Affidavit of Judith Wessler

    SUPREME COURT OF THE STATE OF NEW YORK 
COUNTY OF QUEENS IAS Part 5 

X 
  

THE COUNCIL OF THE CITY OF NEW YORK, et al. 

Plaintiffs, INDEX NO. 004897-96 

Hon. Herbert Posner 
- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 
CITY OF NEW YORK, et al, 

Defendants. AFFIDAVIT OF 

JUDITH B. WESSLER, 
M.P.H. 

X 
  

CAMPAIGN TO SAVE OUR PUBLIC HOSPITALS - 
QUEENS COALITION, an unincorporated 
association, et al., 

Plaintiffs, INDEX NO. 10763/96 

Hon. Herbert Posner 

- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 
CITY OF NEW YORK, et al., 

Defendants. 

X 
  

STATE OF NEW YORK ) 

: SS.: 

COUNTY OF NEW YORK ) 

Judith B. Wessler, being duly sworn, deposes and says: 

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1. I am a health policy analyst with knowledge of and expertise in 

health policy and problems of access to health care. I have worked on health 

care issues in New York City since 1970 as a health policy analyst, health 

educator, and health advocate, and have counselled, taught, and written 

publications on access to health care at the Health and Hospitals Corporation 

("HHC") and the private hospitals in New York City (the "City"). I have 

professional experience in reviewing policies and systems, assisting people in 

gaining access to care, and teaching and writing about both how the public and 

private systems work and how patients can use them. Specifically, I served as 

Health Policy & Medicaid Specialist with the Children’s Defense Fund -- New 

York Office from 1992 through 1995. during which time I worked to expand 

comprehensive health services for children. I previously held the positions of 

Senior Health Policy Analyst in the Office of the Manhattan Borough President 

(1990 - 1991). Director of Health Advocacy with the Community Service Society 

(1988-1990). Health Advocacy Coordinator for Community Action for Legal 

Services (CALS) (1979-1988). among others. I received a B.A. from Boston 

University and a M.P.H. from Columbia University. 

2 In the past year I have reviewed publicly available documents 

relating to the City’s plan to privatize the public hospitals, including the Report 

of the Mayor's Task Force. the Offering Memoranda regarding Queens, 

Elmhurst and Coney Island Hospitals. and the Letter of Intent signed by HHC, 

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the City and PHS. I have also reviewed the draft Sublease ("the Sublease") of 

Coney Island Hospital to Primary Health Systems - New York, Inc. ("PHS-NY") 

and an outline of the contract agreement between HHC and Primary Health 

Systems - New York, Inc. for the transfer of Coney Island Hospital. 

3; This affidavit, first, provides an overview of HHC’s mission and the 

ways in which HHC and private facilities differ with regard to access to care for 

the indigent. See 11 4-14. In the second part of the affidavit I focus on the ways 

in which the arrangements detailed in the Sublease depart from HHC’s historic 

commitment to guaranteeing access to health care regardless of ability to pay. 

See 19 15-39. 

The Unique Mission of the Public Hospitals 
  

4. Since 1992 I have served on the Coordinating Committee of the 

Commission on the Public's Health System. an unincorporated association 

established in 1991 in response to an announcement by Mayor Dinkins of the 

formation of a blue ribbon commission to study the public hospital system. 

Members of the Commission believed that meaningful analysis of the quality and 

efficiency of health care delivery in the public hospitals could not consider HHC 

facilities in isolation but should. instead. have focused on the respective 

responsibilities and roles of the public and private sector. In 1996, for example, 

HHC paid private medical centers nearly five hundred million dollars for their 

services as affiliates of the public hospitals. yet the City Hospital Visiting 

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Committee has found that the private affiliates have been responsible for 

  

problems of low produciiviiy and high cost at HHC facilities. 

5. Since 1991, the Commission has held multiple public hearings in 

communities in Manhattan, the Bronx, Brooklyn, and Queens, many of which I 

have attended. At these hearings community residents have spoken in support of 

a public system. On numerous occasions individuals who were themselves 

uninsured or whose families were uninsured spoke of their experiences being 

turned away from the private system for non-emergent care and emphasized the 

need for places to go for care that have no regard for a patient’s ability to pay. 

6. HHC facilities operate in ways that are essential to the health of 

New York City residents and particularly the City’s 1.9 million uninsured and 

other medically indigent residents. HHC facilities provide a disproportionate 

share of services to the uninsured and those people insured through the 

Medicaid program. as well as to immigrants and to people who other hospitals 

often do not want to treat -- prisoners. addicts, psychiatric patients, people living 

with AIDS. tuberculosis, other chronically ill individuals and the homeless. 

Coney Island Hospital's 450 bed complement, for example, includes 60 

psychiatric beds. 

7. In addition, public hospitals provide a large amount of care made 

available for conditions that are expensive to treat, such as burn patients or 

victims of life threatening trauma or crime. Six of the City’s 15 Trauma Centers 

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approved by the 911 Evaluation Unit are at HHC facilities. A seventh was 

recently approved for Coney Island Hospital based on an demonstration of 

medical need in the surrounding communities. 

8. According to the Coney Island Hospital Offering Memorandum. in 

1995 more than 87.8% of outpatient visits to Coney Island were made by 

participants in public programs, i.e. Medicaid or Medicare, or by patients 

categorized as "self-pay," the vast majority of whom are uninsured. Medicaid 

patients alone account for 53.1% of outpatient visits. Similarly, participants in 

public programs and "self-pay" patients account for 87.6% of inpatient discharges, 

with Medicaid patients alone comprising 65.3%. The majority of Coney Island’s 

net patient service revenue flows from Medicaid and the bad debt and charity 

pools. 

9, The particular services provided by HHC facilities respond to 

community health needs and are critical to addressing these needs. For example, 

HHC facilities play a unique role in meeting the health care needs of persons 

living with HIV in the City. Despite the fact that a number of the not-for-profit 

hospitals in the City are designated AIDS centers and receive higher levels of 

reimbursement for treating persons with AIDS, last year HHC provided 51% of 

hospital-based clinic visits to persons with AIDS in the City and 37% of inpatient 

care stays. Moreover. the public hospitals treat a disproportionate number of 

certain categories of AIDS patients. such as the drug dependent and women with 

 



  

HIV/AIDS. 

10. Similarly, it was HHC that responded to the tuberculosis crisis that 

hit many of the City’s poor communities in the early 1990s, quickly developing 

special programs such as the directly observed therapy program and new 

outreach efforts. 

11. HHC facilities operate in ways that are distinct from the private 

sector, even from the not-for-profits. Most significantly, HHC facilities not only 

provide emergency care without regard to a patient’s ability to pay, but also offer 

non-emergent inpatient and outpatient services on the same basis. In contrast, 

while federal law prohibits all facilities with emergency rooms from turning 

patients away from an emergency room without first screening and, if necessary, 

stabilizing the patient, private facilities are otherwise under no similar obligation 

to provide services to those who lack adequate insurance coverage. Uninsured 

people in cities with public hospitals are significantly more likely to receive 

hospital care than those who live in cities with no public facilities. 

12. Uninsured and underinsured patients who are treated at private 

hospitals across the City experience difficulty obtaining medications and follow 

up care. Many can afford neither the prescribed medications nor follow up visits 

at an office or a clinic. As a result. for the most part HHC facilities have 

maintained outpatient pharmacies. despite their cost. HHC now charges a 

processing fee for prescriptions which can be forgiven if the patient is unable to 

 



pay. Moreover, HHC facilities have aimed to offer comprehensive outpatient 

care, again treating patients with no regard for ability to pay. While at 

Community Action for Legal Services, for example, I developed and conducted a 

telephone survey of public and private hospital clinics to investigate the degree of 

difficulty uninsured patients experience in scheduling appointments and found 

that (a) many private hospitals would not accept uninsured patients in their 

clinics at all and (b) at those clinics that accepted the uninsured, uninsured 

patients had a more difficult time scheduling timely appointments. 

13. To the extent that a few voluntary, not-for-profit hospitals in New 

York City have opened their doors to greater numbers of uninsured or 

underinsured patients, they have experienced both financial difficulties and many 

of the performance problems shared by HHC. Indeed, the survival of some of 

the voluntary hospitals that have shared the cost of caring for the uninsured with 

HHC 1s uncertain. Despite their similarities, however, these not-for-profits still 

do not operate in a manner consistent with HHC’s mission. For example, they 

generally seek to minimize unreimbursed patient care, whether or not such care 

is needed by community residents. To whatever degree the operations of these 

particular not-for-profits can be analogized to the public hospitals, they cannot be 

seen as illustrative of how a private, for-profit corporation would behave. The 

officers of the voluntaries serve the mandates of their institutions as directed by 

their boards of directors or trustees but do not manage the facilities in a manner  



  

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consistent with the interests of shareholders. 

14. As public institutions, HHC hospitals and clinics are also subject to 

freedom of information and sunshine laws, and their fundamental operating 

decisions must be made in public. Thus, community residents and others who 

rely on health care services have the opportunity to become involved in decision- 

making. This is a unique and important feature of public facilities. HHC 

provides care to everyone regardless of the limited and shrinking number of tax 

levy dollars available, whereas under the Sublease PHS-NY would have only a 

limited obligation to provide indigent care. 

Questions and Concerns Regarding the Sublease to PHS-NY 
  

Access to Care for the Uninsured and Underinsured 
  

15. The Sublease does not guarantee that PHS-NY will treat everyone 

who needs care regardless of ability to pay. The Sublease does not even require 

that PHS-NY treat a specific number of uninsured patients. To the contrary, 

Article 28 of the Sublease establishes a cap on PHS-NY’s obligation to serve the 

indigent and defines PHS-NY's level of obligation in terms of dollar amounts. 

Sublease at 74. 75. These provisions represent a complete departure from 

HHC's practice of seeing all patients without regard to insurance status or ability 

to pay and contravene HHC's mission. 

16. In particular. PHS-NY is required to absorb the costs of care only 

up to a specified "trigger point." The trigger point will be established annually 

 



  

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based on HHC’s audited charity care expense for Coney Island Hospital's most 

recent fiscal year inflated annually and multiplied by 115%. Sublease at 75. 

After the "trigger point" is reached, HHC will be obliged to reimburse PHS-NY 

for costs incurred above the trigger point ("excess incurrence") for one year. 

Sublease at 75. Although the City has represented that it will reimburse HHC 

for such outlays, questions remain as to how such expenditures will be budgeted 

and what impact they might have both on HHC’s annual budgeting process and 

on the allocation of funds among HHC'’s other facilities. 

17. After the first year of reaching the trigger point, the Sublease 

explicitly permits PHS-NY to "manage access to health care in such manner as it 

may deem appropriate so as to avoid ‘Excess Incurrence™ of indigent care if 

indigent care costs exceed PHS-NY's cap in any given year. Sublease at 75. 

HHC facilities cannot similarly "manage access to care." This provision is clearly 

at odds with the mission of the public hospitals. 

18. The Sublease also explicitly states that HHC cannot require PHS- 

NY to provide indigent care if the trigger point is met: "[N]othing herein shall 

give Landlord [HHC] the right to require Tenant [PHS-NY] to provide Indigent 

Care in excess of such amount." Sublease at 75. 

19.  PHS-NY could inflate the reported cost of indigent care by 

outsourcing services. thereby more easily meeting the "trigger point" while 

treating fewer indigent patients. Currently HHC clinics and emergency rooms 

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post set charges along a fee scale for services. These are all-inclusive charges. 

The Sublease does not prevent PHS-NY from outsourcing such services as 

radiology, lab work, and pharmaceuticals and then charging separately for each. 

PHS, Inc., outsources services in its Cleveland hospitals. 

