Health Care Financial Management: New York Downtown Hospital - Case Study Example

New York Downtown Hospital History New York Downtown Hospital was established as a product of organization change. In 1853, Elizabeth Blackwell, M.D., the first female licensed physician founded The New York Dispensary for Poor Women and Children. In 1857, the New York Dispensary for Poor Women and Children was transformed into the New York Infirmary for Indigent Women and Children. This year marked the first period of continuous transition for New York Infirmary for Indigent Women and Children. In 1937, the New York Infirmary opened the Strang Cancer Prevention Clinic and in 1969, it formed an affiliation with New York University Medical Center to strengthen the university medical teaching program. This had lead to another structural and administrative reformation. From the New York Infirmary for Indigent Women and Children, in 1979, the hospital merged with Beekman Downtown Hospital, which was founded in 1945 as a product of a merger between St. Gregory’s Free Emergency Accident Hospital and Ambulance Station and became New York Infirmary – Beckman Downtown Hospital. In 1991, New York Infirmary – Beckman Downtown Hospital went through another administrative and organizational change. It consolidated both names into New York Downtown Hospital. Because it was affiliated with New York University Medical Center, New York Infirmary – Beckman Downtown Hospital went through another change in its name to NYU Downtown Hospital. Mergers and acquisitions are hot (Zweig, 2005). This hospital is not exception because changing management, changing policy, changing program (Austin, 2000) and changing procedure, but also brings opportunity (ibid). After the deregulation, Mayor Bloomberg suggested that nonprofit organizations should operate like business to raise fund for its operating costs and to make profits. NYU Downtown Hospital begins to raise fund to increase its revenue and to cover its operating costs without fully depending on government fund. Fund raising effort brings the hospital to come in contact with the Lehman Brothers from the Lehman Brothers Foundation who made a substantial contribution to the hospital. In recognition to its donation, the hospital built the Lehman Brothers Emergency Center with a new state-of-the-art emergency facility and whose size is twice its current size and can handle triple the capacity. Besides financial contribution from the Lehman Brothers Foundation, the Hospital also received substantial amount from the New York-Presbyterian Health System, which had led to the Hospital to change its name to its previous name, which is New York Downtown – Presbyterian Hospital. Vision Quoted directly from http://www.downtownhospital.org/pages/3050/index.htm, the Hospital cites that its vision is: “To be a trusted neighbor who provides access to a full range of quality health care services to our resident community with special emphasis on greater New Yorks Chinese community” and to be a center of excellence for ambulatory care, health maintenance and primary care education for all who live or work in lower Manhattan.” The vision is developed based on the belief that the hospital is a community-based health care organization and it is the hospital responsibility to make the patients, visitors, and staff to feel that they are in a caring environment. The hospital also recognizes that the community is the focus of medical and economic forces and it has an obligation to act positively to meet the health care needs of its neighbor. As a community-based hospital, it seeks to provide a full range health care and social services to its neighbor either through traditional or non-traditional forms of care such as impatient care services or extended social services, midwifery respectively. Surrounded by Chinese population, the hospital seeks to cater to the needs of the Chinese community or to become culturally sensitive in the facilities or services even the staff are sensitive to this culture and other culture as well. The hospital builds on its traditional reputation by specializing on the care for women and children, to ensure that it becomes the center of excellence for health maintenance. In addition, the hospital represents a non-resident working community that emphasizes on community-based facility related networks, one that reflects Christian faith. Sometimes, leaders walk the walk and talk the talk (Pascale, Millemann & Gioja, 2000; Simmons, 2005). Although having this wonderful vision, multiple mergers cause the Hospital to become lost in translation. Fund raising and recognition cause the Hospital to become lost in translation. After receiving fund from Health Care Fund, from the name New York Downtown – Presbyterian Hospital, it becomes New York Downtown Hospital. Mission The hospital mission is: To serve the people who live or work in Lower Manhattan; To offer services and technology appropriate to