Westchester County Medical Center, still another hospital to save, but not quite yet. But never fear. The legislative session's is far from over. I'd still put money on some kind of deal being worked out here.
Of course, the local folks want it saved (and assume that requires State money).
DASNY, New York's public authority which does health care financings did not do the Cabrini deal. So, at least the State isn't involved in making its own work more difficult.
Had a short, but useful conversation with a DASNY staff person who reminded me that the law creating the Commission lists a number of factors besides debt to be taken into consideration. And of course, very few hospitals have no debt. So, if that were the most important criterion, there wouldn't be many potential targets left.
But the truth of it is that the folks at Cabrini aren't the only ones who think that way. Far, far from it. And, if you're running an institution that's a potential State target anyway, you may as well make it as challenging as possible.
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.
And here's another (gasp) one that would close (Westchester County) except that it looks like the State will bail it out. Note the outstanding debt at Westchester County ($750 million) while it continues to lose money. If it were to fail, the County itself would be on the hook for a big chunk of that debt.
Jack Zwanziger, a health economist formerly at the University at Rochester and now at the School of Public Health at the University of Illinois at Chicago and Cathleen Mooney a researcher in the Department of Community and Preventive Medicine at the University at Rochester conclude in the latest Inquiry that, with some caveats and at least in the short term, hospital price deregulation led to price reductions for managed care plans in New York. Here's the abstract of their article, "Has Competition Lowered Hospital Prices" (subscription required):
On Jan. 1, 1997, New York ended its regulation of hospital prices
with the intent of using competitive markets to control prices and
increase efficiency. This paper uses data that come from annual reports
filed by all health maintenance organizations (HMOs) operating in New
York and include payments to and usage in the major hospitals in an
HMO's network. We estimate the relationship between implied prices and
hospital, plan, and market characteristics. The models show that after
1997, hospitals in more competitive markets paid less. Partially
offsetting these price reductions were price increases associated with
hospital mergers that reduced the competitiveness of the local market.
Hospital deregulation was successful, at least in the short run, in
using price competition to reduce hospital payments; it is unclear
whether this success will be undermined by the structural changes
taking place in the hospital industry.
However, the key finding is the confirmation of a change in the pattern of prices negotiated between HMOs and hospitals after implementation of HCRA. Mean case-mix adjusted prices declined during this period, and the multivariate regression results showed that this decline in the average prices was related to decreases in prices paid to hospitals located in more competitive markets.
Actually the first real hint was a couple of years ago when Ken Raske,
head of the Greater New York Hospital Association called for re-regulation. Why would he have wanted that? The same reason he didn't really want de-regulation, what economists call "regulatory capture," the effective control of regulatory policy by the regulated industry. But nobody bought that idea.
Zwanziger and Mooney also conclude that:
An increase in hospital costs tended to be reflected in the price it negotiated, but with an elasticity that was substantially less than 1; thus some of the cost increase was absorbed either by other payers or by the hospital in reduced profits. Similarly, an increase in the proportion of a hospital's patients insured by Medicaid was associated with an increase in prices. (Emphasis added.) Hospitals that became more heavily dependent on an HMO tended to agree to deeper price concessions.
Little acknowledged and discussed even less is the fact that New York did not change its method of calculating Medicaid prices when it deregulated private sector prices. However, its policies of using a variety of methods to shore up hospital finances have likely led to a reverse of the typical pattern, that of private payers cross-subsidizing Medicaid patients. In New York's case, the contrary appears to be true. Certainly there's been talk the past couple of years that Medicaid has become the "best payer" in New York.
The authors also document:
... this market change also induced hospitals to discover means of reducing their vulnerability to the pressures of price-based competitive markets.
It appears that the enactment of HCRA led many hospitals to become members of systems that included potential competitors. The resulting series of mergers has led to major structural changes in many hospital markets across the state with a concomitant decrease in the competitiveness of many hospital markets. The results of this study provide a preliminary indication that though HCRA may have increased price competition in the short term, in the longer term, the resulting increase in hospital concentration may have counteracted the observed effect on hospital prices.
So hospitals have reduced price competition by merging into systems. And now they've set up the State to further reduce price competition by forcing hospital closures. Nobody bought Raske's idea to re-regulate prices, but they did buy his proposal for the State to reduce competition. Different method. Likely to have the same effect.
In the meantime, hospitals are closing anyway. The latest is St. Mary's in Brooklyn. Of particular note in this Newsday story is the following quote:
Particularly frustrating, said some residents, is that they probably will be rerouted to nearby hospitals such as Interfaith Medical Center in Bedford-Stuyvesant, with poorer performance records than St. Mary's
Interfaith is the result of a State supported merger of hospitals the State was already shoring up. One of them, Brooklyn-Jewish, was the very first in a long line of hospitals that New York threw money and political capital at when they ran into financial trouble. That became institutionalized policy with an elaborate infrastructure and organizational bias.
When I asked her how many hospitals the commission would likely recommend closing, a colleague grinned wickedly and said: Oh, five or ten would have closed anyway. So that's what they'll propose and then ... take credit for their closure.
Here are some of the lucky folks who'll be getting pleading and/or threatening calls at home the next year and a half. They've been selected for New York's hospital/nursing home closure commission.
There are some excellent choices in this group and some political innovation too. A couple of the appointees are not residents of New York State. Politically risky, but suggestive of really wanting to do something.
