20 Years of Decisions to Close Hospitals Have ‘Come Home to Roost’

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A once-in-a-century pathogen overwhelmed New York medical centers this spring and at least part of the blame lies in decisions state and health care leaders made to eliminate 20,000 hospital beds over the past two decades.

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Gov. Andrew Cuomo warned New York could need between 55,000 and 110,000 hospital beds to treat COVID-19 patients through the end of April. But the Empire State only had 53,000 licensed hospital beds to begin with, down from the 73,931 that existed in 2000. 

The surge in patients has overloaded both the city’s pricey academic medical centers and its deficit-ridden public hospital system. By the end of April, 41,316 New Yorkers would seek treatment for coronavirus symptoms at a hospital and 17,589 residents died from the disease. At the apex of the pandemic, which occurred around April 12, hospitals contained close to 19,000 COVID patients.

Hospitalizations have declined since then but Cuomo acknowledged the state must be better prepared for the future. The health care system’s ability to protect the public would be imperiled if 70 percent of hospital beds were occupied, he said.

“Governors don’t do global pandemics,” Cuomo said in a briefing on April 28. “It’s not a state responsibility in this system who was supposed to blow the bugle and didn’t. I would bank on this happening again.”

The governor may be right that another wave of illness will strike this fall but the state’s lack of preparedness was due to decades of deregulation, systemic racism, and political apathy that led to dozens of hospital closures across the city.

“The chickens are coming home to roost,” Community Service Society Vice President Elisabeth Benjamin told Commercial Observer. “The people that are suffering and disproportionately dying are living in communities where all these hospitals got closed. Hospital capacity there is so woefully under-resourced it’s an outrage.”

Health care advocates trace the decline of hospital capacity to the mid-1990s when the Pataki administration ended the state’s practice of setting rates for services hospitals provided. The deregulation allowed hospitals to negotiate its own rates with insurance companies, forcing poorer community hospitals to compete with well-funded private ones for procedures.

“Once you deregulate rates that hospitals pay, then it becomes survival of the fittest,” Benjamin said. “Rich hospitals were able to charge higher prices so insurance companies drove the best bargain they could for their payers. Community hospitals couldn’t command the reimbursement rate that wealthier hospitals did so they couldn’t get paid to keep their bottom line up and make payroll.”

Pataki had concerns over the rising costs of Medicaid and his administration saw hospitals with excess bed capacity as wasteful. But experts say the rising costs of treating uninsured patients and unreliable reimbursement were more significant problems 

“Hospitals got the idea for financial reasons that you could discharge patients quicker but this hasn’t saved a penny either because patients recuperating in a hospital didn’t cost that much,” Boston University School of Public Health professor Alan Sager told CO. “Hospital occupancy rates started to fall and people said, ‘Oh we can close hospitals down,’ but if you close the cheaper hospitals you drive up the cost.” 

Instead of seeking care at less expensive community hospitals, patients would be forced to travel to larger, more expensive teaching hospitals that charge a premium, Sager explained.

“The country has been focused on raising the ceiling of care, the best we can do for some people, and ignoring the floor, that is the lowest level of care we allow anyone to suffer,” Sager said. “That’s why we will spend $4 trillion on health care without covering everyone and whining about how expensive health care is, and we do nothing to contain costs.”

Pataki tasked an 18-member panel with slashing health care costs in 2005. The Berger Commission, named after its investment banker chairman, targeted 57 hospitals for restructuring and recommended eliminating 4,200 beds statewide the following year.

One of the nine sites facing termination was New Parkway Hospital in Forest Hills. The 251-bed facility filed for Chapter 11 bankruptcy in 2005 after accumulating a $13 million debt load. Hospital officials talked up a three-year restructuring plan but it could not escape Berger’s bullseye. 

The hospital also got mixed up in two separate corruption scandals. Parkway officials refused to pay bribes to former Queens Assemblyman Anthony Seminerio to keep the hospital open. Seminerio instead shook down executives at Jamaica Hospital for $310,000 and was sentenced to a six-year prison term. Parkway CEO Robert Aquino was later caught bribing former Brooklyn Senator Carl Kruger $60,000 in 2008 in a last ditch effort to save the hospital.