a community hospital with emphasis on outreach and ambulatory services; To continuously support educate graduate and/or undergraduate educational programs and to give them clinical experience in their field such as physicians, nurses and other health professionals; To offer “to its patients, medical staff and employees a caring environment, which emphasizes the value of patient dignity and employee and professional pride” (http://www.downtownhospital.org/pages/3050/index.htm); and To provide programs and deliver services, within its limits, to respond to the needs of its community. Values Patient, integrity, respect for individual, and teamwork Facility Description(s) New York Downtown Hospital is located in the heart of the financial district and is the only community hospital in lower Manhattan. It has 254 certified beds but only 150 are in service. Even though it has additional funding, in 2004, the occupancy rate of its certified beds down to 34%, and 80% of this occupancy is staffed beds. Patient wise, in 2004, 11,306 patients were discharged and 30,409 patients required emergency department visits. In 2005, the hospital had approximately 100,000 outpatient visits. In patient services includes adult pediatric medical/surgical care and obstetrics and approximately more than 40% of inpatient discharged were obstetrics cases. Since almost half of the hospital admissions were resulted from emergency visit, the hospital increased its hiring of full-time emergency staff to 1,091 in 2003. Forty nine percent of the inpatients are of Asian background, mainly of the Chinese background without health insurance and 56% have poor health or live in the unhealthy area or the city. It is projected that the number of patients would likely to increase because of the booming commercial and residential population in the area of Manhattan and downtown New York. Finance According to New York Health Plan Association, 58% of hospitals made profits after privatization but majority is still subsidized by government. Many are quickly jumped on expansion projects rather than program. New York Downtown Hospital, like other hospitals in New York, has taken on private financing but has ended up in debts. Gale Scott describes that New York Downtown Hospital, for example, was in the limelight during the incident of 9/11. This incident brought some luck for the hospital as fund poured in from different sources. However, probably, easy comes, easy goes. Due to poor financial management, the hospital is coming close to financial disaster, says Scott, except its parking lot that is worth $80 million and is being sold by attrition. Appendix 2 shows the Hospital financial condition up until 2000. Since then, financial statement of the Hospital is no longer issued for the public. The reason may be that the Hospital is experiencing financial difficulty. One may say that the reason of the financial difficulty is that the Hospital is deviating from its originality as an impact of mergers and privatization. Privatization has caused the Hospital to experience financial melt down because it emphasizes on making profits rather than managing a hospital. Its financial record (Appendix 1 and 2) shows the Hospital is investing in corporations and trusts, land & buildings, fund, etc., rather than investing in healthcare services. Common sense is that when you invest more, you tend to reduce services because you become dissolution with little income you receive from the investment. The reality also shows that when a nonprofit becomes for-profit, like the for-profit, income from investment tends to be distributed to the CEO and executive members and members of the board and trusts rather than on the program. Consequently, it belittles the organizations programs and it service all together. Facing credit crunch and possible bankruptcy, the hospital is being pressured to “decertify approximately 70 medical surgery and 4 pediatric beds, reducing its licensed capacity from 254 or 180” (The Acute Care Recommendation, 171). It is furthered recommended that the hospital has to discontinue its impatient pediatric service and these services be added to other facilities” (ibid) and “reorganize its outpatient clinics” (ibid). The dilemma of receiving funding from private sector is that “You cannot bite the hands that feed you.” Current recommendation to reduce its capacity is haphazard (Heller, 2007) because it is based on the needs or perception of the guarantor, and thereby it strengthens the hospital’s finance further as it has to accommodate new business. This is reflected in the Hospital financial statement that non-healthcare program is increasing while healthcare program is declining. In addition, investing in bonds also add to the cause of financial melt down because at bonds are only cashable at maturity date. This makes it impossible for the Hospital to have cash at a time it severely in need of cash. Similarly, these bonds require the Hospital to