The New York Times - July 6, 2005
Marc Santora

St. Vincent's Hospital Manhattan is the flagship of a group of Catholic hospitals in serious financial trouble.

St. Vincent officials said that services at the center's seven hospitals and other health care facilities would not be affected by the Chapter 11 filing, and that no job cuts were planned. Within the past year, however, the St. Vincent system has been forced to close one hospital - St. Joseph's in Flushing, Queens - and to begin the process of closing two more, Bayley Seton on Staten Island and St. Mary's in Brooklyn.

Even those familiar with the precarious financial situation of hospitals across the city were surprised that St. Vincent was forced to take such drastic action.

"We are seeing one of the great, proud names of health care in the United States being squeezed financially to the point where they have to seek protection from the federal courts," said Kenneth E. Raske, president of the Greater New York Hospital Association, a nonprofit trade association representing 250 hospitals in the metropolitan area. "It is an example of the economic vise that the health care system has been put in in New York and across the country."

The announcement comes as hospitals across the state brace for the findings of a newly appointed committee intended to identify hospitals that are the best candidates to be closed. St. Vincent officials said that the message from Albany was clear: there would be no more bailouts of financially struggling institutions.

"All of us in New York are looking at that commission over our shoulders," said David Speltz, the president and chief executive of St. Vincent.

By filing for bankruptcy, St. Vincent hopes to ease its debt burden and restructure its finances, allowing it to better balance its books. If the bankruptcy petition is accepted in court, the hospital system will be protected from any action by creditors seeking to collect payment.

St. Vincent has debts of roughly $1.1 billion, according to Bernadette Kingham-Bez, a senior vice president. Last year, the system had revenues of $1.6 billion and a net operating loss of $143.5 million, more than officials expected. In a statement, St. Vincent said that an initial independent audit in 2004 had overstated earnings by $60 million.

The center has been struggling to regain its financial footing for years, from nearly the moment that the St. Vincent system was created in 2000, the result of a merger of several Catholic hospitals.

The merger was seen as a way of consolidating costs and allowing the Catholic hospitals wrapped into the system to continue their mission of providing care for the poor and uninsured. But the landscape soon changed, and hospitals found themselves with too many beds, too few patients and less reimbursement from public and private insurers. At the same time, medical costs - from equipment to malpractice insurance - were skyrocketing.

By last year it was evident that St. Vincent needed to regroup, as the system continued to lose millions. The hope was that the closings would stanch the flow of cash and that millions of dollars would be saved through improved billing. So far, the system has not been brought back to financial health.

Officials stressed that daily work would go on unchanged and that all 12,000 employees would continue to be paid on time.

St. Vincent's Hospital Manhattan in Greenwich Village, the system's flagship, was founded in 1849 and has long enjoyed a reputation as one of the region's best Catholic hospitals. It is connected to the New York Medical College, and has one of the leading AIDS programs in the country, areas that Mr. Speltz said would remain untouched.

And even as the St. Vincent system as a whole is under tremendous pressure, it is in the midst of building a $20 million trauma center. The money raised for that project, hospital officials say, is protected from the bankruptcy proceedings.

The hospital system is sponsored by the Roman Catholic Bishop of Brooklyn and Sisters of Charity of New York, but its board acts independently of the church.

The system has been serving 600,000 patients, and includes - in addition to the two hospitals that are in the process of closing - Mary Immaculate Hospital in Jamaica, Queens; St. John's Queens Hospital in Elmhurst; St. Vincent's Hospital Manhattan; St. Vincent's Midtown Hospital (also in Manhattan); St. Vincent's Hospital Staten Island; and St. Vincent's Hospital Westchester.

Hospital officials say that the savings from those closings, which have not yet been realized, will go a long way toward getting the rest of the system out of debt.

But St. Vincent's situation is emblematic of a broader problem among the state's hospitals, among the most financially troubled in the nation. The state has far too many hospital beds, and has suffered from state laws and federal aid formulas that have reduced its ability to respond to changes in care. Adding to the burden in New York is the fact that about 25 percent of the people living here have no health insurance.

In 2004, St. Vincent provided $104 million in charity care. Mr. Speltz said the system would not change its commitment to providing care for the poor.

Mr. Speltz, who was brought to St. Vincent specifically to deal with its troubled finances, has dealt with similar problems in hospitals from Florida to Boston. But in all his years, he said, he has never seen a grimmer picture.

"New York is in some of the deepest health care distress that I have seen in my career," he said.

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