Hospital Holiday

Study Finds Poor Oversight of a Billion Health Care Dollars

In 1997, as government officials prepared to impose vast changes in the way health care services are provided to the poor, New York hospitals won $1.25 Billion in federal funding to cushion the impact.

The money was allocated by the Clinton administration, which was persuaded to do so by two of its then staunchest allies, health workers leader Dennis Rivera and hospital association chief Kenneth Raske. The idea behind the funding—dubbed the Community Health Care Conversion Demonstration Project—was that the money was needed to help health institutions cope with the potentially wrenching switch from the traditional fee-for-service method of providing care to Medicaid recipients to that of managed care, whereby health care providers would be paid a set amount per month. The managed-care change was viewed with suspicion and apprehension by both hospitals and their unions, which feared the cost-saving system would cause drastic reductions in income and result in closings and layoffs.

Rivera, head of 1199/SEIU, which then had 120,000 members and now has more than twice that number, and Raske, president of the Greater New York Hospital Association, used their combined clout to win the federal help. The aid package was crafted with the assistance of then vice president Al Gore, who was preparing his presidential bid.

So overt were the project's politics that part of the deal was struck in November 1996, when Rivera brought Governor Pataki over to talk to Gore at the Al Smith dinner in the Waldorf Astoria—the Catholic Church's annual political event. The timing was as crucial as the politics: A few months later, Pataki won a waiver from federal regulators that allowed the state to move up to 2.4 million New Yorkers receiving Medicaid into managed-care programs. One month after that, the $1 billion-plus project was awarded to the state.

The theory was that the funds for the project, which were to be phased in over several years, would be generated by huge savings in New York's $24 billion Medicaid budget, half of which comes from the federal government. Hospitals, in turn, would use the extra money to retrain staff and expand facilities needed to provide basic care.

Health advocates at the time feared that the money would do little more than shore up the hospitals financially, rather than improve or expand health services for the poor—the project's declared intention. They also suspected that, left unchecked, much of it would go to large and powerful voluntary hospitals that provide relatively little access to the 24 percent of New Yorkers who lack any medical insurance coverage.

Now, six years after the project was initiated, a study by a New York City advocacy group asserts that those concerns were well founded. Funds have been doled out with minimal oversight by state officials charged with administration, the study says. In some cases, money has gone for uses never anticipated in the original proposal, states the report issued this month by the Commission on the Public's Health System, a nonprofit organization that monitors health services. The commission, which sued the state to win access to the records, found that only two of 44 private, voluntary hospitals in New York City that received funding bothered to file a required final report on how initial grant monies were expended.

In one instance, Brookdale Hospital, one of Brooklyn's largest institutions, used $7 million of the $9 million it received to make its computers compliant with the 2000 millennial change. In another, Beth Israel Medical Center in Manhattan used funds to create a primary-care clinic catering to Japanese-speaking residents of Hartsdale, an affluent Westchester County community.

"This was a demonstration project that was supposed to have been about improving health care for low-income people," said Judy Wessler, co-author of the report and the group's director. "Instead the money has been flowing to hospitals with little or no accountability."

The misspending is only the most recent exposé of the hospital establishment by Wessler, who, for more than 30 years, has been a keen-eyed watchdog of health services for the poor. She worked first for MFY Legal Services on the Lower East Side, where she helped to establish low-cost primary-care clinics, and later for the Community Service Society and the Children's Defense Fund. She also served as health policy analyst for former Manhattan borough president Ruth Messinger.

As the managed-care conversion project evolved, Wessler, along with colleagues Dr. Diana Williams and Sandra Opdycke, joined a task force including the union, District Council 37, AFSCME, which represents workers in the city-owned public hospitals that care for the bulk of the city's low-income and uninsured residents. The group tried to shape the way the federal funds would be allocated, asking regulators to direct money to local community-based health providers, clinics that are key to providing primary care to low-income New Yorkers. They also pushed the feds to press hospitals receiving funding to spend at least some of the money on an expansion of primary-care services, and to guarantee access to health services for all residents.

There were some partial successes. Hospitals were ordered to include primary-care services, and to account for their handling of patients without insurance coverage. The group also was able to persuade regulators to change the initial funding formula so that institutions, such as New York's public hospitals, would receive funding proportionate to their efforts to care for uninsured and low-income New Yorkers.

An early analysis by advocates, however, found "serious flaws in reported data" by some hospitals, according to the report, which were reported to state officials. The findings forced the state to re-address its allocation formula for the project. The group may have been too effective, however. Shortly after the advocates successfully challenged the data's accuracy, the state stopped providing them with information.

In February 2002, Wessler submitted a Freedom of Information request to the state Department of Health seeking final reports submitted by the hospitals for the project's first cycle of funding, along with site visit reports by state inspectors. The group also requested proposals submitted for the project's second and third funding cycles. Health department officials initially provided only partial records, and then in July, they ceased cooperating altogether.

Wessler then contacted Ray Brescia, an attorney at the Urban Justice Center, a nonprofit legal-advocacy group. Last December Brescia filed suit in New York Supreme Court. About three weeks later, the state finally began handing over the records.

"Clearly, they weren't going to give [Wessler] the information she was seeking," said Brescia. "They didn't claim any privilege under the law not to release the information, they just didn't produce the reports."

A spokesman for Raske's hospital association said that all funds had been expended appropriately. As in its dealings with the advocates, the state health department didn't bother to respond to Voice requests for comment. But an agency spokeswoman suggested to The New York Sun's Julie Satow that the agency's laid-back approach was intentional. "The program was specifically created to provide hospitals with flexibility, and our oversight reflects this flexibility," said the spokeswoman.

So casual was the agency's monitoring, the commission's study found, that seven hospitals received grant monies for the project's second and third cycles of funding without even completing full applications to the agency or accounting for how they had spent the previous cycle.

In some cases, even the state's own inspectors couldn't figure out how the money was being spent. In a June 2001 field report on Staten Island University Hospital, a state monitor wrote: "There was an issue with the report that 90 percent of the funding had been expended by the hospital, while considerably less than 90 percent of the activity represented in the workplan had been accomplished." Without further explanation, the monitor added: "This has been straightened out."

Said Wessler: "We are supposed to have been provided with all the records, but we can't figure out what went on there."

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