pay insurance, which is another additional cost burden for nothing. Insurance charged on the bonds is to protect the bond from depreciating below the value of the dollar but it is because market is not pure and full of manipulation. Even though Shim & Siegel (1997) suggest that non-profit organizations can raise fund through this media, it would eventually lead the non-profit organizations to become for-profit organizations. They would deviate from their vision and would value that their service is based on the willingness of the patients to pay and how much they should charge the patients in order to make profits. Privatization indeed constraints the Hospital budget. For example, the Hospital increased hiring full-time emergency staff but contracting out its money management by using KPMG, a private accounting firm. When it comes to money management, one should learn from the Chinese, never trust your money to other people. They would steal from you.” The hospital, although is experiencing financial difficulty, KPMG is recommending it to form an external audit team to ensure that the Hospital is transparent, accountable, compliance and that it does delivers the best value compare to the for-profit organization. Neither KPMG nor the Hospital understands that management differs across sector (Denhardt, Denhart, & Aristigueta, 2002). What seems to be effective in for-profit does not seem effective in the nonprofit and what seems efficient in the for-profit does not necessarily efficient in the nonprofit. Many seem to be buried in the politics of marketization. Not only management differs across sector (Denhart, Denhardt & Aristigueta, 2002), but the services delivered are also different. In the politics of marketization and competition, many have perceived that competition increases efficiency but in reality, it produces radical evil (Grenberg, 2005). The market tends to compare apples and oranges in the same basket. My question is, how can the management and services delivered by the hospital be compared with the management of private sector that is selling computers or other products whose characteristics are agility, adaptability, and can be reengineered? Pascale, Milleman & Gioja (2000) emphasize, “If it ain’t broke, don’t fix it” either wise, you may surf the edge of chaos. And if you want to manage successfully, don’t let other people manage your cash. The Hospital may not experience a financial melt down if it stays in its original discipline rather than continuous expansion of non-health care programs because it reduces the resources available for delivering healthcare services. References Austin, James (2000). The Collaboration Challenge. San Francisco: Josey-Bass Treasurer Report. Building the Future: Education, Community Outreach, And Research Programs. Retrieved September 18, 2007 from http://www.healthcarechaplaincy.org/publications/publications/annual_report_2000/09.html de Luna, Robert (2007, July 24). United Hospital Fund Provides $808,000 for Grants to Improve Health Care in New York City. Retrieved September 18, 2007, from http://www.uhfnyc.org/press_release3159/press_release_show.htm?doc_id=510825 Denhardt, Robert; Denhardt, Janet & Aristigueta, Maria (2002). Managing Human Behavior in Public and Nonprofit Organizations. Thousand Oaks, CA: Sage Publications Dispelling the myths – New York’s Hospital Finances: Another View. New York Health Plan Association. Retrieved September 16, 2007 from http://www.empirenewswire.com/releases/downloads/myshpa.pdf Grenberg, Jeanine (2005). Kant and the Theory of Humility. Cambridge, MA: Cambridge University Press Heller, Karen S. (2007). Health System Restructuring: The New York Experience. Healthcare Financial Management Association New Jersey Chapter Meeting, June 14, 2007 Health System Restructuring: The New York Experience. Retrieved September 18, 2007 from http://www.hfmanj.org/Documents/JuneQPresentations/Heller.pdf New York City Region: Acute Care Recommendations. Retrieved September 18, 2007 from www.gnyha.org/4761/File.aspx Pascale, Richard; Millemann, Mark & Gioja, Linda (2000). Surfing the edge of chaos. New York: Three River Books Rorer, Eleanor (2003, August 25). United Hospital Fund Reports Severe Financial Losses Persist at NYC Nonprofit General Care Hospitals: Viability of One-Third in Doubt Scott, Gale. Description. Retrieved September 17, 2007 from http://goliath.ecnext.com/coms2/summary_0199-9955508_ITM Shim, Jae & Siegel, Joel (1997). Financial Management for Nonprofits. New York: McGraw-Hill Simmons, Annette (2005). The Story Fact. New York: Basic Books Vision, mission, values. Retrieved September 16, from http://www.downtownhospital.org/pages/3050/index.htm DASNY Board Minutes - April 28, 2004. The New York and Presbyterian Hospital. Retrieved September 18, 2007 from http://www.dasny.org/dasny/board/minutes/4_28_04.php Appendix 1 BUILDING THE FUTURE: EDUCATION, COMMUNITY OUTREACH, AND RESEARCH PROGRAMS Treasurer Report Read More