How Mount Sinai Helped Undermine Its Own Health
By ALISON LEIGH COWAN
On the morning of March 19, Dr. Kenneth I. Berns, chief executive of Mount Sinai Medical Center, was preparing for a meeting with union officials when he received a visit from the chairman of the board, Peter W. May.
The two men ? the respected medical academic and the corporate turnaround artist famed for resuscitating the Snapple beverage brand ? had been brought in a year before to lead the rescue of Mount Sinai, one of a handful of elite teaching hospitals in New York City. Not only was it bleeding tens of millions of dollars a year, but the death of a liver donor in its heralded transplant program had dealt Mount Sinai's reputation a stinging blow.
Now, with the hospital's annual financial report ? a verdict on the rescue so far ? to be released in a matter of days, Dr. Berns, according to hospital and union officials, was planning to tell the union that he needed to cut several hundred more jobs.
Mr. May, it turned out, had something else in mind.
He did not wait to discuss it with the full board, or even the executive committee, several trustees say. He contacted several key members to nail down their support, and then he made his move: Would Dr. Berns agree to step aside?
Behind Mr. May's urgency was a hospital spiraling ever deeper into debt. The new financial documents showed that despite one executive shake-up, hundreds of layoffs and an array of program cuts, Mount Sinai's budget deficit had actually grown, to $72 million last year from $14 million in 2001. In January of this year alone, the hospital lost $12 million more, executives said. By the end of 2003, its losses since early 2000 are expected to reach $200 million. Its bonds are in danger of being rated as junk, the rating agencies say.
"The turnaround plan did not have the impact on Mount Sinai Hospital's operations in 2002 that was anticipated," the report concluded with frosty restraint.
The problems do not stop at the bottom line.
Layoffs of housekeepers have left parts of the hospital visibly dirtier. Some clinics for the poor have been closed or cut back. While doctors and administrators insist that the quality of care remains high and that the liver transplant case was a disastrous aberration, many admit that the medical staff is being stretched thin. Physicians say they are working far harder, in some cases for less money; some have left. Morale has suffered badly; patient satisfaction is down.
Mount Sinai's troubles, of course, reach back far beyond the last tumultuous year. Its leaders tend to depict their hospital largely as a victim, overwhelmed by the external forces that have reshaped American health care. As they explain it, Mount Sinai and many other academic medical centers ? especially those in New York ? are being suffocated between the dwindling flow of government money and their ever-more-costly obligations to the poor.
That is certainly one side of the story. But an examination by The New York Times ? based on dozens of interviews in recent months with current and former employees, trustees and outside experts, as well as a review of tax records and state documents ? shows that Mount Sinai has been a constant collaborator in its own decline.
Sandwiched between the gold coast Upper East Side and the East Harlem barrio, Mount Sinai is one of those old-line New York institutions, deeply bonded to the city's social and philanthropic elite. Increasingly, it has aspired to be the kind of medical center that could do it all ? train doctors, be a leader in research, perform transplants and other high-tech surgeries and still heal the poor at its back door. Now, many people are wondering if perhaps it overreached.
Years of generous Medicare and Medicaid payments spawned a culture of fiscal laxity and excess, according to the hospital's outside consultants, the Hunter Group. For example, the consultants found that flawed billing systems cost Mount Sinai tens of millions of dollars, even as it pursued ambitious expansion and building plans and paid its top executives salaries, detailed in tax records, that many experts say were unusually high for a struggling nonprofit institution.
In the late 1990's, as fiscal trouble mounted, Mount Sinai's management was distracted by the long-running psychodrama of its grandest project ? merger with New York University Hospitals Center. Both sides now admit the merger was a failure, and it has been largely unwound.
Mount Sinai's board boasts many of the city's leading business minds, including Robert Rubin, the former treasury secretary, and Henry Kravis, the financier. But many trustees and outside experts say the board failed to exercise strong, independent oversight, especially as the merger careered toward the rocks. After the deal's chief architect, the longtime chief executive Dr. Jack Rowe, was eased out, the board waited more than a year before hiring Dr. Berns, leaving the hospital rudderless in the gathering storm.
Finally, Mount Sinai used an array of acrobatic accounting maneuvers that obscured the precise depth of its fiscal distress, financial statements show. Mount Sinai is a many-chambered whole ? a medical center encompassing the hospital, medical school and real estate interests ? and it has long shunted money from one part to another. In 2001, for example, the hospital made itself $33 million "richer" by selling a staff residence on Park Avenue to the medical school.
When Dr. Berns's resignation was announced two weeks ago, a Mount Sinai spokesman said the chief executive was not being removed for poor performance. But in an interview, Mr. May put it this way: "The speed of implementation is lower than any of us would have liked." Dr. Berns would not be interviewed for this article.
At the same time, a number of trustees and physicians said the swift and surprising change at the top showed Mr. May's determination to seize control after years of drift. Many people spoke highly of the new chief executive, Dr. Kenneth I. Davis, who was already the medical school dean.
Still, beyond the sheer size of the deficit, one crucial item in the new financial report points to the enormity of the task ahead. Since the liver case, some patients are staying away; with occupancy down, the hospital has been shutting down beds, leaving itself 10 percent smaller than in 1997. Without a rebound, Mount Sinai knows, its turnaround will falter, especially with the state threatening new Medicaid cuts that would cost Mount Sinai $15 million a year.
No one is suggesting that Mount Sinai might close, but people in health care and government say that what is at stake in these churning times is the shape of the place, the future of its aspirations and many missions.
"The question is not, `Does it survive?' " said Bruce C. Vladeck, a professor of health policy who ran Medicare and Medicaid during the Clinton administration. "The question is, `What kind of place is it likely to be 10 years from now, and what might it have been had not all these problems occurred?' "
The Fat Years
Not too long ago, as one trustee put it, a hospital "had to be awfully weak or stupid to lose money." Insurers paid the cost of each patient's stay, and then some. Costs and reimbursements rose in tandem.
Those were the rules when Dr. Rowe arrived in 1988. He would not speak for this article, but in a 1990 interview with Crain's New York Business, he vowed to make Mount Sinai "the best medical center in New York City."
Mount Sinai built up its relatively young medical school, developed expertise in areas like transplantation and, with a growing share of federal research money, expanded its work in basic science. It strengthened its system of clinics for the poor. And it conducted a building campaign whose snazziest production was the new Guggenheim Pavilion, a $500 million, I. M. Pei-designed box of glass and brick overlooking Central Park. Most everyone calls it "The Palace."
Then, in the mid-90's, the old economic model hit the wall.
To stem health care costs, hospitals, even nonprofits, would be run like businesses. Insurers, led by giant health maintenance organizations, began linking reimbursement to diagnoses, not the length of hospital stays. Government pulled back, too, and no one was hit harder than urban teaching hospitals like Mount Sinai.
Some adjusted better than others. Nationally, studies show the average big urban hospital on the mend by 2001.
The transition has been rockier at Mount Sinai, with its smaller endowment and multiple missions. Dr. Rowe, masterful at reputation-building in the fat years, proved less adroit in adversity, trustees say. Having sown seeds of fiscal woe, the hospital was slow to undertake the soul-searching that could have rooted them out.
