However, all hope is not lost. CHA Board Member Jeff Strabone has studied the NYS Comptroller's audit of SUNY Downstate and files this report below.
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SEVEN KEY POINTS: LICH AND SUNY FACTS
The SUNY Board of Trustees has voted to seek the NYS Department of Health’s approval to close LICH. The Trustees claim that LICH is a financial burden on SUNY Downstate. Despite SUNY’s spin, the evidence tells a different story:
LICH is not bringing down SUNY Downstate;
SUNY Downstate is bringing down LICH.
The documentary evidence in this report, compiled strictly from the NYS Comptroller’s audits of SUNY Downstate and SUNY’s own online data, shows that SUNY Downstate is over $100 million in the red even without LICH. In fact, LICH was on the rebound before its takeover by SUNY, as shown below, with losses of only $4.7 million in 2010, the year before the merger.
As the NYS Comptroller’s audits show, SUNY Downstate is financially incompetent. And, as SUNY’s own materials show, at the same time that SUNY is moaning about the difficulties hospitals face in today’s market, they want to close LICH in order to open another hospital elsewhere in Brooklyn. Meanwhile, the state legislature is considering a bill to allow a for-profit corporation to operate hospitals specifically in Brooklyn. All the evidence appears below with links to the sources. Happy reading!
The NYS Comptroller’s January 17, 2013 audit of SUNY Downstate is available here:
1. SUNY was looking into LICH's real-estate value even before the NYS Comptroller's audit in January 2013.
SUNY Downstate admitted in comments to the NYS Comptroller that they had appraisals of LICH's real estate.
NYS Comptroller's audit, page 19, SUNY's comments on the draft audit:
NYS Comptroller's audit, page 19, SUNY's comments on the draft audit:
'DMC [Downstate] does have recent appraisals that show values of the PPE ranging from $280-$500 million, which results in assets exceeding liabilities.'
2. The State's declining support has driven SUNY Downstate's downfall.
The State itself has pulled the rug out from SUNY Downstate. You can't blame LICH for that.
NYS Comptroller's audit, page 10:
'According to Hospital officials, when the State Medicaid program cut reimbursement for psychiatric, acute care and rehabilitation services in 2011, the Hospital had to absorb a $20 million loss.'
'Between 2010 and 2011, direct State tax support from SUNY to the Hospital went from $36 million to $27 million; a decline of $9 million. Moreover, between fiscal years 2007-08 and 2011-12, annual State support decreased by $23.5 million.'
'SUNY support for indirect costs and debt service fell from $7.7 million in 2010 to about $1.8 million in 2011; a decline of $5.9 million.'
'Between 2010 and 2011, direct State tax support from SUNY to the Hospital went from $36 million to $27 million; a decline of $9 million. Moreover, between fiscal years 2007-08 and 2011-12, annual State support decreased by $23.5 million.'
'SUNY support for indirect costs and debt service fell from $7.7 million in 2010 to about $1.8 million in 2011; a decline of $5.9 million.'
3. LICH was on the rebound before SUNY took over. SUNY itself? Not so much.
SUNY Downstate acquired LICH in May 2011 and ran it into the ground. In 2010, the last full year before the takeover, LICH was on the rebound.
NYS Comptroller's audit, page 10:
'In fact, for 2009 and 2010, LICH had operating losses of $39.1 million and $4.7 million, respectively.'
Meanwhile, SUNY Downstate was running itself into the ground all on its own.
NYS Comptroller's audit, page 10:
'For the year ended June 30, 2012, the Hospital (including its three component facilities) reported expenses totaling $853.2 million. The Hospital’s financial statements showed a loss totaling $275.8 million for the year ended December 31, 2011.'
LICH is not pulling down Downstate. Downstate is pulling down LICH.
NYS Comptroller's audit, page 14:
'The Hospital [Downstate] anticipates that the structural cash deficit excluding LICH would increase from $71.7 million for the 2011-12 fiscal year to $92.5 million for the 2013-14 fiscal year. The structural cash deficit for LICH would increase from $0.9 million for the 2011-12 fiscal year to $72.5 million for the 2013-14 fiscal year.'
4. At the same time that the SUNY Board of Trustees is trying to close LICH and moaning about the difficulties hospitals face, they are simultaneously planning to open a new hospital elsewhere in Brooklyn.
