Mergers of Teaching Hospitals in Boston, New York, and Northern California

Chapter 4. Formation

CHAPTER 4 Formation The view through the windows in the office ofDr. William T. Speck on the fourteenth floor of the Atchley Building* of the Columbia-Presbyterian Medical Center faces the broad expanse of the Hudson River and New Jersey to the west and the length of Manhattan Island to the south. The view to the north showed Speck his deeply troubled responsibility, the Presbyterian Hospital in the City of New York, which he had led as president since 1993. To survive and continue its missions of healing, research, and education as the principal teaching hospital of Columbia University's renowned College of Physicians and Surgeons, Speck firmly believed that Presbyterian, one of the largest and most famous teaching hospitals in the country, could no longer stand alone.2 Financing Medical Care in New York City The market in which Speck was working and worrying differed from most others. Managed care had barely invaded Manhattan compared to much of the rest of the country. Eli Ginzberg, the Columbia University health care economist,3 ascribes this to the absence of manufacturers who employ large numbers ofworkers needing health insurance, the cost of which HMOs can reduce by decreasing payments to hospitals and doctors. "We have many affluent corporations," says Ginzberg, which "don't care much about the costs of health care because they have so few employees " compared to what the companies earn. "Among our largest employers are nonprofits like Columbia and NYU," both of which run large medical establishments, and whose leaders, Ginzberg has found, "don't push this business. Furthermore, the hospitals have been full, so the local HMOs have not been as able to successfully lean on them."3 Furthermore, compared to other communities, Manhattan has been slow in developing offices unassociated with the teaching hospitals, *The Atchley Building was long known as the Atchley Pavilion. It contains doctors' and administrative offices and the Irving Cancer Center. 1 119 120 Mergers of Teaching Hospitals which can offer advanced care to outpatients less expensively than hospitals ) "The real estate values are prohibitively high," explains Ginzberg, which discourages doctors and medical administrators from opening such projects.3 Manhattan, the borough where the hospitals discussed in this part of the book are located, abounds in sophisticated, well-educated people who are often quite rich. "They demand high-class medical care from their physicians and hospitals," says Ginzberg, without the cut-rate, often inconvenient features that may accompany managed care. Consequently , "We have a very high proportion of M.D.s, particularly specialists and subspecialists, many of whom work in the academic medical centers that enjoy high prestige.3 We're very big spenders compared with other places," Ginzberg adds.3 New York devotes 20 percent of its economic power to health care compared to about 13 percent of the gross national product of the country as a whole. Despite its financial problems, however, Ginzberg finds New York City's medical finances "an acme of stability compared with Boston or Philadelphia."3 Deregulation: Speck to the Rescue For decades, a New York State agency had sustained hospital rates, which prevented the market from lowering rates as was happening elsewhere . However, on January 1, 1997, New York would stop this practice , and Presbyterian's income would drop further as the insurers, now free to negotiate rates, paid less for care at the Columbia-Presbyterian Medical Center.4 "There will be competition, conflict and war between the academic centers. They won't all survive - and I worry none will survive," Speck told a reporter in one of his more gloomy moments.4 "Nobody likes to use the word 'closure' [for the closing of hospitals]they talk about re-engineering, consolidation. I worry that we will end up with a group of mediocre institutions."4 Would deregulation ravage the academic supremacy of the medical center as the Peloponnesian wars devastated the ancient Athenian culture , Speck, the classical Greece aficionado, wondered?4 "I have heard him fret that without a merger Presbyterian could be on the slippery slope to bankruptcy," remembers a colleague.s "Merging was almost a religious principle with him," recalls another .6 "Bill felt Presbyterian had to be part of a 10-ton gorilla to fight off the inevitable."6 At Presbyterian by the early 1990s, the red ink was flowing broadly. To repair its predicament, the hospital trustees had consulted with Harry NewYork-Presbyterian: Formation 121 F. Bolwell, a Cleveland...