20. The City and HHC’s current projections of the number of uninsured 

patients reliant on Coney Island Hospital for care and, thus, its analysis of the 

likelihood that HHC will be required under the Sublease to reimburse PHS-NY 

for indigent care, are erroneous and underestimate the impact of recent changes 

in federal Medicaid eligibility. For example, Appendix A of the SEQRA Report, 

attached to the Turbow Affirmation, states that 66% of the immigrants in Coney 

Island Hospital's primary catchment area are refugees and thus remain eligible 

for Medicaid under the Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996. Appendix A at 10. Yet the analysis fails to calculate 

the impact of the Act on the one-third of immigrants who might no longer be 

eligible. 

PHS-NY's and PHS. Inc.’s Track Records in Service to the Indigent 
  

21. The track records of PHS-NY and PHS, Inc. do not provide any 

basis for concluding that this transaction will ensure continued access to care for 

the indigent. First, PHS-NY is a for-profit corporation established in June, 1996 

for the purpose of subleasing Coney Island Hospital. PHS-NY has never 

operated any other hospital and it has no institutional track record. PHS, Inc., 

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itself only incorporated two years ago, and its reputation thus far is largely based 

on two hospitals, St. Alexis and Deaconess, acquired in Cleveland within the past 

two years. The little documentation available indicates that PHS, Inc. is, at best, 

ill prepared to accept responsibility for Coney Island Hospital's indigent patient 

population. 

22. Coney Island Hospital is 450 bed facility operating with an 

occupancy rate of nearly 90%. The Hospital annually receives more than 300,000 

outpatient department visits, and discharges 17,000 to 18,000 patients from its 

inpatient services. It serves a diverse, multi-lingual community and maintains 

residency programs in internal medicine, general surgery, orthopedics, urology, 

pedidivics obstetrics, gynecology and anesthesiology, ophthalmology, and 

osteopathy. PHS, Inc., has never operated a comparable institution. St. Alexis 

and Deaconess are both relatively small hospitals with much lower occupancy 

rates. few salaried physicians. and no residency programs. Neither St. Alexis nor 

Deaconess offer the type of extensive clinic system relied upon by Coney Island 

patients. Coney Island Hospital receives more than 60,000 emergency room visits 

per year. a figure almost twice as high as that at St. Alexis and Deaconess 

combined. 

23. PHS. Inc.’s performance in Cleveland raises substantial questions 

about its commitment to providing access to care for the uninsured. According 

to data provided by PHS for the years 1993 through 1996, total levels of 

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uncompensated care have dropped significantly since PHS, Inc., assumed control 

of St. Alexis and Deaconess. A November 7 report by New York City 

Comptroller that relies on figures supplied by PHS shows significant declines in 

the amount of care provided to the uninsured working poor and the total 

uncompensated care after PHS assumed control of St. Alexis and Deaconess. 

See Report of the Comptroller of the City of New York, Attached as Appendix 

A. 

24. Documentation provided by PHS and HHC’s own initial reviews of 

PHS’s current operations in Cleveland raise a number of additional unresolved 

questions about both PHS’s commitment to serving the poor and the degree to 

which PHS diverts resources to administrative costs and profits. According to 

Dr. Walid Michelen, HHC'’s Senior Vice President for Medical & Professional 

Affairs, who visited PHS hospitals in September, 1996, he had been informed 

that these two hospitals "subtly" turned away indigent care patients. See 

September 16, 1996 Memorandum from Walid Michelen, Attached as Appendix 

B. In addition, HHC staff have raised concerns regarding PHS’s practice of 

discontinuing and outsourcing services, its policy in Cleveland of taking 30% of 

net revenues for profit and overhead. exclusive of systems, and the possibility that 

PHS. Inc.. plans to transfer Coney Island Hospital after consummating the 

transaction with HHC. 

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Services Accessible to the Indigent 
  

25. The Sublease would allow PHS-NY to significantly alter the number 

and types of services available to the indigent at Coney Island Hospital and does 

not require either that such decisions comport with community health needs or 

that PHS-NY guarantees continued access to these services. 

26. In particular, the Sublease distinguishes between "Core" services and 

"Non-core" services. Under Article 28 of the Sublease, PHS-NY must continue 

to provide core services, including "Emergency Medicine, Medicine, 

Obstetrics/Gynecology, Pediatrics, Psychiatry, Rehabilitation Medicine and 

"nn General Surgery," "to substantially the same degree as provided by Coney Island 

Hospital on the day prior to Commencement Date." Sublease at 67-68. By 

contrast, the Sublease would allow PHS-NY to change the ways and means of 

delivering "non-core" services (which include dental care, cardiology, urology, 

endocrinology. ophthalmology. orthopedic surgery, podiatry, anesthesiology, oral 

surgery. cardiac cath, pharmacy. surgical subspecialties and all other services not 

listed as "core") at PHS-NY’s "reasonable discretion." Sublease at 68. 

27. PHS-NY can thus make changes, including the closure of a non-core 

service or the transfer of the non-core service to another site or provider, without 

any effective limitation. Before closing or transferring the department, PHS-NY 

must only give HHC notice. providing HHC with the opportunity to provide 

input. The Sublease grants HHC no recourse should PHS-NY reject HHC’s 

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recommendations. 

28. The Sublease would allow PHS-NY to transfer responsibility for 

performing inpatient and outpatient "non-core" services off-site to other 

providers, including its affiliates, Brooklyn Hospital and New York University 

Hospital, without any assurance that these providers will accept referred patients 

without regard for ability to pay. Neither the Sublease nor any other publicly 

available document provides any assurance regarding the accessibility of services 

to the uninsured if patients are referred to private providers (i.e. doctors, private 

practices or other private hospitals). 

29. PHS-NY could, therefore, close or greatly reduce "non-core" services 

‘that are crucial to community health but costly to provide. Such services might 

include. example, care for the chronically ill. for diabetics, asthmatics or persons 

living with AIDS. Such decisions would be inconsistent with HHC’s orientation, 

which prioritizes the provision of public health services and places emphasis on 

primary care. 

30. Moreover. the list of "core" services contained in the Sublease 

specifies the categories by department. not services. Available documentation 

contains no list of services by department. Thus, it is unclear, for example, which 

of Coney Island Hospital's 90 out-patient clinics (including, allergy, asthma, 

diabetes. cardiac rehabilitation. out-patient surgery. hearing, geriatrics continuing 

care. pre-natal. alcoholism. and family planning clinics, for example) PHS-NY 

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will continue to provide. 

31. The Sublease would allow PHS-NY to change the ways and means 

of delivering even "core" services and to alter the services offered within the 

enumerated departments. PHS-NY could, after proceeding through a 

notification and arbitration process, even close a "core" department without 

getting HHC’s approval for reasons related to changes in government 

reimbursement mechanisms, for example. Sublease, at 68. 

32. By requiring only that PHS-NY provide care in the core service 

areas to substantially the same degree as provided on the day before the hospital 

changes hands, the Sublease also fails to provide a meaningful baseline for 

measuring whether services are being reduced. A meaningful baseline would 

reflect services provided during at least the most recent year, if not a longer 

term. Moreover. the Sublease would allow reductions in services from current 

levels as long as they are made by HHC prior to the transfer to PHS-NY. 

Impact on Ability of the HHC System as a Whole to Fulfill its Mission 
  

33. The Sublease and publicly available documentation fail to address 

the impact of the loss of Coney Island Hospital to the HHC system and to 

HHC's ability to carry out its mission throughout the City. The City has stated 

that HHC will benefit from PHS-NY's payments for the purchase of Coney 

Island Hospital. due at the time of closing. The City has offered no analysis, on 

the other hand, of the costs of withdrawing Coney Island Hospital from the HHC 

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system. In the past three to five years, HHC has been reorganizing to take 

advantage of the benefits of its position as a multi-site system with purchasing 

power and multiple points of entry. With the health care financing and delivery 

system experiencing tremendous change and, particularly, with the growth of 

managed care, the viability of HHC as a whole may be affected by the disposition 

of HHC’s Coney Island facility. Already, following the announcement that 

Coney Island would be privatized. Coney Island was removed from HHC’s 

Brooklyn/Staten Island Network and has realized little benefit from HHC’s 

recent efforts to network. 

34. The Sublease also fails to specify whether PHS would participate in 

HHC’s managed care program, Metroplus, and, thus, whether low-income 

Metroplus enrollees would maintain continuity of care should they require 

services in Southern Brooklyn. 

Provisions for Monitoring Access to Care 
  

35. The Sublease does not provide for effective outside monitoring or 

the involvement of other city agencies. It instead puts monitoring in the hands of 

a new community advisory board and HHC. Sublease at 69-72. These bodies do 

not have the capacity to perform effective oversight to ensure that PHS-NY 

continues to provide access to care. 

36. In addition. community advisory boards at HHC facilities currently 

have responsibility for oversight over planning and budgeting, areas that affect 

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access to care and the types of services provided. These responsibilities are not 

included under the Sublease. 

37. HHC does not appear to have the necessary staff to audit access to 

care by PHS-NY. Indeed, audits performed by the New York City Comptroller 

have found that HHC’s Harlem, Queens and Elmhurst Hospitals have not done 

an adequate job of monitoring their affiliation contracts. Available documents 

provide no evidence that HHC is reorganizing to expand and strengthen its 

capacity for effective monitoring. 

38. Moreover, the Sublease grants HHC limited ability to do effective 

monitoring. HHC would have no authority to conduct surprise visits, nor to 

observe the hospital's operations outside of normal business hours. Moreover, 

most monitoring will be performed through the review of PHS-NY’s statistical 

reports. Although the Sublease states that HHC may review PHS-NY’s books 

and records, it does not require HHC to do so, much less at a regular interval. 

39. The Sublease contemplates that HHC will monitor PHS-NY’s 

performance and. where necessary. pursue arbitration to address problems but 

fails to provide for the costs of monitoring and arbitration, including the costs of 

legal fees. Such expenditures. as well as payments made to reimburse PHS-NY 

for care provided above the trigger point. could divert needed resources away 

from the HHC system. 

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Dated: New York, New York 

November 27, 1996 

  

SY b Wpsolon 
JUDITH B. WESSLER 

Sworn to before me this 

27th day of November, 1996 

Bn J (2 
NOTARY PUBLIC 

DENNIS D. PARKER 
Notary Public, State of New York 

No. 4972619 
Qualified in Westchester 

Commission Expires Oetober 1, 

  

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EXHIBIT A 

 



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TELEPHONE: (212) 669-7396 
FAX: (212) 669-3637 

THE CITY OF NEW YORK 
OFFICE OF THE COMPTROLLER 
OFFICE OF POLICY MANAGEMENT 
MUNICIPAL BUILDING, ROOM 517 
NEW YORK, N.Y. 10007-2341 
  

ALAN G. HEVESI 
COMPTROLLER 

ANALYSIS OF FUNDAMENTAL ISSUES THAT HAVE YET TO 
  

BE RESOLVED 
  

Whether The Hospital Will Serve Everyone Who Needs Care 
Regardless of Ability To Pay 

A The sublease does not guarantee that PHS-NY will see everyone who needs care 
regardless of ability to pay. 

The sublease does not require that PHS-NY see a specific number of uninsured 
patients. 

In his 10/30/96 presentation to HHC board, PHS’ Chair rejected David Jones’ 
request that these requirements be inserted into the sublease. 

The sublease requires only that PHS-NY spend a certain amount on “charity care.” 
The terms protect PHS-NY, by limiting its liability. But they do not guarantee that 
the hospital will continue to carry out the mission of a public hospital 

  

  

1. PHS-NY is required to provide care only up to a specified “trigger point.” 
The trigger point will be established at closing based on HHC’s audited 
charity care expense for Coney Island Hospital’s most recent fiscal year, 
multiplied by 115% and inflated annually. 

