Volume 23, Number 7| The Newspaper of Lower Manhattan | June 25 - July 1, 2010
|Arthur Webb was St. Vincent’s Hospital’s C.O.O. for the last 15 months of the hospital’s existence.
St. Vincent’s postmortem: Why Village hospital died
By Lincoln Anderson
“It’s all true,” said Arthur Webb, the former chief operating officer of St. Vincent’s Hospital.
Webb was answering a question about the longstanding accusations of mismanagement at St. Vincent’s that culminated in the historic Village institution’s shocking shutdown on April 30.
During a lengthy interview with The Villager three weeks ago, Webb also revealed just how tantalizingly close St. Vincent’s had been to a merger with not only Mt. Sinai Medical Center, but also N.Y.U. Medical Center — mergers, in either case, that would have ensured that the Lower West Side would have been served by a community hospital into the future.
Although the Mt. Sinai near-merger was widely reported, the potential partnership with N.Y.U. was kept under tight wraps — and, in fact, N.Y.U. denies that it almost happened.
In early 2009, Webb left his position as C.E.O. of VillageCare — which runs the Village Nursing Home, at W. 12th and Hudson Sts. — to become the C.O.O. of St. Vincent’s. He had one main job: to help St. Vincent’s get its new hospital constructed at the site of its O’Toole building, at 12th St. and Seventh Ave. The new centralized hospital building would have consolidated St. Vincent’s, an outdated, cobbled-together complex of many buildings.
However, Webb now admits that the new hospital project, with an $800 million price tag, was “an overreach.” He said, in his opinion, a less-expensive hospital of $250 million could have worked.
During his 15 months at St. Vincent’s, Webb was intimately involved in the high-level discussions about trying to keep the teetering hospital afloat.
In a detailed chronology, he laid out for The Villager exactly how and why, in his view, St. Vincent’s failed. And he also gave a behind-the-scenes look at the two failed merger attempts.
Merger was needed
According to Webb, in 2008, St. Vincent’s C.E.O. Henry Amoroso decided the cash-strapped hospital — recently emerged from its first bankruptcy — needed to be part of a larger hospital network in order to survive; St. Vincent’s was authorized to start talks with potential partners. Specifically, in January 2009, St. Vincent’s board of directors passed a resolution to “integrate” with N.Y.U., Webb said.
Webb said there was “strong intent” from N.Y.U. and “lots of conversations with Ken Langone and Dr. Grossman.” (Langone, a venture capitalist, gave $200 million to N.Y.U. Medical Center in 2008, after which it was named for him and his wife, and Grossman is the medical center’s C.E.O.)
N.Y.U. and St. Vincent’s were first going to start collaborating by using the former Cabrini Hospital on E. 19th St. to open up a psychiatric and neurobehavioral facility. The state awarded St. Vincent’s a $25 million HEAL NY grant for the project, but the hospital didn’t follow through on required restructuring steps, and never received the funds.
As for the bigger picture, regarding St. Vincent’s Greenwich Village hospital campus, Webb said, N.Y.U. planned to operate it as a “community hospital.” N.Y.U. was particularly enticed by the new, state-of-the-art, 30-story hospital building St. Vincent’s was planning on its O’Toole site — though the project faced intense community opposition.
“The gold for them at the end of it was the new hospital,” Webb said.
In addition, merging with St. Vincent’s on the West Side would have given N.Y.U. Medical Center, located on First Ave. in the E. 30s, “a strong presence — east/west,” Webb noted.
Another former St. Vincent’s executive, requesting anonymity, also confirmed that N.Y.U. had “strong interest” in a merger with the Village hospital. Echoing Webb, the former executive said N.Y.U. felt that the new hospital building was needed, that St. Vincent’s existing facilities were “big, inefficient — too many problems.”
But N.Y.U. “didn’t get a strong response from the state,” said the former executive, in terms of potential funding to help with the merger.
In fall 2009, N.Y.U. pulled out of merger talks.
“The numbers are just too big for them,” Webb explained, of why N.Y.U. chose not to take on St. Vincent’s, which in April filed for bankruptcy a second time with what turned out to be more than $1 billion in debt.
N.Y.U. tells different story
However, Lisa Greiner, a spokesperson for N.Y.U. Medical Center, denied there ever had been any interest in joining with St. Vincent’s.
“We had a longstanding relationship with St. Vincent’s, and we shared key collaborations in several key areas, but we had no plans to merge with the hospital,” she said in a statement.
This February, as time was fast running out for St. Vincent’s, another potential lifeline emerged when Mt. Sinai started actively investigating a merger.
“They sent like 60 people down to look at [the hospital facilities],” Webb recalled. “We’re holding lots of conversations… They’re all over,” he said of the Mt. Sinai people checking out the place.
