Medical center, like other businesses, must deal with the downturn
 
In a wide-ranging interview, Westchester Medical Center President and CEO Michael Israel laid out a specialty-driven future for the Valhalla facility, although the road to get there is something of a minefield where Medicaid reimburses just 78 cents on the medical-treatment dollar and where his own salary has become a touchstone for perceived extravagance in tight times.
Meantime, the facility is “effectively full,” admitting 25,000 patients per year in its children”™s, psychiatric and acute-care facilities, 6,000 of which are transferred from other facilities.
“Over the past year, since the summer and fall of 2008, we”™ve seen $55 million in reduced Medicaid reimbursements and another $15 million being carried forward,” Israel said. “What you have ”“ apples to apples ”“ is $70 million removed from the revenue flow, but we”™re still expected to render the same services. We treat all patients who come to us.”
The current medical center budget is “a little under $800 million,” according to Israel, making the reduced revenue “8 to 10 percent.”
The hospital”™s recent track record was not one of profitability before Israel arrived in August 2005. It lost $92 million in 2003; $50 million in 2004; and $18 million in 2005. Israel and hospital management, which has seen staff cut 25 percent in four years, took a magnifying glass to expenses, collections and operations.
By 2006, the hospital was $63 million in the black and in 2007 profit reached $76 million. In 2008, the black ink had been trimmed to “$5 (million) to $10 million.” The current budget has $55 million in red ink. Last month, in a budget submitted early, the losses are forecast to equal $14 million, with $10 million of that accounted for in a one-time expense, including buyouts, to close the Taylor senior facility. Taylor was phased out entirely this year, having over several years been reduced from 321 beds to 91. Israel said the facility was losing $10 million per year.
Two-hundred jobs went when Taylor closed this spring and another 200 have been trimmed from the remaining campus, bringing the employee number down to 3,800 today. “It”™s been extremely difficult, top to bottom,” Israel said. “There are no bad guys here. The state is not doing this because it wants to. We have a profound budget deficit.”
Israel expects profitability to return in 2010.
The children”™s, the psychiatric and the acute-care centers on campus “are effectively full,” according to Israel, with the psychiatric facility at 100 percent, the Maria Fareri Children”™s Hospital “above 100 percent” and the adult acute-care hospital usually “84 (percent) to 85 percent full.” Infectious diseases crimp the bottom line by effectively turning about 20 semiprivate rooms each day into private rooms to contain pathogens.
“This year, we”™re losing 8 (percent) to 10 percent of our revenue flow,” Israel said, addressing the full array of factors that confound profitability. “But we”™re still expected to take care of patients.”
The future for Westchester Medical Center includes the sort of big-ticket medicine that smaller hospitals cannot handle, with specialties in advanced-care pediatrics and psychiatry, tertiary care (such as open-heart surgery), quaternary care (such as an organ transplant) and high-end orthopedics (including, as Israel related a recent procedure, elongating a short leg by 3-4 inches to match its partner).
Israel addressed the media reports of his $1.2 million salary and compensation package by saying the hospital board had done its research when it hired him at the then-79th pay percentile of CEOs of similar-sized hospitals in 2005. That percentile figure, he said, is now below the 50th percentile in rank.
“The board went through the process,” Israel said. “The numbers were not pulled out of the air.
“Some would feel all executives are paid too much,” he said. “But all senior executives go through this process. Businesses must pay the market rates or candidates will go elsewhere. When the board hired me, they determined by my credentials and my background that I should be compensated at the 75th percentile of like institutions, meaning that 75 percent make less than I make and 25 percent make more. Now I”™m under the 50th percentile, which means more than half make more than I do.”