Bottom line
Could St. Vincent”™s happen in Westchester County?
The likelihood of the average New York hospital declaring bankruptcy ”“ and facing merger or acquisition ”“ is not as unthinkable as it sounds.
Many New York state hospitals are facing operational losses.
“I think the average bottom line now is a negative 1 percent in the industry,” said John Spicer, president of Sound Shore Health System in New Rochelle. “There are hospitals that are doing fine, but on average, hospitals across the state are losing money,” he said.
Medicine is a Recession-proof business in terms of volume, but demand for treatment has shifted.
Health care reform will result in an additional 30 million to 40 million insured patients that will fill hospital beds.
“More and more people get treated as outpatients, which we handle, but our bread and butter financially is the inpatient business,” said the president and CEO of Sound Shore Medical Center and Mount Vernon Hospital. “So when that begins to shrink, hospitals scramble to keep themselves filled and when those occupancy levels drop, which is what happened at St. Vincent”™s and St. Agnes, hospitals can”™t sustain themselves.”
St. Joseph”™s Medical Center in Yonkers purchased St. Vincent”™s Hospital Westchester in Harrison at the start of the month.
In New York City, Lenox Hill Hospital was acquired by North Shore-Long Island Jewish Health System.
The push to improve facilities
Remaining medically advanced and competitive in the current environment has led Westchester County medical centers to race to upgrade facilities.
Mount Vernon Hospital was on the heels of announcing a major revitalization plan including $30 million-plus in construction costs and $23 million in grant funding at press time.
Hudson Valley Hospital Center this year completed a $100 million capital campaign project.
White Plains Hospital will undergo a $75 million renovation of its newly rebranded facility.
But modernizing infrastructure is expensive ”“ and hospitals face tight operating margins.
“When you look at the details of the (health care) plan, it”™s smart the way they structured it,” Spicer said. “It”™s a nine-year phase-in, but over those nine years, taxes on small businesses have gone up. Taxes on individuals are going to go up. It”™s an extraordinarily expensive undertaking.”
Reimbursement rates fluctuate
Historically, the relations between provider and insurer had faced tighter regulation in New York state, Spicer said.
“During the Cuomo years, the state set all of our rates, even commercial rates,” he said. “They were all based on our Medicaid rate. So essentially, hospitals were reimbursed very close to cost over those years. We were protected by the state in that they wouldn”™t let us go bankrupt, but they wouldn”™t let us make money, either.”
Fast-forward to the Pataki years, Spicer said, and there was little regulation in negotiations with insurers over HMO plans.
“As a result, most of our HMO contracts were not good, they were at cost or maybe a little bit above cost,” Spicer said. “And when you consider that our Medicaid payers are almost below cost, a lot of hospitals had financial difficulties. ”¦ We don”™t really make enough money on the commercial side to offset the problems we have with Medicaid and the uninsured, so it makes our business very tight.”
This ushered in the era of hospital network affiliation ”“ Pinnacle and Stellaris Health Network among them in Westchester County.
“We have gotten better rates, which are better than cost now,” Spicer said. “But we don”™t have the margins you”™ll find in the Midwest or in Florida.”
Sound Shore Health System, which along with Hudson Valley Hospital Center, is part of Pinnacle Health Care, which faced a drawn-out contract dispute over rate reimbursements with Empire BlueCross BlueShield in the summer of 2009.
Stellaris Health ran into a similar occurrence a year later; both ultimately reached multiyear contracts with the insurer.
Advocating for fair reimbursements
John Federspiel, president and CEO of Hudson Valley Hospital Center, during a recent tour of the renovated Cortlandt Manor facility, said it”™s cheaper to do business over the border in New Jersey and Connecticut.
“If two people have the same employer and one goes to Greenwich Hospital to have his appendix removed, and I come to Hudson Valley Hospital Center, Greenwich will get reimbursed twice what Hudson Valley Hospital Center will, even if we have the same insurance and same employer,” he said.
The Westchester County Association”™s Blue Ribbon Task Force has been actively advocating for fair rate reimbursements.
“The business community in collaboration with the hospital community has to come together to really help this infrastructure and make people cognizant because if we begin to lose that infrastructure, it”™s going to hurt us dramatically,” said William M. Mooney Jr., president of the Westchester County Association. “If you”™re a PepsiCo or a MasterCard ”“ when people come into your state, they want to know, ”˜What”™s the health care infrastructure? Can they take care of our employees?”™”