According to page 4 of SUNY’s February 28, 2013 Power Point presentation, phase three of their Plan, after closing LICH, is to open a new hospital elsewhere.
'Phase 3 – Pursue a Brooklyn Solution and Long-Term Sustainability for Downstate Medical Center.
Develop a plan for creating a Brooklyn hospital consortium, including significant affiliations and partnerships that will serve to make Downstate Medical School the medical school for hospitals in Brooklyn. Explore the potential of the consortium to develop a new hospital for central/northern Brooklyn.'
Develop a plan for creating a Brooklyn hospital consortium, including significant affiliations and partnerships that will serve to make Downstate Medical School the medical school for hospitals in Brooklyn. Explore the potential of the consortium to develop a new hospital for central/northern Brooklyn.'
5. SUNY Downstate is incompetent. Don't believe us. Take it from the NYS Comptroller.
One of the Comptroller's 'Key Findings' was financial mismanagment by SUNY Downstate.
NYS Comptroller's audit, page 1:
'Primary reasons for the Hospital’s financial stress include: the costs associated with the acquisition and operation of the LICH and Bay Ridge facilities amidst an already deteriorating fiscal environment; the failure to take timely actions to address emergency health care issues impacting the Brooklyn community; and weak governance and ineffective financial management.'
6. The NYS Comptroller's previous audit of SUNY Downstate, in 2012, found waste, fraud, and abuse.
NYS Comptroller's audit, page 6:
'The report concluded that Downstate had poor procurement practices that led to fraudulent and uneconomical vendor selection, inefficient implementation of a multimillion dollar software system, and conflicts of interests between an employee and a vendor. These deficiencies likely contributed to the financial distress at the Hospital.'
7. SUNY Downstate has no plan, never had a plan, and ignores its own consultants' recommendations for cost-cutting.
How incompetent is SUNY Downstate? They don't even have minutes of their meetings with their accountants, let alone a financial plan!
NYS Comptroller's audit, page 8:
'To further understand the ability of the Hospital to remain a going concern in 2013, we contacted the Hospital’s independent CPA firm to ascertain the firm’s view of the Hospital’s finances. The CPA firm advised us that it had not reached any conclusions and is seeking a financial plan from the Hospital so that it can assess whether the Hospital will remain a going concern in 2013. In addition, the CPA firm reported that it met with SUNY and Hospital officials in October 2012 to discuss, among other things, the Hospital’s financial viability. On November 15, 2012, we asked Hospital officials for minutes and/or supporting documentation regarding the meeting with the CPA firm, but were told that these items were not yet available. We share the CPA’s position that a financial plan, demonstrating how the Hospital will remain a going concern in 2013, is essential. As discussed in more detail later in this report, the Hospital has been unable to provide us with documentation that clearly details the time frames and necessary steps to achieve financial stability.
SUNY Downstate paid $3.1 million to Pitts Management Associates, a consultant, to find ways to cut costs. Pitts found $65.7 to $70.7 million in savings, but SUNY Downstate did nothing to implement the cuts.
NYS Comptroller's audit, page 13:
'In November 2011, Pitts identified several measures that would enhance revenues and save money. According to Pitts, these actions could be undertaken immediately and would result in $70 million of savings [...] Although nearly a one year had passed since the action steps were identified, as of October 2012, Hospital officials were unable to provide any documentation and analysis to track the savings achieved on an ongoing basis by implementing the steps identified by Pitts. We believe that it is essential that Hospital management be able to demonstrate the status of all steps recommended by the consultant and the actual and projected short term and long term fiscal impacts accruing from them.'
Despite ignoring Pitt's cost-cutting recommendations, SUNY Downstate plans to pay them millions more.
NYS Comptroller's audit, page 15:
'In addition, Hospital officials anticipate that as much as $20 million in additional contract payments to Pitts will also increase the structural cash shortfall. In December 2012, the State approved a 9-month contract worth $5.6 million with Pitts.'
CONCLUSION
LICH is not the problem. SUNY Downstate is the problem.
SUNY is trying to sacrifice LICH to pay for its own sins of mismangement and incompetence. Our communities in Brooklyn should not be the scapegoats. The solution:
Save LICH. Fire SUNY.
Report prepared by Jeff Strabone, Minister of Information