Parkway and community advocates fought the state’s closure order but a federal court denied a temporary restraining order in November 2008, dooming the facility, according to the Queens-based TimesLedger.

The Berger Commission expedited the loss of hospital beds but it was far from the only responsible party.

The financial pressures from deregulation affected hospitals that weren’t on the list, including a network of Catholic medical centers struggling to maintain care in the 21st century.

The Sisters of Charity, a religious congregation of the Catholic Church, had run St. Vincent’s Hospital for 150 years treating casualties of the Civil War, influenza and cholera epidemics, and September 11. But the Greenwich Village hospital continued its mission of caring for the city’s poor while other privately-run hospitals loaded up on high tech equipment and emphasized innovative services, attracting patients with the means to pay.

In 2000, St. Vincent’s merged with several outerborough Catholic hospitals including Mary Immaculate in Jamaica, St. Joseph’s in Flushing, and St. John’s in Elmhurst, Queens to stay competitive. 

The ill-fated merger wouldn’t last. St. Vincent’s Catholic Medical Center jettisoned St. Joseph’s first in 2003 and the 200-bed hospital closed a year later without a buyer. Then St. Vincent’s filed for bankruptcy in 2005 after reporting a loss of $150 million and debts just above $800 million. 

By 2006, St. Vincent’s sold St. John’s and Mary Immaculate for $36 million to Bushwick’s Wyckoff Hospital which formed a new company, Caritas Health Care, to manage the three sites. Caritas received loans from the state in 2007 to stay afloat but was unable to restructure debts from the Queens hospitals as the Great Recession bore down on the city.

Two years later Caritas was bankrupt and St. John’s and Mary Immaculate would shutter permanently in February 2009, capping a three month period in which Queens lost 600 beds. 

“We tried to stop it but the die was already cast,” Queens Senator Leroy Comrie, who was a councilman at the time, told CO. “They had already bled out services that were money makers and they were just doing indigent and respite care. They weren’t making any money so they decided to close those down.”

State officials told Queens advocates the loss of the community hospitals was not a big deal. But their absence was acutely felt when the city braced for an outbreak of a mysterious “swine” flu called H1N1 that inundated Elmhurst Hospital with 800 patients and closed two dozen schools.

“We were hearing that it’s not an emergency and they said we have more than enough space from the governor on down to the health department,” Queens Councilman Robert Holder, who protested St. John’s’ closing, told CO. “ I don’t know how they could figure that out. The emergency rooms at St. John’s was always crowded.”

Instead both sites sold at auction to developers in 2009. The Chetrit Group bought Mary Immaculate for $4.8 million and secured $128 million in construction financing to build a 324-unit housing complex. An Asia-based investment group bought the St. John’s site for $55 million in 2014 and converted the seven-story building to 144 units of luxury rentals and 120,000 square feet of retail space on the ground floor. The investors sold it to Flushing-based developer Sentry Operating Corp for $125 million in 2016.

A similar fate met St. Vincent’s, which could not outrun its financial problems after dissolving its merger. The hospital had lost 10 percent of its patients between 1996 and 2007 but experienced a surge in emergency room admissions.

“They had terrible billing,” Manhattan Assemblywoman Deborah Glick told CO. “Many people didn’t get a bill for months if not years and as other Catholic hospitals closed, they were getting paid less for elective surgery than for major hospitals, which they never discussed with elected officials.”

In 2007, hospital leaders proposed a rescue plan selling off its buildings clustered around Seventh Avenue and 12th Street to the Rudin family in order to build a modern glass and steel tower designed by Pei Cobb Freed & Partners Architects. But some community activists opposed the plan and St. Vincent’s began negotiations with Continuum Health Partners, which owned St. Luke’s and Beth Israel Medical Center, to take over the health system.

In January 2010, Continuum announced it would purchase St. Vincent’s and turn the hospital to an outpatient facility. A month later the company backed out and St. Vincent’s solicited other offers. Mt. Sinai’s president even visited the campus and told staff to hang tight as other hospitals examined St. Vincent’s books, but a deal was never reached. 