Note that while the commission is supposed to have 18 members, there are only fifteen listed. The Governor's press release does not mention either the Speaker of the Assembly or the Senate Minority Leader. Seems they haven't made their decisions yet.
From the Governor's press release here are the appointees of the Governor, the Senate Majority Leader and the Assembly Minority Leader:
Stephen Berger (Chair), Chairman of the Chairman of Odyssey Investment Partners (OIP), LLC, a investment firm that specializes in private corporate transactions. Mr. Berger served as Executive
Director of the Port Authority of New York and New Jersey from 1985-1990.
Leo Brideau, President and Chief Executive Officer of St. Mary's Hospital and Clinics in Milwaukee. Previously, he served as President of Strong Health Regional Network in Rochester New York
Craig Duncan, former President and Chief Executive Officer of Northeast Health.
Robert Gaffney, Partner in the law firm of Meyer, Souzzi, English & Klein. Mr. Gaffney after serving as a Special Agent with the Federal Bureau of Investigation, was elected to the New York State Assembly in 1985 and was elected Suffolk County Executive in 1992.
Robert Hinckley, Vice President of Governmental and External Affairs for Capital District Physicians Health Plan. Prior to joining to Capital District Physicians Health Plan, Mr. Hinckley served as Senior Deputy Secretary to the Governor in January 2003.
Howard Howlett, Chairman and Founding Member of the Hospital Trustees of New York State
Darlene Kerr, Former President and Chief Executive Officer of Niagara Mohawk (NIMO). Prior to serving as President and CEO, Ms. Kerr was NIMO's Executive Vice President and Chief Operating Officer.
Mark Kissinger, is Deputy Secretary to the Governor, and is responsible for policies and operations of the State's health and human services agencies. Mr. Kissinger joined the Governor's staff in 1999.
Pat Lee, Chairman and CEO of International Motion Control, Inc. Mr. Lee serves as Director of the New York Federal Reserve Bank, Buffalo Branch and the Empire State Development Corporation, Western New York Region.
Neil Roberts, former Chief Executive Officer of United Methodist Health and Housing, the parent company of Wesley Health Care Center.
Teresa Santiago, Chairperson of the New York Consumer Protection Board. Previously, Ms. Santiago was the Director of Hispanic Expertí, a public relations and advertising firm specializing in the Black and Hispanic consumer markets.
Ruben King Shaw, former Deputy Administrator/COO for the Centers for Medicare and Medicaid Services. In that capacity, he was responsible for the day-to-day direction of Medicare, Medicaid, Child Health Insurance Programs, Survey and Certification of health care facilities and other health care initiatives.
Al Simone, President of Rochester Institute of Technology. He was named President in 1992. Prior to leading RIT, he was the President of the University of Hawaii System and Chancellor of the University Hawaii at Manoa.
Bishop Joseph Sullivan, Vicar for Human Services and Regional Bishop for the 62 parishes of the Brooklyn West Vicariate. He has played various roles in Catholic Charities including Executive Director and Executive Vice President of the Board of Trustees. He is also Secretary to the Ordinary for Charities. In 1980, he was named Auxiliary Bishop by Pope John Paul II.
Buford Sears, Senior Vice President and manager for health care and not-for-profit banking at Manufacturers & Traders Trust Company in Buffalo. Prior to that, he was Senior Vice President at Citizens & Southern National Bank.
Now we'll see what it takes to fill out the roster.
Busy week and so I'd figured on not posting much, but we've been waiting for the announcement of those selected for New York's hospital/nursing home closure commission and the news is in ... things are breaking down politically over the commission's membership and they've already missed the deadline for appointments. How entirely unsurprising.
In today's Albany Times Union, James Odato writes inLeaders clash over hospital panel that the Governor and the Legislature are already behind schedule in naming the membership. Pataki's list of nominees was ready last Friday, the deadline, but there's already a dispute over whether to appoint lobbyists and health care trade association representatives to the commission.
Pataki was ready to announce his appointees last Friday -- the
deadline. But he and the Legislature's leaders have been struggling
over the composition and on whether to allow lobbyists or stakeholders
in the health care industry on the panel, according to health care
"Stakeholders." What a euphemism! What a crock! Eighteen members was too limiting anyway. Why don't we just expand the membership of the commission to include the CEOs of every hospital in the State and let them vote to decide who gets thrown off the island? (Just make sure that they all have to wear some sort of garish tropical print shorts and no shirts and force them to eat bugs for a week.)
Read the article closely and what do you see? Virtually everyone quoted says "not me, not me," they don't want such representation. Does this mean they're all being disingenuous or does it mean that the real hold up is Ken Raske, head of the Greater New York Hospital Association?
Even without the quote, "representatives of SEIU say they don't have to be on the panel," I doubt that it's Dennis Rivera, head of District 1199 (who gets bashed by the Post again here) because he doesn't need a seat at the table. His presence will loom over the entire proceedings anyway. Why only have one seat out of 18?
Doesn't sound like it's Assembly Health Committee Chairman Dick Gottfried who's quoted, "An active issue is whether to appoint stakeholders or not," ... "Appointing stakeholders would be questionable at best." But it could be Assembly leadership
It's not HANYS, which is quoted saying it "doesn't want any hospital group or worker union on the commission." and "It would obviously be a conflict.