Dr. Downsize

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Long Island College Hospital has never been ranked among the city’s best or most heavily endowed medical centers. For 139 years, the Cobble Hill facility quietly educated young doctors, offering decent health care to Brooklyn residents from Red Hook to Greenpoint. But no one could claim it was an institution on the cutting edge.

Until now.

With the arrival of LICH’s new president, Don Snell, one of a breed of bottom-line-obsessed hospital executives common elsewhere in the nation but still rare in New York, this backwater facility has become the site of the city’s most significant battle with labor over market-driven health care–and the real-world consequences of deregulating the state’s multi-billion dollar health care industry.

Snell was hired last November to skipper a ship he claims was foundering, at the time losing up to $1.5 million a month. The 42-year-old administrator has already cut the hospital’s operating budget by $25 million–more than $21 million from personnel reductions alone. He announced the layoff of 412 employees in mid-January and has since eliminated another 153 jobs that were waiting to be filled. Right now, he is in a battle with the nurses’ union to extract $1.8 million in salary givebacks.

Speaking with cool enthusiasm, he outlines plans to reduce the number of beds in the hospital by 40 percent over the next two years. Staff cuts, he says, will be part of the deal.

“This is just the start,” Snell says. “It’s not a popular message, but it’s sort of like the beer commercial: ‘It don’t get no better than this.'”

Industry watchers agree this is the beginning of another painful transition period for New York City’s hospital workers. A new law that took effect in January ended the state’s longtime policy of setting the rates insurers must pay hospitals. Now, insurance companies can negotiate directly with hospitals, extracting better deals for themselves. It’s a practice health maintenance organizations have exercised for years, forcing hospitals to operate more efficiently–or so free-market orthodoxy holds.

But that efficiency comes at a price, critics say. “Financial incentives reduce appropriate care as much as they do inappropriate care,” says Community Service Society health policy analyst Denise Soffel. “They merely replace old incentives to overtreat with what many of us fear are new incentives to undertreat.”

It also means hospitals have to become much leaner–at first by reducing staff costs, and eventually by merging into much larger organizations that provide a full range of in-patient and out-patient services. Add the fact that hospitals can expect to receive reduced Medicaid and Medicare reimbursements, and the picture gets gloomy for the more than 210,000 people–an estimated three-quarters of whom are women and minorities–employed in this sector of the city’s economy.

“Hospitals are still the largest employers, public or private, in almost any low-income community within New York,” says Howard Berliner, chair of health services management and policy at the New School for Social Research. “These jobs have been historically secure. They pay benefits and they pay good salaries, particularly for unionized workers,” he says. “And now those opportunities may be gone.”

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In Snell, employees may have found themselves dealing with the hospital administrator of the future. After 20 years in deregulated city hospitals in Philadelphia, Atlanta and Detroit, Snell brags he is one of a handful of hospital presidents now in the city to cut their teeth in an open-market environment. He literally helped write the book on market-driven health care. The Rising Tide: Emergence of a New Competitive Standard in Health Care, published by a Washington think-tank, is a seize-the-moment manifesto that promotes a work ethos akin to (and this is the book talking) “that of a convict recently escaped from prison and running just ahead of the flashlights and the dogs…never being able to stumble, in order to avoid capture.”

Snell has earned a nationwide reputation for the ruthless management of shrinking hospital budgets. He is attempting to use it to maximum effect, particularly in dealing with unions.

“When I came in [to LICH], the hospital was bleeding from all of its orifices, and there was no sign that it was able to turn itself around. I told the staff this organization would run out of cash and go into receivership by the end of March [if nothing was done],” Snell says. While most of the initial lay-offs came from middle management and the remainder from line workers, he dictated that a minimum of $1.8 million had to come from givebacks in the nurses’ contract. New hires would receive far less and the most senior staff would have to take pay cuts up to $4,500 a year. Snell also canceled the nurses’ automatic union dues deduction, a common practice that costs the hospital little.

The union will have to accept this, he says. If they don’t, Snell says he is prepared to fill their jobs with temporary workers and, if need be, permanent replacements. “As far as we are concerned, [the negotiations are] over for us.”

The nurses’ union, for its part, thinks the fight is just beginning. “The hospital is obligated by law to negotiate with us,” says Elaine Charpentier, labor relations representative for the New York State Nurses Association and its chief bargainer with LICH. “We will continue to pressure this administration.” Charpentier says, Snell came to the bargaining table with his final offer and “never moved off the dime.”

