly the manner that Cabrini has done.
When the debt is small the debtor is in trouble. When the debt is mammoth, it's the creditor that's in trouble.
I've sent a note off to the DASNY, the State's public authority for such financings, asking whether it did this financing. If DASNY rather than a private entity, did the financing, then Cabrini's position is even stronger because the State will have a bigger stake in their survival. Its already on the hook for about $10 billion in healthcare debt in New York. Perhaps there should be a moratorium on new financings until the Commission's work is done.
The analytical test for the Commission will be to ferret out similar cases that have not been so blatant. The test of its courage will be whether it resists gaming the system like this and resists itself being manipulated so blatantly.