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November 28, 2006

Key commission recommends major restructuring of New York's hospital and nursing-home systems

A powerful state commission recommended that New York State close nine hospitals, eliminate some 7,200 hospital and nursing-home beds, and develop new home- and community-based services that would better meet future needs for health care.

The Commission on Health Care Facilities in the 21st Century also recommended that state leaders consider broader changes including comprehensive restructuring of health-care financing, expanded health-insurance coverage, and privatization of three State University teaching hospitals.

"Our health care system is broken and needs repair," said Dr. David Sandman, executive director of the commission. "Unless we act decisively, further facility closures and bankruptcies are almost certain to occur. Moreover, the hospitals that close due to market forces alone may be the ones most critical to preserving access."

The commission's recommendations would reduce Medicaid costs by an estimated $249 million a year, with similar savings for employers and other private purchasers of health insurance. Hospitals and other service providers would reap an estimated $721 million annually that could be used to help pay restructuring and other costs.

The commission said New York's current health-care system suffers from "chronic instability" that has resulted in 70 hospitals and 63 nursing homes closing since 1983, with most surviving institutions operating at a loss. In such a system, "patient access to stable health care services is at risk," it said.

Despite those closings, the statewide hospital occupancy rate fell from 83 percent in 1983 to 65 percent in 2004, as medical advances and development of non-institutional services made hospitalization less necessary. Occupancy rates are especially low in the state's Western, Northern and Central regions, the commission said. Excess capacity increases costs, jeopardizes quality of care, encourages needless hospitalization and diverts resources away from the most vulnerable communities such as inner cities and rural areas, it said.

Recommendations for closure or restructuring affect one in four hospitals statewide and would eliminate 4,200 beds, about 7 percent of current hospital capacity. Some 3,000 nursing-home beds, 3 percent of the statewide total, would be eliminated while more than 1,000 new openings for long-term care would be created in non-institutional settings.

"New York should be proud of having one of the largest and most generous Medicaid programs in the nation," said the commission, which is chaired by Stephen Berger, a former state social services commission. "It is a very costly program to maintain, however, and its costs are rising at an unsustainable rate.

"Medicaid is a crippling budget item for the state and many counties. Upstate counties, which lack broad tax bases but have growing Medicaid populations, are particularly struggling under these cost burdens. We must regain control over Medicaid costs and spend more wisely to maintain health care services without crowding out our ability to finance other important social needs."

Under the statute that created the commission, its recommendations take effect unless both houses of the Legislature vote to reject them before January 1. Absent such rejection, the state Health Department is charged with implementing the recommendations starting in 2007.

The commission urged state leaders to undertake a "comprehensive review" of financing policies that affect hospitals and other health care providers as well as health-insurance purchasers and consumers. It said New York should "strive for health coverage that is universal, continuous, affordable to individuals and families, and affordable and sustainable for society at large."

Its report also called for expansion of primary-care capacity; development of "hybrid" facilities that are "less than a hospital and more than a primary-care center"; analysis of privatizing SUNY teaching hospitals at Brooklyn, Stony Brook and Syracuse; greater use of health-information technologies; and a broad review of "the future role of county-owned and operated nursing homes."

The commission's report is available at www.nyhealthcarecommission.org. A summary compiled by the Business Council is available at www.bcnys.org/whatsnew/2006/1129bergersummary.pdf.