The St. Vincent’s executive who had requested anonymity said, unlike N.Y.U., Mt. Sinai thought it could make St. Vincent’s work in its existing buildings, though in fewer buildings — just five of them: Smith, Raskob, Coleman, Nurses Residence and Spellman. Mt. Sinai felt the buildings needed some modifications, but hoped it would get state funding for that. But, again, the state Department of Health refused to kick in a loan for “transition funds” to help with the merger process.
Also, and more importantly, the state must authorize the creation of a new hospital — and it wasn’t doing so in this case.
Richard Daines, the state Health commissioner, is said to have been against the Mt. Sinai merger.
Again, it came down to the financial numbers — St. Vincent’s debt and the costs for upgrading the facilities were just too daunting — and Mt. Sinai pulled out of talks in late March or early April.
Asked by The Villager if the state’s lack of support was why Mt. Sinai decided not to merge with St. Vincent’s, Ian Michaels, a Mt. Sinai spokesperson, said, “We have decided that we’re not going to comment.”
The anonymous St. Vincent’s executive said, in fact, the merger with N.Y.U. “made the most sense.” But he noted, “That could have been devastating to Beth Israel,” which would have been caught in the middle of a new east/west N.Y.U./St. Vincent’s health juggernaut.
This January, Continuum Health Partners, which includes Beth Israel Medical Center, proposed a plan that would have closed its Downtown rival St. Vincent’s as an inpatient hospital and slashed its emergency department, while keeping open a smaller-scaled health clinic. The state was said to tacitly support the plan. But Continuum dropped the idea in the face of opposition from the community and local politicians, who were stridently demanding keeping a full-service hospital with an emergency room.
Jim Mandler, a spokesperson for Continuum — which also includes St. Luke’s/Roosevelt Hospital and the New York Eye and Ear Infirmary on E. 14th St. — said, “Our proposal was to establish an urgent-care center. When the St. Vincent’s board did not immediately decide to pursue our proposal, we did not feel it was appropriate to leave it on the table as a negotiating tool.”
Asked if Continuum had viewed a potential St. Vincent’s/N.Y.U. merger as a threat, Mandler declined comment.
But, Mandler noted, Beth Israel did score a coup by taking over St. Vincent’s Comprehensive Cancer Center, on W. 15th St. near Eighth Ave. He said there was “tremendous competition” from both Mt. Sinai and N.Y.U. for this outpatient facility. The center will continue to be run by Aptium, an outside company, with Beth Israel maintaining clinical responsibility. Mandler wouldn’t disclose the purchase price, but it’s been reported it was $5 million for the lease and contractual obligations.
In addition, Continuum’s St. Luke’s/Roosevelt Hospital and Mt. Sinai are now running St. Vincent’s H.I.V. Center in the O’Toole building, splitting the responsibilities 50/50, with St. Luke’s/Roosevelt also operating the center’s pharmacy on the ground floor. The H.I.V. Center will continue to operate in O’Toole for a while, Mandler said, though adding Continuum hopes to find a new space for its program by the end of the year. If O’Toole is sold as part of paying off St. Vincent’s huge debt, the lease can be canceled in 90 days.
Although Continuum’s urgent-care plan was panned, ultimately, four days before St. Vincent’s closed, Governor Paterson announced that the state would give $9.4 million to Lenox Hill Hospital/North Shore-Long Island Jewish Health System to run a Village urgent-care center. At a June 14 meeting of Community Board 2’s St. Vincent’s Omnibus Committee at the Little Red School House, Mark Solazzo, North Shore’s C.O.O., said North Shore hoped to have the urgent-care center up and running within about three months, provided Bankruptcy Court approved of them using the former St. Vincent’s emergency department space.
Major misstep in nineties
As for why St. Vincent’s finally closed, Webb said, in truth, the hospital seemed doomed to failure for many years, going back to the 1990s, when the decision was made to form a network with other New York City Catholic hospitals. The idea was a response to managed care, which was causing a drop-off in patients and revenue streams.
“It was probably the biggest mistake that St. Vincent’s ever did,” Webb said. “It was an overreaction.” A number of the other hospitals were already in terrible shape when they teamed up with St. Vincent’s, he noted, and it wasn’t long before they were going out of business. St. Vincent’s filed for bankruptcy for the first time in 2005, with $250 million in debt. When it emerged from bankruptcy in 2007, it was saddled with $700 million in debt obligations — including, from the other failed hospitals, medical malpractice liabilities of $123 million and pension payment liabilities of $65 million.
Meanwhile, St. Vincent’s was overloaded with consultants, or as Webb put it, had “consultants coming out the eyeballs.”
The hospital was reportedly spending as much as $3 million a month on these advisers.
