The county hospitals in both Westchester and Nassau have gone through painful conversion processes the past couple of years, their governance being transferred to public authorities.
Here's Melissa Klein's (Journal News) long article "Anatomy of a Puzzling Financial Collapse, on what's happened in Westchester.
Some of the problems are unique to these types of circumstances, the continued Civil Service status for hospital employees, for example. Perhaps even more important are the dotted lines of authority. The formal power may be vested in the Board, but the informal power is probably even more diffused than for other hospitals. That's, no doubt, compounded by multiple and conflicting agendas, bad enough on most boards, deadly when trying to transform a large, complex insitution.
Others strike me as typical of many hospitals in New York. In particular:
...the question could be raised that perhaps the medical center should have invested in upgrading its outdated computer systems, rather than the children's hospital, which opened in September ... the technology used for tracking expenses, billing and payroll was as outdated s the old pediatrics department ... the hospital also could not track how much it spent on individual patients (emphasis added), or whether a hip replacement or other procedures were profitable ... the hospitals operated with only a rudimentary charge master, the basic list of costs for everything from aspirins to X-rays.
The sorts of "strategic moves" such as rebuilding the Children's hospital or their purchase of a bankrupt 51-bed hospital in Ellenville (Ulster County) might have been good moves (though the latter seems questionable). But making these sorts of moves without basic internal controls and basic internal information, such as what it costs to operate, compounds the risks already inherent in such moves. How can you run an organization without knowing what the costs of production are? Baffling.
The hospital ended up selling $256 million in bonds for the children's hospital, to restructure debt and to pay for routine capital improvements, an amount that now forms the largest chunk of its debt. The county guaranteed $153 million of the borrowing, giving it a stake in the hospital's financial future. Although the county continued to guarantee a yearly line of credit for the hospital, its direct subsidies were over in 1999. At the time, projections showed the hospital's future to be robust. "Investment bankers made a determination that we would be able to operate without a direct subsidy," Tulis (Mark Tulis, a Board member and former Board Chairman) said "They were wrong."
Unlike any other business, it's good to be an indebted hospital in New York. Either directly as is the case here or indirectly through public authorities, government is the debt guarantor. Not wanting to face defaults, government, especially the State, continually props up failing institutions. It never ends. We don't let the failures fail. Capital debt for hospitals and some nursing homes in New York is the best guarantee that they'll stay in business.
Wonder who the bankers were on the bond financing. They're the real culprits here and should be held publicly accountable.
Posted by: Tim McInerney | November 18, 2004 at 11:09 AM