Four Struggling Brooklyn Hospitals to Form New Health Care Company

August 1, 2016

Four financially struggling hospitals in Brooklyn have signed a nonbinding letter of intent to create a not-for-profit company that better positions the group for more than $700 million in state funding the Cuomo administration believes will change the health care paradigm in the eastern and central part of the borough.

Brookdale University Hospital and Medical Center, Kingsbrook Jewish Medical Center, Interfaith Medical Center and Wyckoff Heights Medical Center — the only four unaffiliated hospitals left in Brooklyn — will each have one board member in this new company, according to the letter, which was reviewed by POLITICO New York.

The letter, sent to the state Department of Health, represents the latest step toward the creation of an integrated health care delivery system that could one day replace the four voluntary hospitals.

To varying degrees, each of the four hospitals is dependent upon state subsidies that are costing taxpayers more than $300 million this year, and could cost the state as much as $2 billion over the next five years.

The Cuomo administration awarded Northwell Health $500,000 in April to study the problem, which is not terribly difficult to define. There are a large number of residents on Medicaid with poorer-than-average health outcomes who use the emergency room for primary care at disproportionately high rates. Couple that with an aging hospital infrastructure and outdated services that don't provide the preventive care the community needs and it becomes easy to see why the area has become a money pit.

What is harder to see is how the situation might be resolved. The Cuomo administration, based on the outlines of its agreement with Northwell, would prefer the four hospitals come together into one health system. That is both easier to manage and avoids some duplication of medical services. One new hospital could be built and complemented with outpatient centers of excellence that focus on cardiac care or neurology, as well as primary care and other ambulatory services.

That system would then be led by a larger institution capable of population health management and the kind of value-based contracting that state officials believe is the future of payment reform.

Northwell, which has so far committed to no more than a feasibility study, is the most likely to lead the transformation envisioned by the Cuomo administration.

Northwell tried unsuccessfully to take over Long Island College Hospital in 2014 and last year partnered with Maimonides Medical Center, which covers Southwest Brooklyn. Having a presence in central and eastern Brooklyn would make sense for the Long Island-based system, which has been shut out of the north by the city's other large health systems and is looking for a larger presence in Queens, which is close to Wyckoff.

Northwell and Wyckoff had been in talks before the feasibility study commenced. The letter of intent specifically allows for any one of the four hospitals to back out at any time and does not prohibit these discussions from continuing.

The idea that Northwell would take over more than one of these four hospitals seems, for now, far-fetched given how much debt it would have to assume and what that might do to the system's credit rating.

It could, however, sign a management contract that lets it play an active role without becoming an active parent.

The nonbinding letter, dated July 19, commits the four hospitals to review Northwell's proposal, which is due Sept. 1. It states that the four will apply to the state for a new Certificate of Need for an Article 28 license so they will be considered their own health care facility and can therefore apply for the $700 million in new capital funding. Their display of good faith is expected to strengthen their application. The Cuomo administration expects to call for applications in October.

State money for debt restructuring could become available as well if it helps entice reform.

Cuomo’s top health officials, including state health commissioner Howard Zucker, have convened a series of meetings in Brooklyn over the past few months to gather community input and demonstrate their commitment to neighborhood needs.

The theory is that if the state can provide ancillary services that the community wants — clinics, more ob/gyn, yoga, aqua-therapy, psycho-social services — before reducing the number of inpatient beds, then the administration can avoid the political backlash that occurred when Interfaith declared bankruptcy and nearly closed in 2013.

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