History of Mismanagement Preceded Current Hospital Troubles
By Mary Alice Miller
We have seen this story before. Financial mismanagement led to the closing of St. Vincent’s Hospital in Manhattan.
Decades of mismanagement by two successive consultant companies led to the fateful acquisition of LICH by SUNY Downstate and the subsequent divestment.
Now we know last December’s bankruptcy filing from Interfaith Medical Center was a prelude to the state Department of Health’s rejection of a restructuring plan and demand for a closure plan last week.
Underlying each hospital’s death knell is real estate speculation and excessive extraction of resources by outside management companies. In addition, a state cut in Medicaid inpatient reimbursement proposed
by Governor Andrew Cuomo’s Medicaid Redesign Team decreased hospital reimbursements by 40%.
Cuomo’s solution was to request a fee waiver of payment formulas from the federal government which is unlikely under sequestration.
Serving Bedford-Stuyvesant and surrounding communities, Interfaith Medical Center had 11,000 inpatient visits and 250,000 outpatient visits last year. Employing 1,516 full-time health care professionals, Interfaith has 287 beds, including 120 psychiatric. It is one of several Brooklyn hospitals that have had serious ongoing financial problems.
Interfaith was created in 1982 from a merger of Jewish Medical Center of Brooklyn and St. John’s Episcopal Medical Center. When Kurron Shares of America – an outside management team – was contracted to run the facility, it began several cost-saving measures, including halving the number of beds and eliminating maternity care services.
Those cost savings came at a price. Corbett Price, founder and sole shareholder of Kurron Shares, has been receiving almost $3.5 million annually to manage Interfaith. For two decades, Price sat on Interfaith’s board, a perceived conflict of interest compounded by allegations that Price was an absentee CEO with no physical office or secretary in the hospital.
Published reports in Newsday (in 1999 and 2000) stated that Price was running two large hospitals at the same time, as well as a private consulting company “earning $500,000 a year from one Brooklyn hospital and $450 an hour from another hospital system whose bankruptcy he was supervising”. Unions complained that Price cut costs by eliminating jobs and services.
Meanwhile, during two decades of Kurron’s management of Interfaith, the hospital’s debt grew to $200 million over its assets.
With the looming financial collapse of several borough hospitals, a year ago the Brooklyn Medicaid Redesign Team issued recommendations to reserve needed health care services. Among the recommendations was the suggested merger of Interfaith, Wyckoff Heights Medical Center and Brooklyn Hospital Center, with Brooklyn Hospital Center taking the role of lead because it was seen as having the strongest financial position of the three.
Ultimately, Wyckoff declined to participate in the merger while Interfaith balked at merging with Brooklyn Hospital without an up-front guarantee
of a state infusion of $20-30 million of debtor-in-possession financing to stabilize Interfaith during reorganization. The state refused the requested financing without Interfaith first signing an agreement to merge with Brooklyn Hospital.
With no merger in place, Interfaith filed for Chapter 11 bankruptcy protection against creditors last December. It committed to develop a restructuring plan to keep the hospital open in lieu of liquidation of assets and a complete shutdown. But days before the bankruptcy filing, Interfaith’s Board of Trustees renewed yet another $3 million contract with Kurron, the same management company that led the hospital to bankruptcy, citing Kurron knew Interfaith’s financial situation intimately and was best suited to guide the restructuring. (It should be noted that Mayoral candidate Bill Thompson served as a consultant to Kurron on “Private equity matters,” unrelated to health care according to reporting by Wayne Barrett at WNYC.)
By March, the bankruptcy judge dropped Price from the contract and approved a new restructuring officer with no ties to Kurron. And in April, the NYS Department of Health terminated Kurron’s contract due to questions over excessive fees and bonuses.
So, who is Corbett Price of Kurron Shares? Founded in 1985 as a health care management company under Hospital Corporation of America, Kurron
Shares of America and its founder and sole shareholder Corbett Price orchestrated the layoffs of 650 workers, almost 25% of staff at Prince George’s Hospital Center in Maryland. Four years later, Price moved on and obtained a contract to run another Maryland facility until he was fired months later taking the equivalent of three years CEO pay from his bought out contract with him. All told, Price was responsible for the destruction of 1,200 jobs in Prince George’s County.
Price, an African-American Republican, seems to target health care servicers in communities of color.
According to published reports, Episcopal Health Services abruptly ended a Kurron contract with St. John’s Hospital in Far Rockaway because of Price’s plan to close the obstetrics unit in a low-income neighborhood in order to cut costs.
Price’s perceived malfeasance extended to the Caribbean where he extracted $14.6 million from Bermuda, ostensibly for services ranging from developing a national health care system, creating an insurance system targeting seniors, and establishing a hospital.
Kurron had beat out prestigious Johns Hopkins University for the contract, instigating questions of cronyism. Price had been a longtime friend of Wanda Henton-Brown, the wife of former Bermuda Premier Ewart Brown. Price’s son managed Kurron’s Bermuda operations, creating a $13 million annual deficit for the senior citizen insurance program and the shutdown of the new hospital’s senior health care unit.
Bermuda officials began challenging the excessive fees Kurron generated. When the cronyism scandal forced Premier Brown to resign in 2011, the new premier promptly cancelled Kurron’s five-year contract 18 months before its expiration. At the time, the Royal Gazette, a Bermuda news publication, reported that government officials questioned Kurron workers brought to Bermuda “who were earning $700,000 a year, $21,000 a month and receiving 25 and 15 percent bonuses”.
After 35 years in the health management business, it looks as if Kurron has run its course leaving a path of destruction in its wake. Unless the restructuring team devises a credible plan acceptable to the state
Dept. of Health, Interfaith will close its doors permanently, taking jobs and critical health services with it, no thanks to Kurron.
Interfaith’s fate is uncertain. With the formal implementation of Obamacare scheduled to begin in October, health care servicers can look forward to citizens bringing health coverage with them and a drastic reduction in uninsured patients requesting care.
It remains to be seen if Interfaith will survive into the new health care marketplace.