I Can Tell You Why St. Vincent's Hospital Is Shutting Down, I Was There During The Restructuring Process

st vincent's

(This post appeared on the author’s blog. It is in response to news that the famed St. Vincent’s hospital in New York City is shutting down due to financial woes.)

I spent about a year of what feels like a different life thinking about St. Vincent’s Hospital. There were 40 or so companies that responded to St. Vincent Catholic Medical centres’ RFP for real estate investment companies to propose a way for SVCMC to remain in business indefinitely while it dealt with a terribly inefficient hospital design.

A group I was a part of ended up as one of the final three bidders. (To give you an idea, I valued the land surrounding 1 7th Avenue at about $100 million per acre and our bid was less than 1.5% less than the winning bid with a smaller requirement of density from the buildings department.)

I walked through just about every floor of all 13 (+/-) buildings of the Greenwich Village campus, had a handful of meetings with the SVCMC chief restructuring officer, and met with their bankruptcy attorney who had just returned from China where he was helping them write their bankruptcy code and laws. I spent countless hours thinking about how the deal could work for hospital, their board and backers including the Sisters of Charity and the Roman Catholic Diocese of Brooklyn, and of course our team and investors.

The bottom line is it is completely unsurprising to me that they are closing this hospital.

It’s sad because the St. Vincent’s Hospital at 12th Street and 7th Avenue was founded in 1849. It was the centre of AIDS treatment in the 1980s. It was the hospital that treated nearly everyone wounded in the attacks on the World Trade centre on 9/11. It serves an enormous section of Manhattan’s west side in emergencies. But its problems were just too great.

In 2006, the system was losing approximately $10 million per month. I don’t know how much bloat they have cut since but I would doubt it would do much to combat their ever expanding finance costs on what the NYT reports is now $700 million in debt. Because of inefficiencies in the design of the hospital both from a layout and operational perspective, about 40% of people who entered their emergency room waiting room left untreated. An enormous share of their revenue came from turning emergency room walk-ins into in-patients. Not only were they seeing a large share of those potential patients walk away but their bed count (total potential in-patients) dropped by almost half in the last couple of decades because they didn’t have the money to support the beds. It was a vicious cycle.

Also, because it was a Catholic institution, they could not provide family planning treatments. One of the fastest growing revenue generators at hospitals across the country is in vitro fertilization. The area that surrounds that hospital is just about the perfect demographic for IVF but because of their charter, those rich, older families were sent across town. (I doubt abortions are a big money maker but those were off limits also.)

Their plan was, while keeping almost the entire existing floorplan of the hospital open, to build a new state-of-the-art hospital at the site of one of their buildings on the west side of 7th Avenue, currently the very funky looking O’Toole Building. A bigger hurdle than the hundreds of millions of dollars they would need to raise (mostly from the real estate transaction and donors) was getting the buildings department to sign off on what would become, at approximately 325 feet, the tallest building in the neighbourhood. Not just any neighbourhood either, but one with a very strong community board and a history of keeping a human scale like no other in New York. Then, because the current hospital buildings are completely impractical for residential use and they had no prayer of getting enough value from the real estate without condo prices, they also needed approval to tear down the buildings east of 7th Avenue to be rebuilt as huge condo towers. Our bid was to rebuild to the same height as the current buildings but the winning bid from Rudin included a plan to go higher.

Add it all up with the things I forget or never knew and it’s just too much.

Through learning and thinking about the way hospitals work in Manhattan, where almost every hospital has become part of a “hospital system” and almost every system is in financial trouble, we started thinking about the deeper problems and potential solutions. Why does every hospital in Manhattan need every type of surgical facility? They think they do to compete but my understanding is that only Columbia Presbyterian is on fairly strong financial footing. We should have emergency rooms all over the city but a much smaller number of cardiac, neuro and other surgical facilities where patients are transferred if that’s what they need. Less duplication, less overhead, lower healthcare costs for New Yorkers (where costs are at or near the highest in the country) and more hospitals that can survive for the long term. Could it ever happen?

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