Interfaith Hospital Running Out of Cash as Merger Stalls

Five months after being forced into bankruptcy by the state Department of Health, Interfaith Medical Center in Bedford Stuyvesant is floundering on the shoals of insolvency, running out of cash and drafting both a restructuring and a closure plan, hospital officials confirmed to City Limits on Thursday.

“It’s no question—cash is tight,” acknowledged Interfaith’s CEO and president, Luis Hernandez. In an effort to stay solvent and hold the state Department of Health and the state Dormitory Authority to their promise to keep Interfaith alive, Hernandez and the board of trustees are in the midst of a vast restructuring plan, to be submitted to state DOH some time in the next few weeks that could fundamentally alter how the 287-bed hospital serves the neediest of Central Brooklyn.

At the same time, Interfaith, having filed for bankruptcy, is required by the state Dormitory Authority to draft and file a hospital closure plan—though Hernandez and a hospital spokeswoman, in an interview, stressed that the hospital was focused on restructuring, and still hoped to ultimately merge with Brooklyn Hospital Center in Downtown Brooklyn.

After all, the prospect of that merger was why Interfaith was forced into bankruptcy to begin with.

The predicament facing Interfaith is a complicated, complex and incredibly vexing situation – for the hospital’s administration, its employees and the residential communities of Central Brooklyn, which make up the hospital’s patient base.

And it’s a remarkably sad turn of events for an institution that a decade ago was nearly $50 million in the black, according to one source, and barely got a passing mention in the first state-wide health care reform working group (known as the Berger Commission, after its panel chair, financier Stephen Berger), which was convened in 2004 and called for massive hospital closures across New York State—13 in New York City alone. At the time, Interfaith was “barely a blip on the screen,” the source recalls.

That was then. This is now.

Anatomy of a failure

To understand a little of the rise and fall of Interfaith, one has to track the changes in Medicaid reimbursements over the past decade. While Interfaith was still going strong in 2004, by 2009, the hospital was battling a rising deficit, after the state cut the hospital’s enhanced Medicaid rate for psychiatric treatment; more than 40 percent of the hospital’s beds are dedicated to psychiatric patients.

Flash forward to January of 2011. In an effort to lower Medicaid spending by $2.2 billion by the following fiscal year, Gov. Andrew Cuomo established a second, state-wide working group, known as the Medicaid Redesign Team (MRT), to assess where efficiencies and “integrated systems of care” could be created to reduce Medicaid spending.

A subgroup of the MRT, known as the Brooklyn Working Group and led, again, by Stephen Berger, spent six months looking at hospitals and health care systems in Brooklyn and in November of 2011 called for a series of closures and mergers, including the merger of Kingsbrook Jewish Medical Center in East Flatbush with Brookdale Hospital Medical Center in East New York, the consolidation of the SUNY Downstate Medical Center to single campus at the Long Island College Hospital campus in Downtown Brooklyn and the closure of a seventh hospital, Kingsboro Psychiatric Center and the transfer of its patients to community-based clinics. So far, none of the proposed changes has been enacted.

Interfaith alone, according to the Brooklyn Working Group, lost $57 million in 2010. So, arguing that Interfaith and Wyckoff Heights Medical Center in Bushwick—two of Brooklyn’s financially weakest hospitals—could not survive on their own, the Working Group proposed the two hospitals merge with the more stable Brooklyn Hospital in Downtown Brooklyn.

The logic of the merger was two-fold. Brooklyn Hospital, which had effected its own reorganization, could help restructure Interfaith and Wyckoff, while the weaker hospitals would bring more patients to the table—an enormously expanded payer mix of Medicaid and Medicare patients, to serve as a buffer for Brooklyn Hospital’s bottom line as insurance reimbursements are expected to undergo marked changes with the fully implemented Affordable Care Act.

To make the recommendations more palatable to Brooklyn hospitals, say sources familiar with the situation, the hospitals were promised millions of dollars in state grants under the Health Care Efficiancy and Affordability Law, known as HEAL grants—monies meant for hospitals, according to DOH’s website, that “address unmet health care needs”—to encourage their merger and consolidations.

So far, of the approximately $84 million in HEAL money allocated in fiscal year 2011-2012, $61.6 million was distributed around New York State. The recipients in New York City included Lincoln Medical and Mental Health Center in the Bronx and Woodhull Medical Center in Brooklyn—public hospitals which split a $1.8 million HEAL grant to improve asthma care.

Brooklyn Hospital was awarded $1 million to hire a consultant to explore a merger with Interfaith.

Interfaith received no money; instead, it was urged by the state Department of Health to declare bankruptcy to make it a more palatable merger partner.

Salvation stalled

Following Interfaith’s bankruptcy filing in December of 2012, Brooklyn Hospital and Interfaith signed an MOU on February 1, agreeing to pursue a merger. Since then, say sources, nothing concrete has happened. Insisting it could go it alone, Wyckoff pulled out of the merger discussions.