The sublease does not specify how PHS will calculate its charity care 
expense. However, according to other documents, they will be calculated 
on the basis of PHS-NY'’s fee schedule, rather than its actual costs. The 

- State Environmental Quality Review statement says that PHS’ “charity care 
expense” is the “difference between the charges [that PHS would normally 

  

   



  

levy] and the portion for which the patients would be responsible.” In 

other words, PHS is calculating its charity care as the amount of the 

“discount” from its “normal” fee schedule. 

3. PHS-NY could increase its “charity care expense” even if it treated fewer 
indigent patients. 

a. One way would be by increasing its fee scale. 

b. Another would be through creative accounting. “Unbundling” is an 
example of creative accounting. “Unbundling” means charging 

separately for each part of what would normally be considered a 
single service -- e.g., instead of charging for giving a TB skin test, 
the hospital might give separate charges for the office visit at which 
the TB test was “planted” and for the second office visit for 
“reading” the test. This normally leads to higher charges. 

4 The sublease explicitly says that PHS-NY can deny care if its charity care 
expenses rise above 115% of the amount during HHC’s last year of 
oeprating Coney Island Hospital. “Nothing herein shall give landlord 

[HHC] the night to require tenant [PHS-NY] to provide indigent care in 
excess of such amount.” After exceeding the trigger, PHS-NY “shall have 
the night to manage Access to health care in such manner as it may deem 
appropriate so as to avoid Excess Incurrence in the future.” HHC 
facilities do not have that night. 

5 It is possible that PHS-NY will automatically have greater “charity care 

expenses” than HHC simply because it is calculating charity care expense in 
a different way. 

a. As indicated before, PHS-NY will estimate its charity care 

expense on the basis of the money it is losing, in comparison to 
what it would charge if those patients were paying paying “full 

price,” according to PHS-NY’s fee schedule. “Charity care 

expense” is the expense of forgone charges (including profit). 
b. HHC appears to be calculating its own charity care expenses in a 

different way: based on HHC’s actual costs, as reported on the 

state’s institutional cost report form, not the fee schedule. Is this 
true? 

Cc If so, then PHS-NY would have higher charity care expenses simply 
because it is using the fee schedule, while HHC is using costs. Fees 
are normally higher than costs. 

  

  

  

  

'State Environmental Quality Review, Appendix A, Full Environmental Assessment Form, 
Part III, page A-7, released to HHC board on October 31, 1996. 

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6. Eligibility for “charity care” will be based on PHS-NY’s own charity care 
policy statement. PHS-NY’s policy statement (“New York City Charity 
Care Guidelines”) was distributed to the HHC board on 10/31/96. The 
statement includes the following provisions: 
a. Uninsured “patients with annual incomes exceeding 150% of the 

Federal Poverty Guidelines adjusted by the New York City wage 
index will be expected to pay full charges.” In 1996 dollars, 
someone will have to pay full charges if: 
(1) single, annual income over $17,416; 
(2) 2 person household, annual income of over $23,311; 

3) 4 person household, annual income of over $35,101 
b. Patients with incomes between 100% and 150% of the New York 

City-adjusted federal poverty line will be eligible for the sliding 
scale. The sliding scale is 20% of normal charges, up to 10% of 
annual income. 

C. The final group consists of patients with income below the New 
York City-adjusted federal poverty line. These patients must make 
the minimum payment -- $200 for inpatient care, and $20 for most 
adult outpatient care. In 1996 dollars, this would include patients 
who are: 

(1) single, with annual income below $11,611 
(2) two person household, income below $15,541 
3) four person household, income below $23,400 

d. Medicaid and Medicare patients have to pay some or all of the 
difference between PHS-NY’s charges and the amount that 
Medicaid and Medicare will cover. The amount of the “balance 
billing” is based on the above guidelines.-- i.e., pay all of the 
balance if income is more than 150% of poverty line, and 20% if 
between 100% and 150%. 

E. As discussed in a later section, the sublease does not establish an effective 
monitoring procedure for monitoring the indigent care obligations. 

F. PHS’ own data shows that it has poor track record in providing indigent care. 

1. At 10/21/96 hearings of the New York State Assembly Committees on 
Health, Corporations, and Labor, PHS presented estimates of the costs of 
providing indigent care at its Cleveland hospitals. The estimates cover the 
years between FY93 and FY96. PHS’ tables are attached. 

  

*The guidelines appear to have been toughened in the course of the negotiations. It 
appears that there was an earlier version of this policy, in which the cut-off for paying full charges 
was 200% of the federal poverty line, rather than 150% 

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2 The Comptroller’s Office prepared a new analysis of PHS’ indigent care 

track record, using the numbers from PHS’ own testimony. The analysis 
takes into account PHS’ criticism of the Comptroller’s prior analyses. 

a. PHS said that 1995 data should not be used because PHS did not 

operate the hospitals for that entire fiscal year. We did not 

previously have 1996 numbers. Now that we do, we are using the 
1996 numbers, rather than the 1995 numbers. 

b. PHS also claimed that one of the 1994 numbers is much too high, 

though they have not provided another, more accurate number. We 

are now reducing the impact of the higher number by averaging the 
data for 1993 and 1994. 

c. We now compare the 1993 - 1994 average to 1996, so there is a 

clear comparison between the most recent period before PHS took 
over and the period when PHS was completely in control and had 
some time to institute improvements. 

d. The results are shown in the attached table. The table shows that, 

even after we give PHS every benefit of the doubt, there is still a 
big drop in care for the uninsured working poor (those above the 

poverty line who generally do not have any health care insurance). 
At St. Alexis, care dropped by 30%. At Deaconess, it dropped 
39%. 

e. The table also shows a drop in total uncompensated care. This 

includes not only the working poor (those above the poverty line), 
but also the most destitute (those who are below the poverty line). 
For total uncompensated care, the drop at St. Alexis was 17% and 
47% at Deaconess. 

f In other words, even after taking into account PHS’s new 

information, there are still substantial questions about what PHS 
has done with the two Cleveland hospitals. And these declines may 
well be understated because there is reason to believe that the data 
for 1993 and 1994 understate the amount of care that was actually 
provided. 

  

  

  

  

  

G. During his visit to Cleveland, HHC’s Medical Director was told by persons outside 
of PHS that Deaconess and St. Alexis do turn people away but “that they do so 
subtly.” 3 

  

September 16, 1996 memorandum from Walid Michelen, HHC Senior Vice President for 
Medical and Professional Affairs, to LaRay Brown, HHC Senior Vice President for Corporate 
Planning and Behavioral Health. 

 



  

PHS refuses access to other pertinent data. 

1. The Ohio Hospital Association has trend data on “payer mix,” indicating 
the amount of care to people who are “self-pay” (which usually means 

“uninsured”), as well as those who have Medicaid. St. Alexis and 
Deaconess were participating in this data consortium long before the 
change in ownership. This provides another way to evaluate whether PHS 
reduced indigent care. 

The Ohio Hospital Association will not provide such access without PHS’ 
approval. The Comptroller’s Office and the State Assembly have both 
requested access to these data. But PHS has not given the approval for the 
Ohio Hospital Association to do so. 

There are unresolved questions about the impact of proposed changes in Coney 
Island Hospital’s emergency room. 

L. Due to their lack of regular care, indigent patients often enter a hospital 
through the emergency room. Coney Island Hospital has over 60,000 
emergency room visits a year -- almost twice as much as Deaconess and St. 
Alexis combined. In its meeting with the Comptroller’s Office, PHS 
expressed dissatisfaction with the number of Coney Island patients who 
are admitted through the emergency room. How does PHS plan to change 
this? 

In its meeting with the Comptroller’s Office. PHS also expressed a desire 
to rebuild or reconfigure Coney Island’s emergency room. on the grounds 
that it is too crowded. How does it plan to do so? Will it be designed to 

  

  

  

make the emergency room work efficiently or to make it uncomfortable 
and hence reduce the numbers going to the emergency room. 
  

  

 



» 
’ 

1 1 
] 

[] 

  

II. Whether The Hospital Will Provide The Services The 

Community Needs, Or Only Those Services That Are Profitable 

A. The sublease does not define specific community needs that PHS-NY is supposed 
to meet, nor any external arbiter of what those needs are 

1. Various outside bodies -- including the City and State Health Departments 
and the City Comptroller -- have access to objective health planning data, 
dealing with the prevalence of specific health problems, (e.g., HIV/AIDS, 
alcoholism, asthma, heart disease and tuberculosis). But the sublease does 

not even mention data on patient needs, let alone obligate PHS-NY to take 
them into account. 

ag The CAB is supposed to provide input on needs. But, as explained below, 

in the section on monitoring, the CAB’s input is not binding, nor does the 
CAB have to be representative of the community. 

B. The sublease does not specify the particular services that PHS-NY must provide. 

1. Attached is a list of Coney Island Hospital's 90 out-patient clinics and the 

number of visits at each of them during each of the last ten years. For 
example, there is information on clinics for family planning, allergies, 

asthma, diabetes, cardiac rehabilitation, out-patient surgery, hearing, 

geriatrics continuing care, pre-natal care, and alcoholism, among many 
others. 

2. The sublease does not provide information on which of these clinics will 

operate. or at what level. 
  

  

3. The sublease does not provide a meaningful baseline for measuring whether 
these services are being reduced. A meaningful baseline would take several 
years into account. However, the baseline stated in the sublease is the day 
before the change in ownership 
a. This might not reflect the level of service during the most recent 

year, let alone the longer term trend. 
b. After visiting PHS’ Cleveland hospitals, HHC staff said that they 

were told that reductions of nursing staff were “done prior to the 
PHS takeover within 90 days of the deal being signed.” For 

  

‘Undated September 1996 memorandum by Jean Leon, HHC Senior Vice President for 
South Brooklyn/ Staten Island network. 

 



example, as part of the agreement with Deaconess, 225 employees 
were dropped two months before PHS acquired the hospital.’ 

The main requirement about services concerns the continuation of seven 
departments, which are considered “core” departments. These departments are: 
emergency medicine, medicine, obstetrics/gynecology, pediatrics, psychiatry, 
rehabilitation medicine, and general surgery. The sublease does not indicate what 
specific services these departments will provide. PHS-NY can change the specific 
services at its own “reasonable discretion.” But “reasonable” is not defined. The 
only material constraint is that these particular departments are supposed to keep 
operating, and to do so at “substantially the same degree” as on the day prior to 
the PHS-NY’s takeover. “Substantially the same degree” is not defined either. 

PHS-NY can close one of the “core” departments without getting HHC’s 
approval. Before it closes such a department, PHS-NY must give HHC 90 days 
advance notice. HHC can object. But, if it does, PHS can appeal to an outside 
arbiter. The grounds for appeal would be if PHS-NY could argue that the closure 
is a reasonable response to “changes in health care practices, changes in the health 
care needs of the Coney Island community,” or “fundamental changes in 
government reimbursement mechanisms, or other fundamental changes which 
materially affect the delivery of health care services.” Those conditions are not 
clearly defined. 

  

1. The arbiter’s decision is final. 
The arbiter is “the C.P.R. Panel of Distinguished Neutrals.” The acronym is 
not defined. However, it may stand for Center for Public Resources, a 
competitor of the better known American Arbitration Association. Who 
are they and why were they chosen? 
The arbitration process is itself poorly defined. Article 33 leaves open 
whether the arbitration process will be governed by “federal or state rules 
regarding court proceedings or rules set forth by private arbitration 
organizations, including the Center.” Why is this left open? 
Why is there an arbitration process in the first place? Why doesn’t HHC 
have more power in defining the services that it wants its vendor to 
provide? If the vendor does not want to provide those services, shouldn’t 
the contract be voided? 

