SUNY Downstate Medical Center Faces Insolvency

BROOKLYN, N.Y. -

The State University of New York Downstate Medical Center (Downstate), which includes the University Hospital of Brooklyn, faces insolvency as early as May if immediate actions are not taken, according to an audit assessing the hospital’s financial condition released today by New York State Comptroller Thomas P. DiNapoli.

“SUNY Downstate’s fiscal condition is dire and it needs all hands on deck if it is going to survive,” DiNapoli said. “Management has made poor financial decisions that often times weren’t justified by economic conditions. As a result, the hospital is hemorrhaging millions of dollars every week. This hospital is a key part of the health care delivery system in the city and is a major employer in Brooklyn. The time to act is now if Downstate is going to achieve fiscal stability.” Downstate semploys about 8,000 faculty and staff, making it the fourth-largest employer in Brooklyn.

The hospital provides services at University Hospital of Brooklyn, in East Flatbush; University Hospital at Long Island College Hospital, in Cobble Hill; and SUNY Downstate at Bay Ridge, formerly known as Victory Memorial Hospital.

A major cause of Downstate’s fiscal stress is due to its partnership with and acquisition of Victory Memorial in July 2008 and University Hospital at Long Island College Hospital in May 2011. Victory Memorial was acquired despite its underutilization trends. LICH had operating losses dating back several years.

Auditors found that external forces also had significant impact on Downstate’s finances: State-mandated costs increased by $92.2 million between FY 2007-2008 and 2011-12. One quarter of hospital inpatient beds, excluding LICH and beds for newborns, were unoccupied during 2010.

Medicare and Medicaid accounted for 26 and 19 percent, respectively, of hospital revenues in 2011. When reimbursements for the state Medicaid program were cut in 2011, the hospital absorbed a $20 million loss. The hospital absorbed nearly $4 million in charity care costs during calendar years 2010-2011, while direct state tax support from SUNY to the hospital fell.

Auditors found financial management problems as well. In 2011, the hospital had or shared 15 senior administrators with annual salaries in excess of $200,000. These salaries have remained constant even as the hospital sent layoff notices to 469 employees with an average salary of $63,000 at Downstate and $41,500 at LICH.

The SUNY Chancellor directed SUNY System Administration in March 2012 to analyze and cooperatively manage financial and operational issues confronting the hospital and develop an action plan to re-establish its financial stability.