Urgent Care: $8 Billion Medicaid Waiver Driving Reinvention Of Brooklyn's Hospitals

There were protests. There was outrage. The future mayor of New York City was arrested. 

In 2012 and 2013, the long-simmering problem of cash-strapped Brooklyn hospitals boiled to the surface. Long Island College Hospital was on the brink of closing, and Interfaith Medical Center began bankruptcy proceedings. 

In the heat of the moment, Bill de Blasio, who as public advocate would call for the creation of a Brooklyn Health Authority to transform the system and bring the borough’s hospitals into the 21st century, was memorably led away in handcuffs from a protest against the proposed shuttering of LICH. 

Yet as mayor, de Blasio has not taken any steps, at least publicly, toward following through on that proposal, and his office has not indicated whether he will create a health authority for the borough. Moreover, experts say that city has little actual influence to alter the landscape of Brooklyn’s hospitals and healthcare delivery. 

Still, a major transition is now in progress. There is a move away from inpatient hospital care, and toward comprehensive networks of preventive, primary and urgent care facilities. But rather than policy changes instituted by de Blasio or Gov. Andrew Cuomo, it is New York’s $8 billion Medicaid waiver, which the federal government gave final approval to in April, that will potentially allow Brooklyn’s hospitals to collectivize, reorganize and transform into a more complete and functional healthcare system. 

In 2011, a state-commissioned report found that Brooklyn is plagued with high rates of preventable hospitalizations and chronic illnesses, gratuitous emergency room visits, the inefficient handling of mental health issues and competition with academic medical centers in Manhattan. “We don’t have a healthcare system, we’ve got a sick care system which has all the wrong incentives,” said Stephen Berger, the report’s lead author and chairman of Odyssey Investment Partners. 

Instead of taking action to address these problems, individual hospitals have been preoccupied with their own survival, critics say. Berger described the mindset of hospital boards as “if I can hang on by my fingernails long enough, and the other guys fail, my job is to keep my institution alive.” 

“It’s not that everybody is wrong,” Berger said, referencing different groups of healthcare players like doctors and unions. “It’s just that by everyone defending their own interests, it’s almost impossible to change a system that really has to be changed.” 

Like patients who wait too long to get treatment, hospitals have used all their resources merely to stay alive, and are thus unable to focus on charting a new, long-term strategy. “You need to have an existence that goes beyond sort of just keeping your head above water, worried that you’re going to make payroll this month,” said Dennis Whalen, president of the Healthcare Association of New York State. 

Enter the Medicaid waiver. 

The waiver is earmarked to help the state reform its healthcare system by creating the Delivery System Reform Incentive Payment program, or DSRIP, the goal of which is to help hospitals plan and manage their next incarnation and avoid a series of chaotic closures that will disrupt the lives of thousands. 

Under DSRIP, hospitals and healthcare providers will submit applications to become Performing Provider Systems, also known as PPSs. Some hospitals will continue operating as they do now, while others, some reformers hope, will turn into a non-hospital part of the healthcare network. Applications for the waiver money are reviewed by the state Department of Health and the process runs through December. Currently, the program is in Year Zero; Year One starts on April 1, 2015. 

In addition, Interim Access Assurance Fund (IAAF) money from the waiver has been given to several hospitals and healthcare networks in dire straits in order to maintain critical services, including $152,401,533 to New York City’s Health and Hospitals Corporation (HHC), $20,395,749 to SUNY Downstate and $36,882,960 to Interfaith. 

One of the goals of the Medicaid waiver is to reduce inpatient hospital admission by 25 percent over the next five years. Inpatient numbers are already on the decline, but experts feel more needs to be done to control costs. “We know a substantial number of people who are in inpatient beds in these hospitals don’t belong there,” Berger said. 

The Medicaid waiver comes with a matrix of recommendations and requirements, some of which are easier to follow than others. “The hardest program is the transformation program,” said Whalen, “because it says … you fundamentally are going to be different at the end of this project.” He added, “You may become one of those free-standing emergency departments, you may become a long-term care provider, you may become a clinic, but you’re going to transform yourself from your current state.” 

If hospitals and other healthcare providers do not use the money the way it is intended, funding will be cut off. “[DOH] told us that, and they are dead serious,” said Berger. 

The City of New York is primarily involved in shaping Brooklyn’s healthcare landscape through HHC, which runs three hospitals in the borough: Coney Island Hospital, Kings County Hospital Center, and Woodhull Medical and Mental Health Center. The new challenge for HHC will be to branch out beyond its own network, and become part of the local community’s health ecosystem. 

“Discussions are ongoing as to how the city can most productively support and guide the transformation of the Brooklyn healthcare delivery system into one that is of highest clinical quality, improved accessibility and fiscal sustainability,” said Maibe Ponet, a spokeswoman for the mayor’s office. 

Perhaps the most important role that the city can play, however, is to sell the public on the notion that quality healthcare can be provided outside of a brick and mortar hospital setting. 

“Is having … a bunch of PPSs start up and do this stuff the right answer, or do you need a more… global overarching solution?” mused Whalen. “I think … the political situation at the moment, where everybody is kind of running for re-election … [has] kind of modified the approach.”