  

  

HHC has even less influence over changes in other departments. In all the other 
departments -- which are not considered “core” departments -- PHS-NY can 
make changes (including closure) without any effective limitation (e.g.. to have the 

  

  

  

  

*Raquel Ayala, HHC Vice President for Corporate Affairs, September 1996 report on 
Cleveland due diligence visit.  



. a 
» 1 1 

1 LJ 
. 

  

service provided by referring patients to another site, or by bringing in different 

doctors). The departments where it has such discretion include cardiology. 

urology, pulmonary care, pharmacy, dentistry, podiatry, oral surgery, 

anesthesiology. endocrinology, ophthalmology, orthopedic surgery. and special 

hematology. : 

  

  

  

  

  

1. Before closing one of these “non-core” departments, PHS-NY has to give 

HHC a chance to provide input. But there is no requirement about how 
much advance notice to give. 

2 PHS-NY is free to reject HHC’s input, without HHC having any recourse, 
even to an arbiter. 

 



’ 
’ 1 \ 

v [] 

  

III. Whether PHS’ Performance Will Be Effectively Monitored 

A. The sublease does not make provision for effective, outside monitoring. It puts 

monitoring in the hands of a new Community Advisory Board and HHC. But, as 

shown below, these bodies are not in a position to perform effective and independent 
oversight. 

B. The sublease specifically drops reference to the authority of the City Comptroller. 

1. No provision is made for the City Comptroller to verify PHS-NY’s 
estimate of its indigent care costs by auditing and inspecting PHS-NYs 

books, records, papers and files. Prior versions of the sublease had this 

provision, but it has been removed from the current version. 

  

  

  

  

2. PHS-NY is required to give HHC and the Community Advisory Board copies 
of reports prepared by or for accrediting bodies or New York State. However, 
the contract does not state that it is required to give these reports to other City 
agencies -- such as the City Health Department, the City Comptroller or the 
City Council. The same is true of its periodic “report cards,” which will 
include statistics related to indigent care. 

C: The new Community Advisory Board (CAB) does not have to be representative of the 
community. 

lL. The sublease calls for the creation of an entirely new Community Advisory 
Board. There is no requirement that the existing community advisory board 
have any continuing role, nor that any of its members be appointed to the new 
CAB. The existing Board is, in effect, abolished. 

2. Six of the CAB’s 12 members will be appointed by PHS-NY itself. 

3 Only two seats are set aside for representatives of local community planning 
boards and the Borough President. But the immediate catchment area has three 
community planning boards -- 11, 13, and 15. No process is stated for which 
community planning boards will be excluded. 

4 The other four members will be appointed by the Mayor and HHC. 

D. The Community Advisory Board (CAB) will not be provided with the means to be 
good monitors. 
  

  

]. Main responsibility is defined as publicizing the indigent care obligation and 
providing a grievance mechanism. Members can make suggestions, but the 
suggestions are not binding. 

2. The CAB will not be given access to PHS-NYs insitutional cost reports and 

9 

 



  

other records of whether PHS-NY is meeting its indigent care obligations. 

PHS-NY is not required to meet with the CAB more than four times a year. 

Representatives of HHC, the City and PHS-NY are permitted to attend its 
meetings, but “in no event shall the Community Advisory Board be deemed 
hereunder a public body.” In other words, the CAB does not have to comply 
with open meeting laws. 

No specific time frame is defined for how soon the CAB must be established. 

The sublease does not provide for the CAB to be given any staff, technical 
assistance, or budget. 

Most monitoring will be by HHC. But HHC will have limited ability to do effective 
monitoring. 

PHS must give HHC “access to Hospital and related facilities during regular 
business hours upon reasonable request.” But HHC does not have authority to 
conduct surprise visits, nor to observe the hospital’s operations outside of 
normal business hours. 

  

  

The sublease circumscribes the scope of the information HHC can request. 
It must be operating or financial information and PHS-NY has to agree that 
it is “reasonably needed to allow [HHC] to determine whether [PHS-NY] 
has performed its service obligations and the indigent care obligations.” 
PHS-NY has 30 days to provide the information. 

The Comptroller’s audits have found that HHC’s Harlem. Queens and 
Elmhurst Hospitals have not done an adequate job of monitoring their 
affiliation contracts. How can we expect HHC to do a better job 
monitoring PHS, when its position toward PHS is far weaker than its 
position toward its affiliates? 

  

  

  

  

  

Most monitoring will be through the review of PHS-NY ’s statistical reports. 
The sublease says that HHC may review PHS-NY’s books and records. 
But it does not say that HHC has to do so -- e.g., twice a year, or at some 
other stated interval 

HHC does not appear to have the necessary auditing staff. Does the City 
plan to provide HHC with additional funds to hire additional staff or to 
contract with an independent auditing firm? How much? What reason is 
there to believe that HHC will have either the means -- or the motivation -- to 
conduct aggressive monitoring once Coney Island is removed from HHC? 

10 

 



  

Even if HHC does find problems, its ability to enforce the contract is severely 

limited. It is unfortunate that HHC’s authority over PHS-NY is so much less than 

other agencies’ authority over their own vendors. 

1, There is no recourse if HHC finds problems with the quality of care, unless 
the problems are so great that the hospital loses its accreditation. 

As discussed in the prior section, HHC would have very limited influence 
over changes in services. 

The sublease does define an enforcement process for violations of the 
indigent care obligations, or if the hospital is in danger of losing its 
accreditation. However, the process is so complex and lengthy that it may 

not be workable. Enforcement would require HHC to go through all of the 
following steps, and ultimately go to court.: 

a. issuing a written notice of deficiency 
b. meeting with PHS-NY 

C. commissioning an independent third party audit to confirm the 
alleged deficiency 

d. giving PHS-NY further opportunity to correct the problem or deny 
the deficiency 

e. if PHS-NY still denies the deficiency, ask outside arbiter to hold 
hearing to resolve whether the deficiency exists 

f appoint an on-site monitor to observe the correction of the 
deficiency 

g. after the monitor has been in place for at least six months, 

determine whether problem has been corrected; if not, notify PHS- 
NY and meet again 

h. seek further arbitration and/or take legal action 

Section 28.04 (h) specifically states that HHC does not have any other 
recourse for problems in indigent care, or services. 

HHC 1s not given authority to impose fines for poor performance. PHS- 

NY is not required to post a performance bond. from which HHC could 

readily collect fines. 

  

  

  

11 

 



Will PHS Improve The Quality of Care? 

A. The quality of care requirement is minimal. The only requirement is that PHS-NY 
comply with the State’s regulatory requirements and that the hospital continue to 
be accredited. 

HHC is supposed to monitor PHS-NY by using statistical information, provided by 
PHS-NY itself. Some specific indicators are mentioned in the contract, but most 
of them are related to the quantity of care, not the quality. The only measure 
related to quality of care is waiting time. 

PHS has not negotiated an agreement for the provision of any specific number or 
type of doctor -- neither with the hospital’s current affiliate (University Medical 

oup), nor with Brooklyn Hospital, one of the proposed new affiliates. How can 
the City even judge the quality of care without knowing where PHS will get the 
doctors and what they will do? Will there be an agreement for physician services 
before HHC is asked to approve the sublease, and will affected groups be able to 
review it before HHC votes? 

  

  

  

It is hard to make any meaningful evaluation of whether PHS-NY will improve the 
quality of care in the absence of a clear statement about the specific services to be 
provided, and without any written agreement between PHS-NY and a medical 
affiliate about the number of doctors it will provide. 

There are outstanding issues about the quality of care provided at PHS’ Cleveland 
hospitals and their relevance for Coney Island Hospital. 

E The main objective evidence that PHS improved the quality of care in its 
Cleveland hospitals is that St. Alexis recently received a score of 93 from 
the Joint Commission on the Accreditation of Health Care Organizations -- 
up from 90 in the Joint Commission’s prior review. But Coney Island 
currently has a rating of 97. Is there any evidence that PHS hospitals 
provide better care? 

At her 10/24/96 briefing of the HHC board, Maria Mitchell said that PHS 
will fare better in the next report of Cleveland Quality Choices than in the 
last. But no evidence was provided. At his 10/31/96 presentation to the 
HHC board, the director of Cleveland Quality Choices presented selected 
data from the next report. The data showed no significant improvement 

  

PHS Vice President Sussman told the Comptroller’s Office that there is an agreement 
with Brooklyn Hospital, but that the agreement has to do with more general matters -- for 
example, cooperation in strategic planning. There is no agreement at all with current doctors. 

12  



from the prior report -- e.g., at St. Alexis, the hospital’s ranking on 

whether intensive care patients die was still worse than before the change in 
ownership. 

How have the PHS hospitals scored on the reports of the specialty 

societies, such as the American College of Obstetrics, Academy of 

Pediatrics, and American College of Surgeons? What is the evidence that 
their evaluations have improved since PHS took over? 

The Coney Island Hospital Community Advisory Board (CAB) was 
scheduled to go to Cleveland to evaluate PHS hospitals for itself. But the 
City cancelled the visit. Will the CAB have the opportunity to make such a 
visit before the sublease is signed? If the CAB’s evaluation is negative, will 
the deal be cancelled? 

Frequent mention has been made of PHS’ 33 quality of care indicators. 
What are they? How are they different from the ones Coney Island 
already uses? What does PHS do with this data that is different from what 

Coney Island does with its own data? When HHC staff visited Cleveland, 
why did they find it “difficult to determine the structure used to monitor or 
corrective action taken.”’? 

PHS states that it uses these indicators to track its facilities on a regular 
basis. Will PHS make this data public? 

What specific steps has PHS taken to improve quality of care at its other 
hospitals? How are these steps different from what Coney Island Hospital 
is already doing? 

The main improvement that has been mentioned by PHS or the City is that 
PHS will invest in improving Coney Island Hospital’s physical plant, but 
PHS said that it would not develop a capital plan until it takes the hospital 
over. The specific capital improvements that have been mentioned are ones 
that will improve the hospital’s financial position by making it more 
attractive to potential patients, without necessary improving the quality of 
care -- eg., building an atrium at the entrance, planting more shrubs, 
improving the elevators, and converting six patient rooms into two and 
four patient rooms. Most of these proposals are in the hospital’s existing 
capital plan. Moreover, the amount PHS has commited to spend ($25 
million over five years) is less than the amount needed -- $117 million, 

  

"Undated September 1996 memorandum by Pete Velez, HHC Senior Vice President for 
Queens network. 

13  



according to J.P. Morgan’s analysis.® 

PHS also said that it would increase the amount of outpatient care. But 
HHC staff who have visited the Cleveland hospitals pointed out that these 
hospitals “provide few outpatient services at the hospital site,” “the activity 
in the emergency department is extremely light,” and the hospitals “are not 
comparable to Coney Island Hospital in scope of services, volume of 
outpatient and emergency room workload or diversity of patients.”'° 
Concern was expressed over whether PHS’ management information 
systems are sufficient to manage the volume of outpatient care at Coney 
Island Hospital." For example, the system “is inpatient oriented with little 
emphasis on outpatient” [care] and it “does not have an appointment 
booking system.”!? 

  

*J.P. Morgan, Report to the City of New York Concerning the Privatization of: Coney 
Island Hospital, Elmhurst Hospital Center; Queens Hospital Center, March 1995. 

Velez, op cit. 

"’LaRay Brown, HHC Senior Vice President for Corporate Planning and Behavioral 
Health, “Summary of HHC Senior Management Staffs’ Site Visit Reports,” September 1996. 

'"HHC Assistant Vice President for Corporate Reimbursement Peter Klemperer, 
September 13, 1996 memorandum to HHC Senior Vice President Rick Langfelder. 