And the leadership of St. Vincent’s Catholic Medical Centers, the healthcare network, insisted on seeing St. Vincent’s Hospital as a regional medical center, drawing patients from all the boroughs. But the reality was that this dynamic wasn’t happening, and the Greenwich Village hospital really should have been streamlined, Webb said.
“I would say, on a general basis, St. Vincent’s wasn’t well run for decades,” he said. “This is a classic case where history hindered progress.”
The plan to build a new hospital at 12th St. and Seventh Ave. emerged as St. Vincent’s was coming out of bankruptcy in 2007, according to Webb, who said Guy Sansone, the hospital’s then-C.E.O., convinced the board it was necessary. Amoroso succeeded Sansone as C.E.O. in August 2007, and pushed forward with getting the needed approvals for the project.
Briefly, the hospital’s hopes revived. But then the economy started tanking, on top of cuts to Medicare, plus Webb said, as usual, “Managed care was just beating the crap out of us.”
‘A top-heavy hospital’
Webb came onboard in February 2009 and, he said, it soon became clear to him that St. Vincent’s management was bloated, and that, in general, the hospital wasn’t being run in a cost-efficient manner.
“It was top heavy,” he said, “both administration and medical costs — way too many residents and teaching costs.”
For example, there were 120 separate IT systems, and it would have cost up to $30 million to unify them into a cohesive system, he said. And St. Vincent’s, which prided itself on being a teaching hospital, had 356 residents (doctors in training) whereas a typical hospital normally has about 250.
Webb and a top St. Vincent’s doctor laid out what Webb called a “pretty radical change” for the hospital, which he said really should have been done two years earlier. The changes called for a more compact, stripped-down hospital, and an overhaul of the E.R., which hadn’t seen a renovation since 1982.
“I think our first order of business was to restore our position as the go-to hospital for the community,” Webb said.
St. Vincent’s was too large at 1.2 million square feet, he said, and was still being run as if it were an 800-bed hospital, when in reality it had been downsized to around 250 to 300 beds; as a result, it had double the amount of staff it needed.
Maintaining a Level 1 trauma center with doctors on call was also a big expense at $4 million a year, and should have been eliminated, in Webb’s view.
“The hospital had to reorganize, to rethink itself as more of a community hospital with a good teaching program,” he asserted.
Toward the end of 2009, the hospital’s C.F.O. told Webb St. Vincent’s would soon run out of cash, to the tune of an operating deficit of $70 million. Amoroso put in place a plan to get St. Vincent’s “cash neutral” — mainly through layoffs — Webb said. Five hundred hospital workers were let go, and spending was reduced by $34 million, but it fell short of their target of cutting $55 million.
“We had no capital — none,” Webb said.
By late 2009, it was becoming apparent, he said, that the state would let St. Vincent’s fail.
Meanwhile, what Webb called “the power vacuum in the Governor’s Office” was only helping seal St. Vincent’s fate. Paterson was “totally distracted, totally consumed with the state fiscal situation,” he said. Plus, there was silence from Mayor Bloomberg, whose Health and Hospitals Corporation was struggling under its own $1.2 billion deficit.
For their part, local politicians seemed overwhelmed by St. Vincent’s predicament and the sheer size of the problem, and mobilized late to try to save the hospital.
Webb unquestionably feels St. Vincent’s was a critically needed facility for the Lower West Side. As for whether the area might someday get a new full-service hospital, he said he could see one being built possibly on Tenth Ave., perhaps included in another project. As Webb envisions it, the hospital would have 200 to 250 inpatient beds, “a little bit of teaching” — with this residency program tied to N.Y.U. or Mt. Sinai — “with a really good E.R., good ambulatory care.” It would cost $250 million to build, and it would have to be linked in with a bigger healthcare system, in his view.
“You can make this happen,” Webb said, though adding, “But that’s not going to happen in our lifetime.”
In the end, Webb said, St. Vincent’s leadership suffered from three flawed assumptions. First, they felt, as he put it, “We were too big too fail, we were too important to the city… . We had the E.R., tradition.” Second, they thought that “people would rally” to save the city’s last Catholic hospital — but this never happened on a large scale. “This community’s no longer Catholic,” Webb noted; on the other hand, he said, if St. Vincent’s had faced closure in the 1940s or ’50s, people would have been marching in outrage in the streets and stopping traffic. Finally, Webb said, St. Vincent’s administration didn’t believe the hospital’s creditors would really close them or that the state would really allow them to be closed.
Landmarks and development
As for what happens next with St. Vincent’s Greenwich Village hospital campus, Webb said, the landmarks review of the Rudin Organizaton’s planned residential development still stands. In other words, the four St. Vincent’s buildings that L.P.C. said cannot be demolished will remain protected. That’s good for Rudin, Webb noted, since “it devalues the land,” denying potential developers the ability to raze the whole site. The Bankruptcy Court will dispense of the property quickly, Webb said, in “a short auction — 30 days.”
