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Spinning Off Children's Hospital May Help, Experts Say

Posted on: Tuesday, 5 July 2005, 09:01 CDT

Can the Maria Fareri Children's Hospital at Westchester Medical Center help cure the regional hospital's financial woes as well as it treats the region's sickest children?

One community hospital's chief executive thinks so, suggesting recently that the medical center should examine a spin-off of the children's hospital as part of its turnaround effort.

"I don't know if it's a good idea or not a good idea. It's something that would require quite a bit of consultants looking into the detail of it. But I think we would be terribly remiss (not studying) if there was a way to do it," said Jim Foy, president and chief executive officer of St. John's Riverside Hospital in Yonkers.

Foy said a spin-off would allow the children's hospital to reduce its debt and perhaps claim higher Medicaid reimbursements.

From its conceptual stages in the mid-1990s, the medical center has considered its children's hospital an integral portion of its overall facility. To reinforce that connection, the medical center set aside 36,000 square feet, 14 percent of the space in the children's hospital building, for the Joel A. Halpern Regional Trauma Center, a top-tier "level 1" facility that opened last fall.

Alan D. Sheinkman, who served as county attorney under County Executive Andrew J. Spano in the late 1990s, said the idea of spinning off the children's hospital was not examined even as Westchester briefly considered finding a buyer for the med center.

I don't believe (a spinoff) would have improved their balance sheet in any way. Even if they did set it up, from what source could they have borrowed money?" said Sheinkman, now with the White Plains law firm DelBello Donnellan Weingarten Tartaglia Wise & Wiederkehr L.L.P.

While Westchester spun off the med center in 1997 its new owner, a public benefit corporation, has been allowed to borrow money using the county's credit rating.

BASE YEARS DIFFER

Medicaid reimbursements for children's hospitals exceed those for traditional hospitals because the base years used to calculate the reimbursements differ. Children's hospital reimbursements are based on higher 1990 rates for procedures, versus 1983 for traditional hospitals.

It is possible for the children's hospital to receive more from Medicaid as a standalone hospital, said Matthew Cox, a spokesman for the Healthcare Association of New York State, an Albany group whose 550 hospital and nursing-home members include Westchester Medical Center.

"Whether it saves money overall is not clear. The children's hospital could likely get a better Medicaid rate, but there might be other things that would wipe out the savings or make its costs increase," Cox said. "It is not guaranteed that breaking off as a separate stand-alone hospital would generate extra revenue for them."

Cox said higher Medicaid revenues could be negated by the expenses of increasing patient load, as well as providing separate equipment, personnel and facilities. hi addition, the children's hospital would need an entire new governing board.

The prospect of those expenses compelled Montefiore Medical Center in the Bronx to keep its four-year-old children's hospital as a part of its health-care system rather than as a separate entity, said Montefiore president Dr. Spencer Foreman.

"We chose to build a children's hospital as part of our general hospital to eliminate having to reproduce several support services such as radiology, the lab, the kitchen and the cardiac cath (catheterization) lab," Foreman said. "How we would be paid was not a primary determinant in our reason to build a children's hospital."

Only patient demand prompted Montefiore to build a separate emergency room and five operating rooms for the children's hospital, Foreman said.

Montefiore is one of two New York City hospital systems that have opened children's hospitals within the past four years; the other is New York-Presbytetian Hospital, which transformed the old Babies Hospital into the Morgan Stanley Children's Hospital.

A DIFFERENT CLASS

Lawrence A. McAndrews, president and chief executive officer of the National Association of Children's Hospitals and Related Institutions in Alexandria, Va., said a better avenue for Westchester Medical Center to raise its Medicaid revenues would be by persuading the state to change its classification to a "disproportionate" share of Medicaid patients.

"If your facility has a high percentage of Medicaid patients, you can't afford to see them just with the conventional 80 percent of reasonable cost. That's a formula to go out of business," said McAndrews, whose group includes the Fareri children's hospital.

In recent months, med center board chairman Richard A. Berman said the regional hospital has stepped up talks with state officials to reclassify itself for improved Medicaid reimbursements, and with federal officials over Medicare reimbursements, said Berman, the president of Manhattanville College in Purchase.

McAndrews also said the children's hospital should not try another potential formula for higher reimbursements in New York state, limiting itself to being a "specialty" hospital caring for chronically sick children, given its proximity to Blythedale Children's Hospital in Valhalla about a mile east.

Copyright Westfair Communications May 23, 2005

Source: Westchester County Business Journal

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