“Summary of September 13, 1996 site visit to PHS/Integrated Health Computing, Inc., 
Wayne, Pa. 

14  



  

V. Whether Other HHC Facilities Will Be Adversely Affected 

A The deal may endanger the tax status of bonds that were used to finance 

improvements at Coney Island Hospital. An IRS determination that the City had 
violated IRS regulations might make it more costly for HHC to finance capital 
improvements in the future. 

Ls In order for outstanding HHC bonds which financed improvements at CIH to 

remain non-taxable, the change is use of the hospital must comport with 

established IRS standards. Where those standards are not precisely met, as in 

the case here, an alternative use of the lease proceeds may - or may not- be 

acceptable to the IRS. The Comptroller’s Office has cautioned the City that 

before it proceeds with the lease, it should seek a definitive ruling from the IRS 

that HHC’s plans will result in the continued non-taxability of the outstanding 

CIH debt. The City, however, intends to close the deal right away without a 
ruling in hand. . 

2. The IRS may ultimately rule against the City, determining that the City has 
violated IRS regulations. One of the consequences of such a determination 
might be that it would be more costly for HHC to finance capital improvements 
at other HHC facilities in the future. 

B. Misleading statements are being made about how Coney Island’s operating losses affect 
the rest of the HHC facilities. 

1 At its October 31 meeting, the HHC Board was given a document saying that, 
in FY95, Coney Island Hospital had an operating loss of about $11.5 million. 
The document goes on to say that eliminating Coney Island’s losses will 
improve “the fi,nancial picture for HHC systemwide. >” 

2 $9,034,000 of the $11.5 million is the amount that HHC charged off to 
Coney Island Hospital, to cover the costs of running HHC as a whole 

3 The Offering Memorandum says that the hospital made a profit of almost $10.4 
million in FY 95, prior to deducting the cost of depreciation, interest, and the 
allocations of costs from the Central Office. 

C. In his 10/24/96 comments to HHC Board, Deputy Mayor Mastro said that $17 million 
of the payment for Coney Island’s outstanding capital debt would be made available to 

  

"*One page leaflet, titled “Benefits for HHC and the City.” 

“We say “almost” because we reduced the estimated profit by taking out the $181,000 tax 
levy contribution. 

15 

 



Ld 
¥ 

® 

. 
. 

  

HHC to reinvest in the capital needs of other HHC Hospitals. What assurances are 

there that the funds will be used toward HHC’s capital costs, rather than for cash 

flow or operating expenses, or that it will not be offset by other reductions in City 
support? 

D. HHC may be harmed by provisions of the sublease that require HHC to help PHS-NY 

manage the costs of providing indigent care. 

1. The sublease requires HHC to reimburse PHS-NY for the cost of providing 

indigent care beyond the 115% “trigger point” during the first year in which 

such costs are incurred. In its 10/24 briefing, the HHC board was told that the 

City would sign a side agreement with HHC, under which the City would 

reimburse HHC if HHC had to pay for excess care. The City has not provided 

copies of any such side letter and, in any case, it is not clear that such a letter 

would be readily enforceable. If the City intends to make this payment, why 

doesn’t the sublease state that the City -- the “fee holder” -- would reimburse 

PHS-NY’s excess costs? If HHC does bear these costs itself, then it has no 

choice but to take the money from other HHC hospitals. 

2 The sublease also says that if, PHS-NY is about to reach the trigger point -- or 

if it has reached that point already, HHC will be informed and will work with 

PHS-NY to manage those costs. Other than paying PHS-NY, HHC’s only 

other feasible option is for HHC to transfer indigents to other HHC facilities. 

3. At the same time, HHC is prohibited from competing with PHS-NY for the 
neighborhood’s insured patients. 

E.  HHC gets substantial sums from Medicaid and Medicare in response to appeals of 

reimbursement decisions concerning services provided in prior years. How will future 

proceeds from future “rate appeals” be apportioned between HHC and PHS-NY? 

F. The costs of monitoring are to be borne by HHC (the “landlord”), rather than by the 

City (the “fee holder”). Has the City estimated the likely cost -- e.g., for contracting 

with an independent auditor, or hiring additional HHC staff? 

G. Disagreements between HHC and PHS-NY are to be resolved by using an outside 
arbiter and, if necessary, going to court. Has anyone estimated how much HHC will 

have to pay for arbitration costs or court costs? 

H. According to a memo from HHC staff, * PHS’ president “claims that the city has 

agreed to ‘relocate’ unionized staff that will be downsized to other facilities in the 
  

  

'*September 16, 1996 memorandum from Walid Michelen, HHC Senior Vice President for 
Medical and Professional Affairs, to LaRay Brown, HHC Senior Vice President for Corporate 
Planning and Behavioral Health. 

16 

 



¥ 
[ Ll 

[ 
A 

  

corporation.” Is this true? Given the layoffs at the other HHC facilities. doesn’t this 

simply increase the number of layoffs at the other HHC facilities? Doesn’t this simplv 

shift PHS’ severence costs to other HHC facilities? 

  

  

  

L The administration is making questionable claims about other hospitals getting more 
money from the free care/ bad debt pool. 

1. Mana Mitchell told the Comptroller’s Office that the City would save $7.5 

million from a portion of the hospital’s Medicaid-funded reimbursement for 
free care/bad debt for services rendered at Coney Island Hospital. This portion 
comes from two particular pools of money, called the Supplementary (SUPP) 
pool and the Supplemental Low Income Program Adjustment (SLIPA) pool.’ 
The City pays the $7.5 million into the pool, and the Federal government 
provides a matching share. 

2. These funds are available only to governmental hospitals. Coney Island 
Hospital would no longer be eligible because it would no longer be a 
governmental hospital. Therefore, the $7.5 million would be a real savings. 

3. Mana Mitchell contends that the City would transfer the $7.5 million to other 
HHC hospitals. 

a She said that the City has authority to pay $7.5 million in liey of its pool 
payments as an addition to HHC’s subsidy. 

b. If thus 1s true, HHC would not have any recourse if the City did not do 
SO. 

C The City says that HHC no longer needs a subsidy,” even though the 
City has paid $44.7 million subsidy so far this year and the cash subsidy 
to HHC in the fiscal 1997 adopted financial plan is: 
(1) 1997: $51.3 million 

(2) 1998: $117.2 million 
3) 1999: $113.2 million 

4) 2000: $124.7 mullion 

  

“Maria Mitchell gave this estimate during a September 6, 1996 briefing of the 
Comptroller’s staff. 

'"Mastro, op cit. 

17 

 



VI. Whether PHS Is Making A Credible Long-Term Commitment, 
Or Whether It Will Pull Out When It Becomes Profitable To Do 
So 

A. There have been widespread concerns -- including by HHC staff who have visited 
Cleveland" -- about whether PHS-NY has a long-term commitment to running the 
hospital, or whether its ultimate goal is to make the hospital profitable and then sell it to 
another health care entity -- perhaps a larger for-profit hospital chain. 

]. The sublease permits this to happen. Within broad limits, Articles 10 and 11 
give PHS-NY the right to sell its interest in the lease, transfer control, or sublet. 
Section 10.01 (e) requires that PHS-NY notify HHC 60 days before the 
effective data of the assignment, transfer, or sublease. HHC has 30 days to 
object, but only on very limited grounds -- e.g., that the property is being 
assigned to a criminal -- 10.01 (f). 

If this does happen, what are the protections for HHC and the community? 

Why should PHS have the right to sell its interest to someone else? Shouldn’t 
the facility revert to HHC? 
  

  

Why 1s PHS-NY’s capital commitment only for five years, and at a level ($25 million, 
plus $5 million a year in routine maintenance) that is less than the $117 million that is 
needed, according to J.P. Morgan's analysis." 

PHS-NY was formed this June, the day before the letter of intent was signed. Asa 
separate entity, PHS-NY could go bankrupt without the bankrupcy affecting the 
position of PHS, the Delaware Corporation. In the event that this occurs, what are the 
protections for the City? 

Durning the 10/31/96 briefing of the HHC Board, the Mayor’s Office testified that the 
City has investigated the background -- including a Vendex check -- of the two 
individuals who are listed as officers or shareholders of PHS-NY, but not the rest of the 
individuals and corporations that are shareholders or officers of PHS, the Delaware 

  

"*In his September 13, 1996 memorandum to HHC Senior Vice President Rick Langfelder, 
HHC Assistant Vice President for Corporate Reimbursement Peter Klemperer said that he 
believes that it is “ultimately true” that PHS wants to strengthen its hospitals in order to “sell them 
at a large profit.” He added that this won’t harm anyone “as long as the contract we sign protects 
HHC and the community against any negative effects of a sale.” He did not say whether he 
believes that the contract does in fact provide such protection. 

"J.P. Morgan, Report to the City of New York Concerning the Privatization of: Coney 
Island Hospital, Elmhurst Hospital Center; Queens Hospital Center, March 1995. 

18  



FJ 
K ; N t 

® : 

1] 

Corporation. 

1; Both of the PHS-NY shareholders and officers are also officers or shareholders 

of PHS, the Delaware Corporation. These are Robert Fleming and Michael 

Sussman. Robert Fleming is Chairman of PHS-NY and also President of PHS, 

the Delaware Corporation. Michael Sussman is President of PHS-NY and also 

a Vice President of PHS, the Delaware Corporation. 

Why didn’t the City also perform a background check on the rest of the officers 

and shareholders of PHS, the Delaware Corporation? 

In the 10/24/96 briefing of the HHC Board, Maria Mitchell said that PHS-NY will 

make a security deposit of $750,000. Where does the sublease state this requirement 

and the conditions surrounding the use of the deposit? 

 



VII. Whether The City Got The Best Possible Deal 

A. The State Attorneys-General of Ohio and Michigan have raised concerns that for-profit 
entities do not pay fair market value when they acquire not-for-profit hospitals. In the 

case of Coney Island Hospital, what was the basis for determining that $48 million 

(Deputy Mayor Mayor Mastro’s estimate of the hospital’s outstanding debt) % is a fair 
price? 

1. Where is the document where PHS-NY states exactly what it will pay? The 

sublease says that PHS-NY will “pay Debt Service Rent in the amounts and on 

the dates specified in the Debt Service Rent Schedule attached hereto,” but the 

schedule is not attached to the copies given to the HHC board. Deputy Mayor 

Mastro said that the amount of outstanding debt is approximately $48 million 2! 

but other documents mention a variety of numbers, ranging from a high of $50 
million® to a low of $45 million.” What is the price?. 

According to Coney Island Hospital’s audited balance sheet (attached to the 
Offering Memorandum), the net value of plant and equipment by themelves 
were worth $59 million in FY95. The market value of the land is another 
$18.9 million, based on a 43% real estate equalization rate on a NYC 

Department of Finance assessment of $8.6 million.. The total is roughly $78 
million -- $30 million more than the $48 million stated by Deputy Mavor 
Mastro. 

  

  

  

  

  

The discrepancy would be even greater if we also included the value of the 
hospitals’ current and projected revenues. For example, the hospital’s FY95 
audited net patient service revenue was $221 million. 

Did J.P. Morgan ever prepare an analysis of Coney Island Hospital’s market 
value? What number did they come up with, and what was the basis by which 
they arrnived at that estimate? 

What were the offers that were rejected, and what were the dollar values of 
those offers? 

Were the losing bidders given an opportunity to match PHS’ offer; i.e., a “best 

  

®Daily News, October 31, 1996, page 39 

*'Daily News, October 31, 1996, page 39. 

ZL etter of Intent, June 26, 1996, page 2. 

PState Environmental Quality Review, Appendix A, Full Environmental Assessment 
Form, Part III, page A-3, released to HHC board on October 31, 1996. 

