Tasked with the challenge of modernizing a dysfunctional health care system, a state panel has submitted to Governor Pataki a template for restructuring New York’s hospital industry. The Commission on Health Care Facilities in the 21st Century is advising the governor to close nine hospitals in the state, including at least five in New York City, and is recommending reconfiguration, merger, and conversion plans involving an additional 48 hospitals. The commission says its plan will save the state about $1.5 billion a year and bring stability to a system that faces spiraling debt, bankruptcy, and rising healthcare costs. Hospitals targeted by the commissions are vowing to fight for their survival, while state’s most powerful politicians, including the next governor of New York, have responded with caution, refusing at the moment to endorse or reject its conclusions. Below are answers to some of the most pressing questions about the hospital commission’s report and its impact on New York.

Why is the state deciding which hospitals to close?

Commission members argue that allowing market forces alone to determine the fate of hospitals will endanger hospitals that are struggling financially but provide crucial services for communities.”Because such market driven closures can occur irrespective of or even contrary to public policy goals, access to and quality of care are at risk. The most important institutions to preserve may also be the most fragile,” the commission’s report says. They also point out that many of the hospitals that are marked for closure are on the brink of extinction anyway. The panel sees its role as cushioning their fall, by recommending that federal funds be used to help those hospitals pay off debts and to help displaced employees find jobs elsewhere in the system.

Another argument put forward is that individual hospitals can sometimes pursue a less efficient agenda that endangers the whole system. A hospital, for example, may be reluctant to enter into a merger with a competitor even though such a move would improve its finances in the long run. Finally, some industry analysts say a laissez-faire approach won’t necessarily produce an ideal result because the health care marketplace is already distorted. Commission members argue that in a state subsidized system, patients are insulated from health care costs, and demand an oversupply of technology and hospitals because they don’t’ directly bear the brunt of expenses.

Critics of such government intervention say the state could more effectively reduce the price of health care by making Medicaid more like private health insurance. They would argue that the state could encourage patients to make more efficient choices, such as by requiring higher co-payments and directing patients to lower cost hospitals, and scaling back benefits and eligibility requirements to match the national average.

What sort of hospital did the commission target for closure?

Particularly in New York City, the commission targeted small private hospitals that were financially weak and not protected by alliances with larger institutions. Industry experts say the hospitals also lacked a loyal patient base, mostly because of their proximity to other hospitals with better reputations.

State officials have estimated the number of excess beds to be in the area of 20,000. What prevented the commission from reducing more beds?

The commission was not operating in a vacuum but in a politically sensitive environment. If it slashed more beds, the commission risked a more powerful backlash from health care lobbyists, lawmakers, and residents that threatened to torpedo its whole effort. The chairman of the commission, Stephen Berger, said the goal was to come up with a first step toward trimming and modernizing the industry that would ultimately be accepted by the major players. “To try to do more up front would have been massively destabilizing to the system,” he said yesterday.

What happens next?

The governor has until December 5 to reject the report or approve it and submit it to lawmakers. If they don’t reject the report in its entirety by the end of the year, it becomes law. The state health commission is then required to implement the recommendations within 18 months. None of the major players, including legislative leaders, the hospital association, and the health workers union, have called for an outright rejection of the report, while some expressed alarm about the closures. While it’s expected that Mr. Pataki and both legislative houses will endorse the report, it’s not clear whether Governor-elect Spitzer will enforce it. Yesterday, he said in a statement that the commission’s plans involved one “important element of a broader plan to fundamentally restructure New York’s healthcare system.”

The targeted hospitals are vowing to fight, organizing protest rallies, threatening lawsuits, and trying to shield themselves by filing for bankruptcy. With billions of dollars of funding on the line contingent on the enforcement of the commission’s plan, the powerful hospital association lobbyists and 1199 SEIU union are unlikely to join them in the battle. Industry experts say unless Albany strikes down the report, there is little that hospitals can do to save themselves. The institutions will likely suffer an immediate loss of patients and staff, who are likely to flee to more secure institutions.