St. Vincent's is the Lehman Brothers of New York's hospitals, New York magazine reports. Its dramatic departure raises questions about the viability of the city's five dozen remaining hospitals.
The financial distress of New York hospitals is universal. Even large, prestigious institutions such as New York-Presbyterian and Mount Sinai get by on razor-thin margins and mountains of debt.
"If you've accumulated any reserve over time, the first thing you do is eat it up," a leader at a major New York hospital told New York magazine. "Then you cut costs on staffing and support services, sometimes below levels you know are safe. Then you stop spending money to keep your physical plant and equipment up to date...Then, when there's nothing else you can do, you declare bankruptcy. That's the life cycle of a New York hospital."
New York's hospitals are swimming in the red. They lost $3 billion on care delivered that wasn't paid for in 2008, operating at a 6 percent loss, compared with hospitals nationwide that earned averaged profits of about 4 percent over the past decade. Because New York hospitals carry twice as much debt in relation to net assets as hospitals around the country, they are forced to pay higher interest rates.
Kenneth Raske, the president and CEO of the Greater New York Hospital Association, said that more closures are inevitable. "In some communities, we're one epidemic away from a disaster," he said.
A constellation of forces place New York hospitals in financially more precarious positions than most. Higher labor costs thanks to strong unions, higher staffing levels and extremely well-paid hospital executives place high burdens on hospitals.
The biggest challenge, however, is demographic. New York is home to a disproportionately large population of people who lack health insurance (1.4 million). That, along with 2.3 million Medicaid recipients make up 39 percent of the city's hospital patients.
To learn more:
- read the New York magazine article
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