(The plan for a new public school at the Foundling Hospital in Chelsea that Rudin committed to backing will happen, Webb assured, adding that the city’s School Construction Authority has committed to the project.)
Webb speculated that St. Vincent’s O’Toole building, with 210,000 square feet, could possibly be kept as a community facility.
There were no golden parachutes for executives, he said, because there was no money left. The union is “getting royally screwed,” Webb said, noting former St. Vincent’s unionized workers aren’t getting all of their accrued benefits.
Webb was upfront about his own salary, $625,000. As for Amoroso, Webb said, it’s likely his salary was at least $1 million, since St. Vincent’s was a $950 million operation and that would be on the low end of the pay scale for a C.E.O. of that size hospital.
Webb is currently helping North Shore open up its urgent-care center in the Village, while Amoroso plans to do hospital consulting work in Manhattan.
Amoroso declined comment for this article.
The loss of St. Vincent’s will be felt on many levels, Webb noted.
“People don’t realize the breadth of St. Vincent’s,” he said. “We had programs in 40 shelters, 3,000 methadone patients, 500 units of housing for the mentally ill, psychiatric school-based programs, extensive mental-health services at 54 locations in the city.” Raising his hand and pulling an imaginary bunch of threads out of the air, representing St. Vincent’s extensive reach, Webb said, “I don’t think the city has grasped the impact of all this.”
‘End of an era’
St. Vincent’s was the city’s first Catholic hospital to open and its last to close. The Sisters of Charity founded it in 1849, and were running it when it finally went under.
“This is the end of an era for the Sisters of Charity,” said Sister Jane Iannucelli, vice chairperson of the board of directors of Saint Vincent Catholic Medical Centers.
Asked if she thought they had operated St. Vincent’s in a cost-effective manner, she said, yes.
“I think, in a lot of ways, we really did try to cut to the bone,” she said, adding, “Hindsight is 20/20 vision.”
Asked about the mergers that almost came off, she said, “With Mt. Sinai and others that were intended — it was close to a fix. Time ran out. You can say, ‘Coulda, woulda, shoulda.’”
Yet the community’s healthcare needs remain, and will only grow, she said.
“People in the West Village deserve a hospital,” she stated, adding that the Hudson Yards will soon see new development, which will increase the long-term demand for a hospital.
Advocates are saying that a healthcare needs assessment must be done quickly to prove the case that a new hospital is needed. But Iannucelli said, the picture is already clear.
“I don’t even know if we need a study,” she said. “We’ve got to deal with what’s in front of our eyes.”
The state’s take
Diane Mathis, a spokesperson for the state Health Department, denied that Commissioner Daines pulled the plug on St. Vincent’s by failing to provide transition funds for a merger.
“The state Health Department did not advocate for, nor in any way support or encourage, the closure of St. Vincent’s,” Mathis stated. “The department worked very hard as part of the Governor’s Task Force to find a viable solution for St. Vincent’s. However, at a time when the state is facing a $9.2 billion deficit, the department had to be honest with all stakeholders that the state was not in a position to provide hundreds of millions of dollars needed to keep the hospital running.
“In the end, it was hard for many to accept the reality that no one — not government, nor other healthcare entities, nor the hospital’s long-term supporters — was able to save the hospital,” Mathis said. “If St. Vincent’s were to be saved, it had to save itself by adopting a different business model many months, even years ago, before its financial condition went from bad, to worse, to catastrophic. You can’t lose $80 million in one year — which it did in 2009 — and have an additional legacy debt of $700 million — and still survive.
“The hospital’s business model as a stand-alone community hospital just doesn’t work for most hospitals in today’s competitive healthcare market,” Mathis continued. “If you are the only stand-alone hospital in a community, you might be able to operate that way. But that model doesn’t work in a large city where there are other hospitals competing for the same patients.
“Academic medical centers are considered the lions in today’s healthcare market because they have the size, the reputation for quality and the physicians, modern equipment and services that patients and health plans prefer,” she continued. “That’s why the state Health Department constantly urged St. Vincent’s to partner with a major academic medical center.”
Mathis added, “Of total inpatient hospital admissions for residents residing in the 11 zip codes closest to St. Vincent’s, only 14 percent went to St. Vincent’s. That means that 86 percent of the area’s inpatient admissions were already heading to other hospitals. People choose hospitals with their feet and the majority of the residents of Greenwich Village and the surrounding area preferred other hospitals.
“Currently, the number of hospital beds in Manhattan appears to be adequate to meet need,” the Health spokesperson stated. “Should an organization submit a proposal to create a new community hospital and have adequate financing, D.O.H. would consider that proposal as it would any proposal brought to the department regarding the establishment of new healthcare entities. However, we do not have any indication that there is such a proposal in the making at this time.”