4/1/13

Victory Memorial and the Fate of the City's Community Hospitals

According to a 2006 New York Times article, Victory Memorial Hospital, just a few blocks from the foot of the Verrazano, was built in 1927. Its specialty was obstetrics.  Generations of local residents were born in the maternity room there.

When the hospital opened, its patients were mostly Irish and Italian. By 2006, they were likely to be Chinese or Russian.

Victory had bilingual phones that allowed doctors to conference with translators, and a program that allowed Muslim women to opt for female doctors and nurses only.

Bay Ridge's Russian population delivered at Victory because so much of the staff there spoke Russian -- and because it was accessible.

In 2006, when Victory ended up on a state closure list based on declining patient visits and growing financial troubles, Governor Pataki and Governor-elect Spitzer signed on, leaving the State Legislature the hospital's only hope.

On November 16, 2006, Victory filed voluntary petitions for a chapter 11 reorganization in the bankruptcy court in the Eastern District of New York.

Two years later, hospital workers were still waiting for the severance pay and benefits that State Senator Marty Golden had assured them were forthcoming when they lost their jobs in 2006. 

New York state gave Victory a $25 million grant in 2007 to cover its closing costs.  The hospital used about $19 million to pay off the mortgage, setting aside $5.4 million for its former workers.

Telling its workers there wasn't enough to pay them out of the proceeds of the bankruptcy, Victory paid its lawyers, DLA Piper, $6.4 million in legal fees.

Victory was among the dozens of small community hospitals, staffed by LMDs or "local medical docs", sucked in as affiliates in the 1990s by big-name institutions in exchange for promises of loans and the percs of academic prestige.

When the big hospitals came calling in 1994, Victory Memorial Hospital had never been in financial distress. Only about 5% of its patients were on Medicaid.

The city's hospitals, as part of the national rush to cope with the coming of managed care, were consolidating into huge networks, with a constantly shifting stable of acquisitions, during the 1990s.

Affiliating with community hospitals brought the big hospitals a steady stream of tertiary care referrals: specialized, high-revenue medical procedures, like bypass surgery, that big hospitals need to survive and community hospitals often cannot perform. Most of Victory's patients, working people, were insured.

What community hospitals like Victory looked to get in return was the prestige of a big name and a share of its resources, which they hoped would make them more efficient and attractive to third-party payers: insurers, HMOs and companies seeking care for members or employees at a negotiated price.

But state regulators worried that, given the huge volume of consolidations, the big New York City networks would abandon the local communities, leaving small hospitals, especially those serving poor neighborhoods, to fail.

The New York State Department of Health considered regulating these partnerships out of concern that smaller hospitals would become nothing more than referral banks for Manhattan's giants, getting nothing back in return.

Prophetic.

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