Edition: U.S. / Global


Published: June 4, 1996

At least a dozen of New York City's private hospitals are planning large-scale layoffs next month or are late in paying significant bills, concrete signals that the long-predicted financial crisis for the region's private hospitals has finally arrived.

Squeezed by sharp Medicaid cuts and the rise of health maintenance organizations, a handful of private hospitals this month notified the city's principal hospital workers union that they intend to lay off 517 union members July 1, a huge increase from the usual rate of 50 a month. And many other hospital workers will lose their jobs as well. St. Luke's-Roosevelt Hospital Center in Manhattan will eliminate hundreds of positions from its work force on July 1, including 160 from the hospital workers union, 34 registered nurses and more than 100 supervisory jobs.

At the same time, some hospitals, mostly those in poor neighborhoods, have fallen hundreds of thousands of dollars behind in paying bills for services like business consulting and health insurance for their employees. Interfaith Medical Center in central Brooklyn owes $11 million to the union fund that provides pensions and health insurance for its workers, a bill so large that paying it could force the hospital into bankruptcy. Bronx-Lebanon Hospital Center and Brookdale Hospital Medical Center in Brooklyn also owe millions.

"Hospitals will close," said Dennis Rivera, president of Local 1199 of the National Health and Human Service Employees Union, with 117,000 members. "It is happening in front of our eyes." Mr. Rivera called the number of planned layoffs and delinquencies on payments "just extraordinary," adding: "Not a day goes by without a call saying, 'How about we don't pay workers for two weeks?' Or, 'Don't cash that check for the next three hours.' I never got calls like that before."

Kenneth E. Raske, president of the Greater New York Hospital Association, an industry group, called the layoffs and the piles of unpaid bills "early warning signs" of hospitals in jeopardy and agreed that some of the city's 80 private hospitals could close in a matter of months.

But Dr. Barbara A. DeBuono, the New York State Commissioner of Health, said that most if not all of the hospitals sending out distress signals would survive, either by allying with stronger hospitals or reinventing themselves as other types of medical centers, such as outpatient clinics.

"I don't think any hospital is likely to close soon," Dr. DeBuono said. "In other states there have been lots of mergers and conversions and I think that will happen here."

Virtually everyone, including the hospital trade association, agrees that there are more hospital beds than are needed in the metropolitan area, and that drives up costs. But while some health economists predict increased efficiency as a result of consolidation, others worry that if the market is allowed to decide which hospitals survive, some poor neighborhoods will be left without either hospital care or outpatient care, since the clinics where patients go for routine doctor visits are often located within hospital buildings in the inner city

Dr. DeBuono said the state would monitor the fate of troubled hospitals to make sure that people in poor areas of the city continued to have access to primary care, hospitalization and emergency rooms.

Fewer Beds By a Third

Hospitals in the state, both public and private, are suffering for a variety of reasons, including two years of $100 million in Medicaid cuts and the rapid growth of health maintenance organizations, which demand deep discounts for care. Public hospitals in New York City have recently announced 1,800 union layoffs for next month.

Earlier this year two studies predicted that the state would lose a third of its 37,000 hospital beds in the next four years, with up to a dozen private hospitals closing. Now, the state, which has for years swept in to rescue troubled hospitals, plans to deregulate the industry on July 1, allowing market forces to have far greater sway in their rates and fates.

"Everyone always cries wolf, but the pressures are of a different magnitude now," said William Bernstein, a partner in Kalkines Arky Zall & Bernstein, a law firm with a large health care practice. "In the past everyone wanted to preserve the viability of hospitals, but that is no longer the operating assumption of the market or the government."

While it is difficult to measure exactly how budget and staffing cuts affect patients, health experts say that at some point the quality of services if not medical care itself must fall. Rooms might be dirtier, meals served cold and attendants harder to summon.

In a number of other cities, private hospitals in poor neighborhoods have succumbed to the combined pressure of government cuts and the rise of managed care. In Chicago, for example, more than a dozen hospitals have closed in the last five years, and some are now skeletons, empty buildings with locked doors.

Shock waves from failures in New York are certain to reach Capitol Hill. Sixty-four hospitals in New York have a combined $4.5 billion worth of mortgages insured by the Federal Housing Administration, a branch of the Department of Housing and Urban Development. If a hospital goes into default, taxpayers will be left with the bill.