‘One of the Biggest Turnarounds in Medical History’

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The New York Sun

Mount Sinai Hospital, the venerable Upper East Side institution, which just three years ago was mired in a financial and quality crisis so deep that it could barely meet payroll and had its live-liver transplant program suspended by the state, has quietly dug itself out of the hole.

For the first time this decade, the hospital’s operating ledger is now in the black, and trustees, including a former Clinton treasury secretary, Robert Rubin, are confident enough to be planning a $1 billion fund-raising campaign. Physicians from the National Institutes of Health, Harvard, New York University, and the University of North Carolina-Chapel Hill are expressing their own confidence by coming to work at Mount Sinai, according to officials there.

State health officials and financial experts who rate the hospital’s bonds, once among the hospital’s harshest critics, are now hailing the turnaround.

“If the circumstances had not changed they would have been in very serious straits,” the executive deputy commissioner of the state Department of Health, Dennis Whalen, said. “Sinai has turned around. They are on stable ground.”

Mr.Whalen cautioned that no hospital can rest on its laurels, but he praised the CEO of Mount Sinai, Dr. Kenneth Davis, saying, “He stabilized the ship, grabbed the rudder, and is forging ahead.”

“What is unique about Mount Sinai is the depth of the turnaround,” a director in health care rating at Standard & Poor’s, Liz Sweeney, said. “It is one of the biggest turnarounds in academic medical history.”

The vote of confidence comes just a few years after the Manhattan hospital recorded several years of operating losses in the tens of millions of dollars. For 2005, it recorded a surplus of $46.7 million.

“There was a point in time when we had just enough money in the bank to make payroll,” the chairman of the board of trustees at Mount Sinai, Peter May, said. He said the institution now has $300 million on hand.

The improved finances have allowed the institution to shift its focus from its failed merger with NYU and the devastating bout of publicity that came in 2002 and 2003 in connection with a fatal liver transplant.

The about-face was hard to imagine three years ago. The institution was bleeding cash, laying off employees, closing clinics, and losing patients. Penny-pinching had cut into the housekeeping budget so the hospital was in substandard shape, and doctors and trustees were talking about whether the institution was going to be able to shore up its finances.

Dr. Davis, who was tapped by Mr. May to deal with the crisis, said the only way to steer the hospital out of the choppy water was to stop the “Draconian” cuts and to “grow the top line.”

Earlier this week, Mr. May, the former CEO of the buyout firm Triarc, recalled the days when a national health care consulting firm known for cost-cutting, the Hunter Group, was in charge and told employees to bring their own coffee to meetings. No expense was too small to slash.

The current management team has taken a different approach. They have made it easier for other hospitals to transfer patients in, which has simultaneously increased the number of patients coming through its doors and the number of complicated, moneymaking cases.

The hospital decreased the average length of stay for patients, allowing surgeons to conduct more procedures, and, with the help of an outside consulting firm, revamped billing and collections because it was failing to get paid adequately for many of its services.

The hospital recently consolidated all of its cardiac care in one building and purchased new equipment for a number of medical specialties. With its new investments, it is hoping to elevate its reputation for a few highly competitive specialties, including cardiology, neurosurgery, and orthopedics.

“This is not a community hospital,” said Dr. Davis during an interview earlier this week in his hospital office. “This hospital has to care for the most complex cases. You should be coming here because you’ve exhausted the care provided in your community hospital.”

Dr. Davis said the hospital recently brought on diabetes and depression experts from the National Institutes of Health, high-risk pregnancy doctors from NYU, a heart surgeon from Montefiore Medical Center in the Bronx, an epidemiologist from University of North Carolina-Chapel Hill, and a molecular cardiologist from Harvard who is scheduled to start at Mount Sinai within the next eight months.

The hospital also recruited Daryl Wilkerson, a former defensive end in the National Football League who was working at the University of Chicago, to head up housekeeping and security. Mr. Wilkerson starts in a few weeks.

The new director of diabetes, Dr. Derek LeRoith, said colleagues thought he’d be crazy to consider Mount Sinai because of the problems it was having a few year back. But, he said, when he saw how the facility had turned around and what it had in mind for diabetes he was convinced. “There is a buzz here,” said the longtime NIH doctor.

Dr. Davis speaks of the recruits with pride, but dismissed the notion that luring doctors from NYU was a coup. He said recruiting is a nationwide effort and pointed out that doctors regularly move between the institutions. NYU, he said, recruited a top cancer specialist from Mount Sinai last year.

Dr. Davis said that while the hospital has invested in revenue generators, like cardiac surgery, many of its new services, including diabetes, will lose money.

“We can’t have a series of services that are financial losers,” Dr. Davis said. “You have to invest in some winners in order to balance everything out. We live in the real world and we make sure that we keep this great entity financially viable so that we can do all of those other good things.”

He also said the hospital is keeping data in a way it never did so it can identify its strengths and weaknesses. At his office, he quickly logged on to his computer and pulled up graphs and charts on a range of measures.

One of the darkest stretches for the hospital came in 2002, when the state Department of Health suspended Mount Sinai’s live-liver transplant program for six months after a donor died and a series of violations was uncovered. A few months later, in 2003, the New York Times, whose chairman emeritus, Arthur Ochs Sulzberger, is a life trustee of Mount Sinai, wrote a 3,761-word story detailing the hospital’s woes, including the turmoil with the senior management team and a board of trustees that did little to take past hospital executives to task.

Although many of the problems have been resolved, there are still hospitals with stronger financial portfolios than Mount Sinai in the city – most notably New York-Presbyterian. Health care analysts say the financial gap is widening between the “haves” and the “have nots” among hospitals. Mount Sinai seems to back among the “haves.”

In the last year several New York hospitals filed for bankruptcy. Others have seen their credit downgraded. In November, Lenox Hill Hospital, also on the Upper East Side, had its bonds downgraded to junk status. Many of those following health care now view Lenox Hill as the question mark.

Mr. May said Mount Sinai is planning to spend $1.6 billion during the next 10 years on research, new facilities, and recruiting. He said: “Our expectation is to raise approximately $1 billion in philanthropy.”

According to S&P, Mount Sinai and NYU may be completely rid of each other within the next two months.

The two merged in 1998, but decided three years later to divorce. Now, after splitting their other assets, the two hospitals are finally on the verge of separating their $690 million in shared debt. S&P has said if all goes smoothly, it will raise Mount Sinai’s credit rating. Moody’s Investors Service has taken a similar position.

Mr. May and Dr. Davis both characterized the merger as a distraction that shifted attention to a complex administrative puzzle and away from the hospital’s real mission.

A trustee at Mount Sinai, Richard Ravitch, a former chairman of the Metropolitan Transportation Authority, said the institution’s serious problems were not tended to for five to seven years, but that the existing executives have put things back on track.

Dr. Davis said when he first took over nine out of 10 letters he received about the hospital were complaints ranging from billing problems to dirty bathrooms. Now, he said, 90% of those letters praise the hospital.

The New York Sun

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