According to some familiar with the situation, Brooklyn Hospital is waiting for a second tranche of $1.6 million from state DOH, to do a further study of what a merger with Interfaith would look like, in technical detail. But, say several sources familiar with the negotiations, the state DOH, annoyed that the first consultant’s report didn’t go far enough, is loathe to release a second round of money.

As for Interfaith, the hospital is between a rock and a hard place, says a well-placed source. The hospital can’t push Brooklyn Hospital on the merger, but can’t pull out itself. According to the same source, Interfaith was warned point blank by state DOH that if it didn’t sign the MOU with Brooklyn Hospital this past February, “they wouldn’t make financing available to us in the bankruptcy proceedings.”

Tactfully stepping around the question of state pressure, Hernandez confirmed that signing the MOU was a “stipulation” from the state DOH as part of its bankruptcy proccedings. The hospital still has to go to court on a monthly basis to get the money it needs from the state Dormitory Authority to pay its bills, despite its success in shaving costs and breaking even the past two months.

Recently, said Hernandez, the Dormitory Authority promised to release additional funds to ease the hospital’s financial crunch, but as of yet, has not done so.

A spokesman for the Dormitory Authority referred all questions to the state Department of Health. A spokesman for the DOH released the following statement: “The State Health Department (DOH) is aware that the hospitals have had merger discussions. DOH cannot comment as no formal plan has been submitted. Additionally, DOH has not received a hospital closure plan from Interfaith Hospital.”

Interfaith at the crossroads

“What will happen if we were not here?” Hernandez pondered the question. “ If you look at Brooklyn, we are the only hopsital in that area, Central Brooklyn.”

Without Interfaith, patients will be scattered north to Woodhull, south to Kings County and Kingbrook Jewish. It’s not a good scenario, particularly for Kings County, which in January had an average wait time of 23.9 hours between patients being seen in the ER and being admitted.

Interfaith, located at 1545 Atlantic Avenue, is the only hospital in Central Brooklyn, serving a constellation of neighborhoods, including Crown Heights, Weeksville, Bedford Stuyvesant, Ocean Hill-Brownsville, East Flatbush, and Cypress Hills—though patients also come from as far away as Gowanus. Of the 50,000 visitors to the ER last year, approximately 60 percent of the patients were on Medicaid, 25 percent were on Medicare, 5 percent were uninsured and the rest had some kind of private insurance.

Under its current draft restructuring plan, the hospital administration hopes to keep the emergency department open, but plans to cut beds and move to a more “ambulatory” model of care. “We still want to provide the services that the community needs and [are] focusing on those services that have been defined as specifically needed: mental health and medical/surgical services,” said Hernandez.

The hospital has taken concrete steps to cuts costs. Responding to a 2012 survey of ER patients that revealed that at least 40 percent had non-emergent medical issues, a physicians’ group associated with the hospital opened up an urgent care center to help direct foot traffic away from the ER. The move was critical, said Hernandez: Of the roughly $530 the hospital spends on each ER visit, only about $110 to $150 is reimbursed.

“Our goal is to trim down, but not to the point [that] it would choke us,” said Hernandez. The goal is for the hospital, in some iteration, to stay open and viable and crucial. What that will look, however, is still up in the air.

Several sources familiar with the merger negotiations between Brooklyn Hospital and Interfaith Medical Center stress both hospitals are opposed to a merger, though Interfaith will go forward if it is the only way to save it. But Hernandez maintained that Interfaith had met with Brooklyn Hospital as recently as two weeks ago and that discussions were “very cooperative.” Brooklyn Hospital was waiting “for some funding so they can start the analysis that needs to be conducted to undertake this process” of merger, said Hernandez.

After repeated phone calls for comment, Brooklyn Hospital released the following statement: “The Brooklyn Hospital Center continues to negotiate in good faith to establish a relationship with Interfaith Medical Center that will help that hospital remain open to provide the community with valuable healthcare services. TBHC will remain diligent not to enter any relationship that could jeopardize the stronger financial position we have achived in recent years.”

In the meantime, Hernandez acknowledged, Interfaith did have some concerns with the draft merger report done by the consultant hired by Brooklyn Hospital in 2012, Navigant, which hypothesized several scenarios, one in which Brooklyn Hospital expanded its operations in the wake of a fully shuttered Interfaith and others in which Interfaith became a strictly urgent care and behavioral health site while all medical/surgical services were diverted to Brooklyn Hospital.

“We felt they needed to do more analysis,” said Hernandez.

But without Brooklyn Hospital taking a more concrete step toward a merger, or a significant infusion of cash from the state, Interfaith hospital could run out of money “as soon as August,” warns the hospital spokeswoman, Melissa Krantz. Having two very different hospitals combing, “with different audiences and constituents and product lines was not as well thought through as possible,” says Krantz.

Along with its geographic distance from Downtown Brooklyn, Interfaith serves a much poorer population—with more than 50 percent of patients on Medicaid, and with a strong focus behavioral health, including drug addictions and mental health issues: “We are the only hospital in Central Brooklyn,” stresses Krantz. “We are a safety net hospital. To combine us with anybody was a challenging endeavor, at best.”