By April, St. Vincent’s was back in bankruptcy court seeking protections after amassing $1 billion in debt and its board of trustees voted to shut down the 400-bed hospital. After 160 years in Greenwich Village St. Vincent’s closed on April 30, 2010.

“We warned people in positions it was dangerous to close this hospital and the only response was the hospital wasn’t making money,” attorney Yetta Kurland, who represented advocates fighting the closure, told CO. “It was almost a condemnation that it was the hospital’s fault. The justification for closing the hospital was its inability to generate a profit.” 

The hospital still had to pay its creditors so it sought to sell its property. Rudin Management’s interest in the site never wavered and they began negotiations in bankruptcy court in December to purchase the property with North Shore-Long Island Jewish Health System which would run a vastly scaled down emergency room on the site. 

Activists decried the proposal but realized it was too late to stop the sale.

“The bankruptcy judge called the shots,” pro bono attorney Tom Shanahan, who attended the proceedings, told CO. “She said, ‘I’m moving this estate.’ We tried to get standing to challenge things. She wasn’t having it.”

In April 2011, the bankruptcy court approved the deal. Rudin purchased the site for $260 million and obtained $525 million in construction financing to build its 200-unit luxury condo complex and North Shore-LIJ spent $110 million to turn St. Vincent’s iconic O’Toole building into an emergency clinic. 

The sight of the condos and the absence of a trauma center on the West Side still stings.

“This was a classic case of greed and political connection at the expense of public policy,” former Manhattan Councilman Alan Gerson said. “It was playing Russia roulette with the lives of people who live downtown or the West Side. It’s outrageous and there should be a requirement for a real hospital there. An urgent care center is not a hospital.”

A similar situation was unfolding across the East River. In October 2010, eight months after Continuum withdrew its offer for St. Vincent’s, the health care company reached an agreement with the Paterson administration to merge Long Island College Hospital with SUNY Downstate Medical Center. 

By February 2011, the arrangement was in doubt. State health officials under its newly elected governor Andrew Cuomo told Continuum they would delay $62 million of undistributed Medicaid grants that would finance the merger. Without the money, LICH would be forced to go into bankruptcy.

SUNY Downstate wound up purchasing the Cobble Hill hospital from Continuum in May for $205 million even though it owed $170 million. Activists worried SUNY only acquired the site to sell the property which the university believed could be triple the hospital’s $143 million worth.

State officials said that wasn’t the case but LICH became so expensive to run it accounted for 40 percent of Downstate’s $179 million debt and SUNY’s Board of Trustees voted to shutter LICH in March 2013.

The vote rankled Public Advocate Bill de Blasio who sued to keep the hospital running and recruited six Brooklyn civic organizations to join him. In July, de Blasio led a demonstration against the closure where he and several elected officials were arrested in an act of civil disobedience, boosting his profile in a crowded mayoral primary.

Civic leaders sought a new operator who could maintain a full-service hospital on the site and Judge Johnny Lee Baynes allowed activists to file lawsuit after lawsuit against SUNY in order to force it to keep the hospital running.

“It’s not just that he tried to work out a deal to keep LICH open. He entered four different orders directing SUNY to stop the shut down and at least threatened to hold SUNY board members in contempt,” said attorney Jim Walden who represented civic groups. “There was a process they had to go through and they didn’t follow it.”

SUNY ultimately reached a deal in June 2014 to sell LICH to Fortis Property Group for $240 million. Fortis planned to build three condo towers with 176 luxury units while partnering with NYU Langone to run an emergency department on the former medical campus.

After he became mayor, de Blasio backed the sale to Fortis which enraged residents who fought to preserve the hospital. They haven’t forgiven Cuomo either.

“This is the kind of thing that doesn’t happen without the governor being behind it,” Brooklyn Assemblywoman Jo Anne Simon said. “The governor has been very much on everybody’s shit list in the neighborhood. They were not happy with de Blasio a year later and felt betrayed by him but they all clearly blame the governor for closing their hospital.”

In the middle of a difficult negotiation before the sale was finalized, Baynes warned that the legacy of the hospital’s closure would not be apparent until years later.

“This could go bad,” he told the New York Times in 2014. “I believe it will not. I am thinking positive.”

Baynes died on March 26, 2020 from pneumonia after contracting coronavirus.