Purpose

To determine the financial condition of the State University Hospital of Brooklyn (Hospital).

Background

The State University of New York Health Science Center at Brooklyn (also known as SUNY Downstate Medical Center [or Downstate]) includes the College of Medicine, College of Health Related Professions, College of Nursing, School of Graduate Studies, School of Public Health, and the University Hospital of Brooklyn (Hospital). Downstate employs about 8,000 faculty and staff and is the fourth largest employer in Brooklyn. It reported expenses for the year ended June 30, 2012 totaling $853.2 million.

The University Hospital is a key component of New York City's health care delivery system, providing services to communities with largely uninsured or underinsured minority populations. The Hospital provides services at the following three facilities: University Hospital of Brooklyn located in East Flatbush, Brooklyn; University Hospital at Long Island College Hospital (LICH) located in Cobble Hill, Brooklyn; and SUNY Downstate at Bay Ridge (Bay Ridge), formerly known as Victory Memorial Hospital, located in Bay Ridge, Brooklyn.

Key Findings

• The Hospital is facing potential insolvency within a matter of months. Absent other actions or plans to increase revenue or limit expenses, the Hospital will not have sufficient cash to meet its liabilities, possibly as early as May 2013, and it will be forced to make choices about which financial obligations it will honor.
• The Hospital has experienced cash shortfalls averaging nearly $3 million each week. Its operating loss for the six months ended June 30, 2012 was $113.5 million, and its losses for 2012 could exceed $200 million. The Hospital's aggregate operating and non-operating loss for 2011 was $275.8 million.
• Present actions and plans to deal with the Hospital's looming insolvency are insufficient to restore financial stability. While the Hospital has hired a consultant to help identify solutions, a full complement of recommendations has not been formulated.
• 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.

Key Recommendations

• Work with SUNY System Administration, state policymakers, union officials and the Brooklyn community to identify and implement solutions that balance the Hospital's fiscal stability with health care and economic needs of the community and the strategic goals of Downstate Medical Center.
• Ensure that any decisions to acquire or expand hospital locations are thoroughly supported with documented financial analysis demonstrating the financial viability of such decisions.
• Establish a Finance Committee of senior Downstate officials to periodically to review the financial status of the Hospital and recommend needed steps to improve fiscal stability.
• Continue to monitor overtime and to identify measures to minimize costs.
• Reassess the need to retain the current complement of administrators and reevaluate their salaries.
• Work with the consultant (Pitts Management Associates) to ensure that the patient billing system is working as intended and maximizes revenue.
• Establish a financial plan that charts the time frames and steps for restoring Hospital financial stability. Concurrent with the financial plan, establish ongoing monitoring that tracks the status and impacts of Action Plan steps and affords management the ability to determine the success of those steps and identify whether further steps are necessary.
• Update existing cost analysis to include the costs of employee severance and contracted consulting.

Other Related Audit/Report of Interest

State University of New York Downstate Medical Center: Allegations of Procurement Fraud, Waste and Abuse (2010-S-45)