20  



  

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&® ! 
. . 

and final offer? 

7 What is the evidence that other for-profits were given a fair chance to make 
competing bids? 

What arrangements have been made for PHS-NY to pay local taxes? 

1. For the purposes of real estate valuation, the New York City Department of 
Finance currently assesses the land and hospital building at $51 million. The 
real estate tax would be over $2.3 million dollars a year. In prior drafts, the 
sublease required PHS-NY to make a payment in lieu of taxes, in the amount it 
would have paid were it paying real estate taxes. In the current draft, no 
mention is made of such a payment. Will PHS-NY have to pay real estate 
taxes, or make an equivalent payment? 

2 As a corporate entity, what other taxes will PHS-NY have to pay? What taxes 
will they be relieved from paying? 

Subject to broad limits, Article 11 gives PHS-NY authority to mortgage the property. 
What is the legal basis for a “leasee” to get a mortgage? Has the City estimated the 
money that PHS-NY could earn bv mortgaging the property and then investing the 
proceeds? Will the City, as landlord. get a share of those earnings? 

  

  
  

  

  

The New York City Economic Development Corporation (EDC) was the lead entity in 
negotiating this agreement. EDC’s main job is attract and retain business by offering 
economic incentives. Did the EDC or the City offer PHS any incentives beyond the 
apparent abatement of real estate taxes? What is their monetary value? 

The hospital has a variety of concession agreements, covering services such as the 
parking lot, the coffee shop, the gift shop, vending machines, and TV rentals. 
Together, the most recent concession contracts are worth over $7 million. Does HHC 
or the City retain any rights to these commissions, or to commissions from the 
concessions? 

21 

 



  

VIII. Whether The City Will Save Money 

A. J.P. Morgan estimated that, in the first five years, the deal would save the City 
approximately $20 million a year. In a September 19, 1996, letter, we raised questions 
about the specific elements of this estimate, and asked that J.P. Morgan provide further 
explanation. Maria Mitchell promised that J.P. Morgan would respond but it has not. 

¥ How is it possible for the City to save $20 million or more a year on one HHC 
hospital when the City’s total subsidy for all 17 HHC facilities is only $51 
million (according to the City’s adopted budget), and is expected to fall to 
approximately $45 million (according to HHC officials), and when the 
administration is now telling the press that HHC no longer needs a City 
subsidy?%* 

2 How does J.P. Morgan reconcile its estimate of savings due to loss in 
operations ($5 million a year)® with the independent audit attached to the 
Offering Memorandum? The independent audit estimates that, in 1995, the 
City’s tax levy contribution to operations was only $181,000.% 

3. Why does J.P. Morgan count the entire cost of capital maintenance and the 
principal on outstanding capital debt as a savings, when most of this will be 
recouped through Medicaid and Medicare reimbursements? Doesn’t it make 
more sense to count only the portion that is not reimbursed? 

4. On what basis are the capital savings being estimated? Are they based on 
HHC’s actual spending or on the basis of projected needs? Are they based 
on the amount that PHS-NY is projected to spend? If HHC is not actually 
spending all that money, why is it all counted as a savings? 
a. According to a document distributed at an October 31, 1996 HHC 

board meeting, “HHC’s FY 1995 capital plan for Coney Island 
Hospital totaled $15.3 million in projected five-year spending for 
new projects.” 

b. Yet, a document distributed at October 24, 1996 board meeting, 

  

#Deputy Mayor Mastro said that, “for the first time in its 26-year history, the Health and 
Hospitals Corp. can pay its own way without a city subsidy, generating its full $3.2 billion 
budget” (Daily News, October 31, 1996, page 39). 

*Maria K. Mitchell, “Testimony to New York State Assembly Joint Committee Hearing 
on The Privatization of Coney Island Hospital,” August 13, 1996. 

KPMG Peat Marwick, Independent Auditor’s Report, “Statement of Revenue and 
Expenses,” line titled, “Funds appropriated by the City of New York for Operations.” 

22 

 



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1 » t L] 

. 

p . 

  

titled “Benefits for HHC and the City” lists the saving from 

avoiding future capital liabilities as $50 million -- the entire amount 
of PHS’ five year commitment ($25 million in capital 
improvements plus an additional $5 million a year in routine capital 
maintenance). 

5. In addition, there appears to be double-counting. In one part of the 
October 24 statement of benefits, the repayment of $48 million of existing 
capital debt is listed as one of the savings. Later, separate mention is made 
of “$17 million of the initial payment available for qualified HHC capital 
expenses.” But isn’t the $17 million part of the $48 million? 

6. How did J.P. Morgan calculate the amount the City would no longer have 
to pay into the indigent care pool? Why would the City save from pool 
payments when most of these contributions are part of the City’s Medicaid 
share and, therefore, payable regardless of whether the patient is going to a 
hospital operated by HHC? Are they just talking about SLIPA and the 
supplemental pools -- the portions of free care/bad debt pool for which 
public hospitals are the only ones eligible??’ 

B. To what extent does the administration’s estimate of possible savings take into 
account the offsetting loses -- eg., loss of hospital revenues, the net value of 
hospital assets, additional payments when the cost of indigent care exceeds the 
trigger point, the matching federal funds that were “pulled down” when the City 
made its contribution to the portion of the free care/bad debt pool that Coney 
Island can no longer collect (SLIPA and SUPP pools), and the continuing financial 
Liabilities stated elsewhere in this memo -- including the potential for additional 
interest payments if the IRS rules against the way the City is retiring Coney 
Island’s existing capital debt? 

C The sublease requires HHC to pay PHS-NY for PHS-NY’s “excess” costs during 
the first year when the cost of indigent care exceeds 115% of Coney Island 
Hospital's prior costs. But, when HHC’s own facilities face a similar “excess,” 
the City does not increase HHC’s own subsidy. 

]. Isn’t this itself a cost increase? 

2. The sublease states that HHC is liable only for indigent care costs beyond those 
for which state reimbursement is available. PHS-NY is eligible for 
reimbursements from the main part of the State’s “free care” pool -- though not 
from other elements (SLIPA and SUPP pools). However, the State is reducing 

  

*’See supra, for explanation of SLIPA and SUPP pools. 

23 

 



  

LJ 
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M 

the total size of its free care pool. How will this affect HHC’s liability for PHS- 
NY’s “excess” costs? 

In her 10/24/96 briefing of the HHC board, Maria Mitchell said that the City 

would sign a “side letter” with HHC, promising to compensate HHC for such 

payments. What is the City’s estimate of the likely costs of keeping this 

promise? What is HHC’s protection against the City offsetting this payment 

through a reduction in the City’s overall subsidy? 

What are the labor-related costs for which the City will still be liable? 

1. 

2 

3. 

4. 

Unemployment and other severence costs? 

Pension rights for employees who have participated in the New York City 
Employees Retirement System? 

Post-retirement health benefits? 

Vested vacation and sick leave? 

Coney Island Hospital currently provides free care for prisoners, and for the work- 
related needs of police and fire fighters. Will PHS-NY continue to do so? 

1. 

2 

Will there be a separate charge to the City? At what cost? 

The City pays higher rates for employee health insurance when employees incur 
more insurance costs. HHC saves the City on employee health costs when it 
treats uniformed officers for free. Will PHS-NY bill City health insurance 
when they take care of the work-related needs of police officers, fire fighters 
and other uniformed officers. If so, what is the estimated impact on the City’s 
employee health insurance costs? 

The final sublease may leave the City liable for other costs, for which it was not liable 
in prior drafts. What is the potential financial cost of the City or HHC of: 

lL. Hazardous or toxic wastes found on the premises (current draft removes 
protection of the City from Section 17.04); 

Latent or patent defects in the hospital (protection of City removed from 
Section 17.03). 

Medical malpractice. Section 7.09 (d) is titled “medical malpractice,” but the 
content is left blank. Section 19.01 (d) indicates that PHS-NY will indemnify 
HHC and the City against any liabilities related to accidents and injuries which 
occur in, on or about the premises. This clearly covers trips and falls. But is 
this sufficient to cover medical malpractice liability, which is not specifically 
included in the list of liabilities for which PHS-NY must indemnify HHC or the 

24 

 



 



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t 

. 

  

IX. What Is The Evidence That The City Has Adequately 
Investigated PHS’ Background? 

A. In its meeting with the Comptroller’s Office, PHS promised to provide a list of the 
documents that PHS has provided the City in response to the City’s “due diligence” 
investigation. But PHS has not done so yet. Will the City or HHC provide such a list 
itself? 

B. What specific numbers does HHC have concerning trends in indigent care at PHS’ 
Cleveland Hospitals, beyond the data that we brought to HHC’s attention, from 
institutional cost reports? For example, what data did HHC collect concerning trends in 
the hospitals’ payer mix? 

C. According to one of the documents in the HHC Board’s briefing book (“Responses To 
Issues Raised At The Joint Public Hearing”), City investigators conducted “detailed 
research” on indigent care at PHS-owned hospitals and found that “indigent care 
provided by PHS-owned facilities was at least equal to and in some cases greater than 
the level of charity care provided by prior owners.” What is the evidence to support 
this conclusion? 

D. What specific reports did HHC examine from the Ohio Health Department? From 
medical specialty societies? May we have copies? 

E May the Comptroller’s Office have a copy of the Joint Commission’s report on its 
August 1996 visit to St. Alexis? 

F. What are the findings of any investigations into the background and financial interests 
of corporate and individual stockholders in PHS, the Delaware Corporation? HHC 
staff said that HHC checked the background of PHS-NY’s two shareholders, but not 
the background of the larger group (about 15) which owns shares of PHS, the 
Delaware corporation. Why wasn’t the larger group subject to a background check? 
May we have a copy of the report on Fleming and Sussman? 

G. What is the evidence of PHS-NYs financial ability to carry out the terms of the 
agreement? 

H What are the names of the hospitals owned by American Health Care Management 
dunng the ime when PHS managers were with AHCM. For which of these hospitals 
does the City have independent assessments of trends in the quality of care, and the 
level of indigent care? Which of these assessments will be made available? For 
example, does the City have copies of California Health’s Department’s information on 
indigent care at AHCM's East Los Angeles hospital? 

26 

 



  

M 
t ( [} 

be 

: 

» 

X. Why Is The Administration Trying To Rush This Agreement 

Through When PHS Is Not Yet Ready To Carry Out Its 

Contractual Obligations and There Are Still Outstanding 

Questions About the Legality of the Transaction? 

A. In its 10/7/96 meeting with the Comptroller’s Office, PHS indicated that it did not yet 
have a business plan, a capital plan, nor a clinical plan. In his 10/31/96 presentation to 
the HHC board, the PHS Chairman said that PHS has a “vision,” but will not develop a 

business plan until it is in control of the hospital. Without these plans in hand, how can 

the City realistically judge their financial feasibility, or the likely quality of care? 

1. How can the City judge the quality of care without knowing the specific 
services that will be provided? 

2. How can the City judge the likely quality of care when PHS does not yet know 

what doctors it will have; for example, they do not have an agreement with the 

physicans that currently staff the hospital. Will HHC require that there be such 

agreements prior to approving the sublease? Will they be made public? Is 

there a written agreement between PHS and its projected affiliate, Brooklyn 

Hospital? Will this be made public prior to approving the sublease? 

5. Many hospitals -- both public and private -- are experiencing severe financial 

pressures. Without knowing PHS-NY” business plan, how can the City be 

confident that it will not go bankrupt? PHS says PHS-NY will increase the 
hospital’s revenue by attracting more insured patients, but other providers are 
competing for the same patients, and many of them are in networks that are far 
bigger that PHS.. How can the City evaluate whether PHS-NY will win out, 
without knowing its business plan (eg., marketing strategy)? 
a Does PHS have a track record of expanding the patient base at its other 

hospitals? 

b. Why do PHS’ Cleveland hospitals have an occupancy rate of less than 
50% (compared to 90% at Coney Island),?® while also providing 
relatively little out-patient care.? 