Every hospital worker in the city should be watching what happens at LICH, adds Charpentier. “Given that the single biggest hospital expense is personnel, if you squeeze your costs while paying top dollar for senior executives, the money will have to come from downsizing staffs,” she says. “It’s the workers who are going to get screwed.”

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Since January, when Governor George Pataki’s Health Care Reform Act of 1996 took effect, either angels or buzzards–depending on your point of view–have been circling around New York City’s hospitals.

The law, bringing New York in line with every other state except Maryland, ended rate regulations that guaranteed all hospitals a fixed fee for services from insurance companies. For years, regulators set these rates, giving higher reimbursements, for example, to teaching hospitals or hospitals agreeing to treat uninsured patients. Now that they are no longer braced by the old system, everything from strategic planning and mission to salaries, patient care and employment rolls is subject to a new profit-maximizing calculation.

Free market enthusiasts think this sort of herd-culling is good, arguing that leaner and hungrier businesses serve the public more efficiently. They also note that health maintenance organizations, now dominant players in the market, have long been able to negotiate directly with hospitals, so deregulation only serves to make the market more fair for everyone. Others, however, worry that losing the cushion provided by rate regulation will prove cataclysmic.

The reality is likely to be somewhere in between, the New School’s Berliner says. Today, HMOs and other health plans often demand their patients seek care whenever possible not in hospitals, but in outpatient clinics, rehabilitation centers or by using services such as home health care. Since no one is expecting demand for health care to slacken–the population is aging and everyone is seeking access to the latest treatments–employment opportunities will actually grow in outpatient services. But low-skilled hospital workers, who tend to be well paid with decent benefits, are likely to be victims of the expected wave of mega-mergers as hospitals consolidate and diversify, he says.

“The jobs that will be gone more or less forever are the lower skilled and less skilled hospital-based jobs–things like food service workers, a lot of laboratory work, central supply,” he says. Hospital networks will get those services from one supplier, rather than individually supporting entire staffs. “The new jobs will be in the suburbs, in managed care offices. Or they will be jobs requiring substantially more skills and training than these workers currently have.”

The unions, for their part, are fighting back, exploiting a popular issue with the public: All of these cutbacks seem certain to diminish the quality of care. Administrators crying poverty already routinely replace high-priced nursing professionals with “nursing techs” who have no formal training, but are assigned to more routine tasks formerly performed by nurses. The New York State Nurses Association, for example, has launched a state-wide campaign encouraging patients to “Ask for a Real Nurse.”

In its last bargaining round, the large Hospital and Health Care Employees Union Local 1199 signed contracts giving up wage increases in exchange for job security guarantees, albeit with rigorous–some say onerous–retraining requirements for low-skilled staff. Snell opposes even these provisions.

“I found it pretty amazing that anyone would have negotiated that,” he says, adding that the job security language promises to be a major headache for presidents like himself. “Hospitals can’t afford this anymore. Everyone is going to be reducing by 40 to 50 percent. And if you can’t, you’re going to go out of business.”

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Getting beyond the immediate cash crunch, Snell aims to quickstep LICH into a brave new world dominated by managed care. With competition for insurers rewarding those who offer the cheapest care possible, Snell thinks he has little choice but to turn what is primarily a traditional teaching and acute care hospital into a comprehensive system serving people, in Snell’s words, “womb to tomb.” Within the next two years, he anticipates affiliating LICH with one of what he sees as three to five emerging hospital associations, the major players now being Beth Israel-St. Luke’s/Roosevelt, the Mt. Sinai system and the Columbia-Presbyterian/New York Hospital/Cornell combine.

To do this, he says LICH will be diverting people from hospital beds to new community-based clinics to be opened throughout Northwest Brooklyn. LICH now has 516 beds. Snell expects that number to be reduced to 250 by 1999.

The new system will require workers trained in prevention, as well as primary, sub-acute, home health and hospice care. The staff remaining in the hospital, he adds, will be expected to do a variety of jobs.

“Anyone who thinks that they’re going to have the same job that they’ve had all along will be casualties in the change,” Snell says. “But if they’re flexible, understand where the market is going and put in the time necessary to be retrained, they’ll actually have very good careers. The health care industry is a growth industry. Hospitals are not.”

Michael Hirsch is a Manhattan-based freelance writer.