Albany has put hospital closures squarely on the table as part of the statewide effort to cut health care costs. Then why are hospitals throughout New York City spending hundreds of millions of dollars to expand?
The reason, according to the hospitals, is that they need to spend money to make money.
“You have to invest to stay in the game,” says Pete Wolf, acting executive director of city-owned Coney Island Hospital.
But the growth is also pushing up the hospitals’ debt levels–already the highest in the country–and will make it more difficult for the state to trim costs. Even as the governor’s newly formed closure commission tries to cut back, some hospitals are busy expanding.
Approval for projects
Over the past five years, public and private hospitals in the city have won state approval for $3.2 billion in capital projects: modernizations, new buildings and investments in technology.
- Under a 1960s-era law designed to keep health care expenses down, the state must certify that all hospital expansions that cost more than $3 million are necessary.
Through a separate agency, the Dormitory Authority of the State of New York, the state also helps provide financing for some of the additions.
Of course, not every project gets approved or financed. The intensity of the state’s review process has curtailed some projects. The city’s weakest hospitals have been largely unable to undertake capital projects because of relatively high debt levels.
The expansions are driven by two factors: the surge in radiological medicine, which requires expensive technology such as MRIs and CT scanners, and the need to modernize aging facilities. Among other factors should be also put into consideration is the extra expense going with these kinds of machines. For example: regarding the MRIs, the hospital also need to equip power generators, steel frames (for immobilization) and air compressor (read these air compressor reviews first before purchasing) to support the normal operation of MRIs.
Seven hospitals have won the OK for radiological expansions since January. In Brooklyn, Brookdale University Hospital and Medical Center is adding a third CT scanner for $1.2 million, and St. Luke’s-Roosevelt Hospital Center is renovating an interventional radiology suite for $9.5 million.
In some cases, renovations are long overdue. The city’s Health and Hospitals Corp. is spending $1.4 billion on modernization. Officials hope the renovations will help it narrow its four-year-old operating deficit.
- At Coney Island Hospital, the city spent $91 million on a modernization and construction of a seven-story tower that opened last month. The facility allows the hospital to replace six-bed wards with semiprivate and private rooms. As a result, officials believe, the risk of infection will decline and Coney Island Hospital will be able to attract more patients, increasing occupancy from 74% to more than 85%.
One of the city’s largest private hospitals, Montefiore Medical Center, borrowed $189 million in 2004 to replace more than 300 beds, add five operating rooms, update mechanical systems and add a radiation therapy center.
The additions may help improve the Bronx hospital’s 2% operating margin and accommodate rising admissions, which grew 44% between 1993 and 2005.
“On the one hand, you can’t not invest in capital needs,” says Joel Perlman, Montefiore’s chief financial officer. “On the other hand, the financial state of New York hospitals is quite fragile.”
It’s likely the expansions will continue at a steady pace.
Many buildings constructed in the 1980s are close to the end of their 25-year life cycles. New York-Presbyterian Hospital, for instance, has been conducting a $1 billion capital campaign with an eye toward a major building program.
And a string of eventual hospital closings may spur expansions by strong hospitals that survive.
New York Hospital Medical Center of Queens, operating at 96% to 97% of capacity, is already planning an expansion because of rapid residential growth.
It may also need to take into account the possible closure of nearby Parkway Hospital, which is in the midst of financial woes. “It is something to be considered,” says a spokesman for New York Hospital Medical Center.