4. At the 10/24/96 briefing of the HHC board, Maria Mitchell said that PHS-NY 
needs the HHC board’s vote in order to raise the money to finance their offer. 
What is the evidence that PHS-NY has the financial ability to carry out their 
offer? Does this depend on PHS-NY mortgaging the hospital -- a practice that 
the sublease will permit? 

  

%Qctober 19, 1996 memorandum from James R. Dumpson to HHC Board of Directors, 
titled “Summary Report of my Visit to PHS, Inc. 

*Brown, op cit, and Velez op cit. 

27 

 



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hd : » 
L 

. 

  

B. The sublease states that PHS-NY will contract with PHS, the Delaware Corporation, to 

manage the facility and that PHS will be the guarantor of the indigent care obligations. 

However, on October 31, the City’s Law Department told the HHC board that there is 

not yet a contract between PHS and PHS-NY. When will there be one? Will the HHC 
board review it prior to agreeing to the sublease? 

C, PHS said that it will negotiate with the existing unions. But it has not yet reached an 
agreement with them. In her 10/24/96 briefing of the HHC Board, Maria Mitchell said 

~ that the agreement will not go into effect until a labor agreement is reached. But we 

did not find any such stipulation in the sublease. Where is there a written agreement 
stating this stipulation? 

D. Several law suits have been filed, challenging the legality of this transaction. In prior 

versions of the sublease, it was stated that the sublease will not go into effect while 

legal actions are pending. But this stipulation does not appear to be in the current 

version. Why not? Will the HHC Board be asked to vote on an agreement without a 

definitive judgement about the legality of the agreement? 

E, What provision has been made to deal with the fact that HHC is subleasing the property 
for a period that is longer than its own lease? The City leased the hospital to HHC 26 
years ago (on June 16, 1970), for a period of 99 years. In 1996, the lease has 73 more 
years to run. By what authority can HHC give PHS-NY a sublease that will run, with 
renewals, for 198 years? 

28 

 



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[ 
[] 

  

XI. Have All Agreements Been Made Public? 

A The HHC board has been given copies of the sublease. However, the 

administration has made statements about terms which are not in the sublease such 

as the conditions for closing the sublease, and the amount of financing PHS-NY 

payments must obtain. Are the terms stated in other documents? If so, which 
ones? Will these be made publicly available before the board votes? 

B. Are there other written agreements between PHS or PHS-NY and HHC, the 
Economic Development Corporation, or with other City agencies? Will they be 
made public before the board votes? 

  

**One place it did so is in October 24, 1996 document for HHC board, titled “Coney 
Island Hospital Privatization: Transaction and Board Process.” 

29 

 



  

    

  

  

  
  

  

  

INDIGENT CARE LEVELS AT 
rE or 

DEACONESS HOSPITAL 
fry Ot 

1993 - 1996 ny oie he seb! 

ls/zr [6 

» 93 Y ss Bi periiminaryl 

Deaconess 

Charges 
Gen Asst 510,658 348,610 401,642 267,785 

Other Charity __ 236.801 583.021 69.337 _168.144 

< 100% Poverty 
747,459 09% 931,631 1.1% 470,979 0.6% 435,929 0.7% 

> 100% Poverty 
152.723 02% 3.432.480 4.1% 170.964 02% 1.592.951 2.3% 

- Total Indigent 
: 905,184 1.1% 4,364,111 33% 642,943 08% 2,028,880 31% 

Hospital Total Charges. 30704395 __82980370 __ 729.028.8610 _ 61994.144 

Estimated Cost 

<100% Poverty 496,026 555,269 472,034 180,911 

Soir 104.669 2,045.822 172.349 _ 661.075 
  

  

 



INDIGENT CARE LEVELS AT 
FR om 

  

  
  

  
  

  

  

  
  

  

ST. ALEXIS HOSPITAL PHS TESTimown 

1993 - 1996 PNY S As senb! 
|e / 2 / 14 

93 wh 9 Sie {prodiminnry} 

0 2,814,926 2,931,456 1,536,978 

__2.888365 9. _ 2222608 456.191 

2,888,365 6.0% 2,814,926 5.2% 5,154,064 96% 1,993,169 4.3% 

2715411 3% 2.842680 32% 252.569 0.3% 1.424.578 22% 

5623,776 11.6% 5,657,606 10.4% 5,406,633 101% 3,417,747 10% o! 

48.354.747 54183390 531.783.2290 44079002 oils 

1,689,557 1,667,148 2,530,574 1,600,515 

  
1.600.086 1.683.586 124,008 1.143.936 
  

    
 



   
   

OBNEY ISLAND HUSH IAL 

CLINIC VISITS - FY 1967 THRU FY 1997 IsT uy 

  

  

~N 

] 

len) 

! 

a SMS : FY1oe7 UY 1s6s FY19589 FYI FYISS1 FY 152 FY DO FYI99¢ FYI9S PYDS JME JMOL 

cob CLINIC TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TORAL FYI? EXT TORY : 

Tp) . 
g -l 

S 840 ABORTION 2252 2085 1508 1178 "is "oe 0 * » 0 ] * fi 

838 ADOLES. OUTARE - GRADY 
15 “2 ” % Oo i 

2 " 825 ADULT EVE. & WEEKEND oon 004 610 7 1 1 1045 292 1.714 1.519 8 2.281 - 

- 083 ALCOHOL $8502 14.462 12008 11655 12158 105% 11205 10951 11,058 0,502 1.089 7m 

wn 884 ALCOHOL CLINIC SERVICES 
250 1,049 14 we 

Tr 001 ALLERGY 4300 4333 42771 4246 441 4p 5308 5100 4541 3.947 “ne 3,050 | 

ve) 629 AM-SURG. PRE-ADMIT 28 742 738 1181 1618 1388 1.761 $83 2.313 i 

p 604 ARTHRITIS 1043 1733 1085 1717 15201 1513 16% 1683 1788 1,500 393 1,559 

@76 BREAST SURGERY 307 1061 1100 148 1404 1717 2077 2100 2,12 2178 or 2015 i! 

© 807 CARDIAC 062 1505 1843 167 2025 168 2128 1824 1851 157% 414 1843 

on 871 CARDIAC REHAB. 0 405 75 858 ws 21 1 440 

oii . 854 CARDIOVASC. IMAGING 
3 1 0 0 [] 0 | 

~ 857 CAT SCAN $80 1085 1128 1,008 1,008 0 0 0 0 0 o 0 

976 CD 4 MONITORING 1 4 0 [| [|] o .’ 0 

¥ 757 CDATP - DAY CARE : 12008 15837 21,146 20081 30767 30,008 2347 177 0 027 sit 2543 

o 758 COATP-OP VISITS 153 3609 4030 3256 1847 479 13315 10,145 9,852 2829 8,050 

860 CHC - FAMILY PLAN. 191 oe hh 146 125 a 7 42 15 1 ¢ 

758 CHC -GYN 1.028 853 69 1435 2 1,109 909 1805 1833 24 Te 2205 

929 CHC - MED 6245 6083 08580 8070 838 1M TAR 7350 T7013 8,525 2492 0.007 

803 CHC - PED 3585 387 4,05 3677 3004 2028 2.440 3017 3489 176 pad 2,760 

814 CHC - POD (NON ROUTINE) 0 0 0 C3 468 433 405 408 485 we a3 250 

” 728 CHC - POD. (ROUTINE) 0 0 0 32 12 8 3 52 4a n 3 

Ln 796 CHC - WELL BABY 843 338 355 1,185 684 1220 nr 402 n 3 1 4 

3 924 CHC HIV PRE-COUN NOT. 
4 L 4 

| 816 CHC HIV PRE-COUNNO T. 
2 o 0 # 0 

\0 842 CHC-OBS 843 361 808 a4 858 1,079 0s 7] 142 007 1464 a7 

Oo 715 CHC-CD 4 MONT {SATI) 0 1 0 0 0 0 0 0 

! 658 CHC-COMP HIV EV(SAT) 0 a 1 0 0 0 0 0 

* 684 CHC-DENTAL COMPLETE 50 2241 1102 2726 3118 4088 5479 $309 1279 8,043 

~ 688 CHC-DENTAL ROUTINE 3457 0 0 0 0 q 0 0 # 0 

3 890 CHC-DENTAL-IN PROG 2140 4368 4703 1% LW 142 108 o79 pat 4 

- 685 CHC-DENT. MPLANTY 4 3» 0 0 ° » 0 

Oo 720 CHC-DRUG IMMUN (SAT) 0 0 0 0 0 * ’ 0 

ro 837 CHCPOST CONT-NEG 
12 4 102 7 14 158 » 341 

' 936 CHCPOST CONT-POS 1 5 5 12 3 3 1 4 

a. 663 CHC-PRECOUN TEST(SAT 4 4 75 125 1 v4) 1 400 [ 

3 633 CHEMOTHERAPY V 
58 pot *" 185 12s 500 : 

S 920 CHEST - TB 087 815 856 s18 ©@5 1448 2458 2114 2315 1,870 “0 1.781 

680 CHEST BURGERY an 358 27e i. “Us S02 abe 870 7 ei we 813 

\ 610 CHEST-NON TB 227% 2333 2513 2827 2880 3403 2635 2886 2,079 2,776 e12 2420 

917 CiH FAM PLN HIV CSL-NT 
1 » % i] 

831 CiHH- OTHER HIV COUN-NT 
45 Lv. 797 Hh 254 

815 CIHHIV PRENAT COUNNT 
18 308 261 Eo 188 

872 COMP - HV EVAL 2 0 0° 0 » 0 ® 0 

005 CONTINUING TREATMENT 10,024 1225v 11917 11820 11107 8742 7020 9044 10821 10714 ey 2.630 

' 
ON

EY
 

IS
L.
 

ME
D 

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LUNE IDLANU NUDE iw 

CLINIC VISITS -FY 1987 THRU FY 1997 

  

  

    

  

n 
o5T ssT | 

2 sms Fyasss FYises FY 16s TY 1990 FV FY192 FYI FY1994 FY 995 JYDPS6 IOS 3 MOS : 

L CODE CLINIC TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL WY ed EXT Pe FY i 
H 

0° ga3 CYSTOSCOPY a Sn ow a Ms "es Mt. WN oa? J 148 P= | 

> 615 DERMATOLOGY 2723 3080 2677 3150 3478 33% 2815 4374 A231 1 3920 b 

o 894 DEVEL EVAL 1701 2ue 1350 1840 1.341 1420 1298 1323 1304 1,085 "me 674 H 

Z- 817 DWMBETIC na aon 563 470 pa 543 441 438 52 7 3 29 s 

5 037 DIABETIC 0 0 rT 115 "0 25 152 101 157 134 n Cy 

pee 878 DRUG IMMUNIO THERAPY 
0 y 0 1] » 0 

> 631 EAR, NOSE, THROAT 3508 3748 3635 4048 IIR 4044 4583 4332 468 4204 1.497 4.7149 : 

4 500 EMP VISITS{OTH CLIN) 3101 3301 567 ° 0 0 # 0 0 0 ¥ [] | 

935 EMPLOYEE HEALTH 7015 0382 $5803 S42 755 7507 1903 9428 8978 5,629 1.008 ey 

620 ENDOCRINE 1018 1152 1353 1078 1.134 1314 1472 175 1.484 1,411 ns 1,498 ; 

0 892 EYE 1383 1200 1367 MB 3M 4947 4854 474 0018 5121 1412 5,002 

wid 928 FAMILY PLANNING - CiH RES 673 453 7 308 200 126 1584 198 1002 428 1,000 

< 896 FAM PLN-POST COUN-NE 
7 a a9 A 2 a4 . 0 

oN 970 FAM PLN-POST 
0 5 12 @ 6 $ A ] ' 

+o 969 FAM PUN-PREC 8 TEST 
s [3] 0 a4 45 19 3’ 12 : 

3 624 GASTRO-INTES 4560 1486 1568 1758 1.008 1900 2118 22 2507 2,305 3 2511 i 

600 GENITAL - URINARY 338 3288 3414 3633 31568 3827 4020 4831 5808 6002 L572 8237 : 

855 GERWTRIC ALCOHOL 
: 1.72 1778 2 ] 1] ° 

881 GERIATRICS CONT. TREAT. 2004 S958 7587 7898 7510 7.100 7613 7005 sas 2,007 

822 GYN - ENDO 2 0 2 1 0 12 a 250 385 101 3 12 

827 GYN - SCREENING 12 276 n 1 = 1 3 1 4 0 0 

829 GYN - TUMOR 1244 1361 1420 1725 1.908 1572 g76 1319 1455 1.450 a 1,058 

go 628 GYN- WALK N » 102 9 "2 129 302 157 (44 1.243 74 1404 

vie 830 GYNECOLOGY 9231 9295 9275 0682 687 8670 10340 11002 11548 WSN 2p18 10,375 

Ln 748 GYNAUROLOGY 
@ 51 15 ~ 

3 704 HEAD - NECK 63 39 02 100 a 118 302 1 As an 02 405 

— 708 HEARING 77 1.127 638 600 499 538 752 21 861 750 154 611 

9 627 HEMATOLOGY 3425 2784 3810 3841 4385 48% sp13 ©6856 7608 7883 1898 150 ; 

© 628 HEMODIALYSIS 2318 2748 2.078 1.957 a 3oh 1.830 2088 3 oe 8 1797 

™ 832 INFECL DIS. 262 395 8 11 1 0 : TN 218 863 

Jy 636 MED RECEPT (SHORE Y) 848 483 285 Le 414 ET = 3s 0 0 » ° 

634 MEDICINE PRIMARY CARE ~~ 54253 52008 48843 45502 4380 44501 42767 44.107 48.785 Wwr20 1201 47.848 : 

> 958 MENT HLTH GRP COULAT. 
3 0 0 1) 0 

| 902 MENTAL HYG. 11402 9569 9400 OM7 8360 0.877 11202 11,118 11087 11,084 ass 12,045 

- 671 MH CLN COLLAT.-ADULT 
1 7 19 0 * 0 

712 MINOR SURGERY 107 61 s6 54 7” a 14 75 ha “w 21 8 

gs 641 NEUROLOGY s762 1428 1678 1730 1805 1.834 1953 1630 1344 1322 w 1,501 

= 941 NUCLEAR MED. 973 Poa 789 1,009 041 1492 1200 1249 1,403 1420 243 064 

841 OBS - HIV COUNTEST 
2613 248 150 + + 

848 08S - POST PART -CH 877 711 a7 $18 wy 2 941 681 ase ho. Ht 778 

. 849 OBS - PRENATAL 9437 10071 10,108 11.771 10805 0026 10908 11,435 10,008 8,367 ax 8.616 

wr 853 OBS - PREN TEENPREG 
1 0 0 ¥ 0 

= 851 OBS - sag 1138 1.113 1,352 1701 1742 1.501 1,384 1,200 m 1,679 

: 852 OBS - WALK IN 10 28 50 74 7 51 nh 12 * C] 0 

Er 614 OBS INTIAL VISIT - CHC 80 310 rig! 168 1S 2% 33 21 62 55 4 * 

“u - 

i 

102288 PROLNVS WKI 

oO 
(GR) 

 



  

   

  

LCOUNEY ISLAND SDI ba. 

: 

CLINIC VISITS - FY 1987 THRU FY 1997 
: i 

  

  

3 

1; isT ; 

S sms FY1967 FY ISS FY 136 FY 990 FY 191 FY1992 FY 198 DY (199% PV 1995 FY 19% 300% IMO : 

AQ CODE cLNC TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL rom TTY : 

LQ 

3 

3 611 OBS INTIAL VISIT -CH 191 (7 S77 152 1050 1837 154 1408 1.108 tas ioe 1,085 i 

’ 877 OCCUP. THER. 2928 2883 2712 200 2088 2793 2381 27M 4.5% 4,000 NL 3002 : 

o 716 ONCOLOGY 1534 1742 1551 1939 1947 2181 1.500 1 5 120 * ° ! 

< 717 OPHTHALMOLOGY 731 e452 e652 S0¥ ABT3  49T  4AB8 4714 AWM 5.440 1.287 $027 

© 719 ORTHOPEDICS 318 ©6344 0006 6828 807% 7043 0355 70% 1.500 7.77 1.004 8.308 y 

¥ 765 PED - ADOLES. ape 2686 138 877 1224 1723 18 02 2548 3,087 "i 3,029 : 

©O 907 PED - MENT. HYG. 4242 4812 484 ANN 4364 4142 3447 1820 1,363 0 (3 [1] : 

» 797 PED - RENAL mn" 10 2s 71] 251 21 248 224 190 - m ’ 

791 PED - SCREENING 
797 1063 1620 17080 2230 2613 24060 1,931 1,505 ar 1.004 t 

782 PED - WALKIN “or 872 “oe 765 540 3 804 1200 1,408 41 1870 ; 

7H 808 PEDIATRICS se? 632 6100 4871 S7® 858 od24 7318 A715 a8 180 7008 

- 916 PEDS M H NEPTUNE 
190 2000 230 3532 A 373 

pi 888 PEDS MHCLN.-COLLAT 
25 han 74 12 ° 0 : 

851 PEDS SCHL MH PS188 
43 1% 108 apa ” 357 : 

4 908 PEDS SCHL Mii PS288 
70 278 22 1.084 zr S04 

fa 909 PEDS SCHL MH PSX20 
55 14 150 290 20 115 

771 PED. ALLERGY 71 422 513 hla 816 we ™ 555 a7 7 73 200 

774 PED. CARDIAC 162 216 249 248 3 £114 297 341 42 ns as 37 

781 PED. ENDOCRINE 200 237 180 180 210 333 34S US 21 us 1 m 

787 PED. GYN 0 0 0 0 [7] 212 273 357 302 300 [1 1 

788 PED. HEMATOLOGY 323 345 381 3 395 kT) 527 654 23 539 128 S08 

0 793 PED. NEURO. 294 363 380 398 429 455 457 sn 457 ps , an 

tH 788 PED. NIC ae7 801 1097 o7é 1.108 1114 1189 1385 1.20 1.581 2 2,071 

ks 808 PED. WELL BABY 3908 4035 4420 433% sees 45271 4m 41® 3.670 2676 it 2,412 

4 932 PED. (EVEN. +WK END) 4181 4040 4088 3546 340 2965 3100 1718 2435 2,142 are 1.085 

0 722 PERWPHERAL VAS. DIS. 1648 1564 1,215 o77 830 637 ang 544 A 2 1]; 208 

oo 872 PHYSIO - THER. 8534 10821 8884 7647 7548 7308 7527 es 7185 6.624 3.521 13,900 

; 723 PLASTIC SURGERY 1255 1316 1248 13% 1459 1502 ted) 2030 1.079 2,064 es 2492 

662 PODIATRY 6620 ©6455 4702 633 5134 4862 7031 7507 2245 8.044 2484 9.055 

~ 725 PODIATRY (ROUTINE) ase 5.149 e282 4122 S51 10 4802 2333 4344 0255 2.204 410 1827 

' 875 POST COUNSEL NEG 
4 28 67 78 298 05 108 ia 

- 974 POST COUNSEL POS 
1 2 11 14 3M 30 7) 40 

= 873 PRE COUNSEL & TEST 
" w od 138 1 tM "3 o47 

vin 062 PRENATAL POST COUNN 
3% 25 283 199 =] 782 "7 742 

961 PRENATAL POST COUN-P 
1 2 4] Ss 2 5 2 (1 

ai 960 PRENATAL PREC & TEST 
«Q 738 981 1048 I. 843 240 952 

2 850 PREN. - HOGH RISK 478 79 850 7 20 1407 1839 213 1.01 244 e108 2444 

635 PRIMARY CARE RESID. CIN 071 4991 5532 4442 0488 7505 7230 7838 7, 5,082 1370 5.435 

728 PROCTOLOGY 03 612 841 ard a4 842 905 1.153 1,047 1.134 y £1 wt 

910 PSYCH - DAY CARE 3448 3704 3548 4202 3612 2070 1.474 a 0 0 [] 0 

i 580 PSYCH - OFF SITE 4612 S534 0 a 0 (1) 0 0 0 . * 

wl 660 PSYCH. ADULT 3950 4835 4168 4428 5004 A850 5740 4TI3 485 5.230 1,840 8.145 

ha 978 RAD. DIAG 2005 3782 3752 3906 ad412 S538 5000 7568 7AM 7.557 1.582 887 

873 REHAB 4224 4350 4253 4001 3048 4153 437 47 4S 4822 1,189 4,683 

A 649 RENAL 730 ans 775 a19 508 55 SQ 633 LS Hd “.e 1] 

— 

. 

ta 
A 

192288 PROLNVISWIC 

RD) 

 



   
- QONEY (SLAND HOSH IAL 

  

CLINIC VISITS - FY 1987 THRU FY 1987 
ak wy 

il PY987 FY158 FY1580 FYI9%0 FY 1991 PV 33 BY IMG FYI DV 1988 FYes 30008 El 

CODE CLIC TOTAL TOTAL YOTAL TOTAL TOVAL TOTAL TOTAL TOTAL TOTAL TOTAL NYP EXT TONY 

733 SCOLIOSIS ha 20 PX] " FA 13 7 ¢ 12 & 1 4 

933 SCREENING 5700 5431 380 53%8 $292 G40 0007 ad TAL (Rig 184 0.204 

25 SPECIAL MEDICAL CLINIC 1,740 1675 180 1433 1343 1421 139 188 1270 Le Yd 1,400 

735 SPEECH 55 153 1873 1,220 is 28 "es T90 1202 “oe 2 "» 

730 SURGERY 430 3818 3550 3W4 337 388 3654 3718 4115 - 37a ol 80 

045 ULTRASOUND 3955 5031 5408 5509 4684 4785 5007 5.84 4.0% Len Lue AM 

657 WOMENS ALC PROG. 1 SIM Gd A300 4390 1.997 RR 1801 

TOTAL 200,000 310,985 312670 34170 32821 IAIN 332443 NA M48 BE MSE acd 

  

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REVISED ANALYSIS OF INDIGENT CARE COSTS AT PHS HOSPITALS IN CLEVELAND, 
BEFORE AND AFTER BEING PURCHASED BY PHS (FY95) 

TAKING INTO ACCOUNT PHS’ COMMENTS, AND UTILIZING PHS’ LATEST NUMBERS, 
WHICH PHS PRESENTED IN ITS 10/21/TESTIMONY TO NYS ASSEMBLY, 10/21/96 * 
  

  

  

  

  

              

GROUP RECEIVING WHETHER OHIO | REIMBURSED HOSPITAL 
UNCOMPENSATED CARE PERMITS UNDER 

HOSPITALS TO OHIO S Deaconess St. Alexis CHARGE THOSE | HOSPITAL 
PATIENTS CARE : 

ASSURANCE | Average of | Costsin | Percent | Average of | Costs in Percent 
PROGRAM Yearly FY96* Change | Yearly FY96 Change 

Costs, Costs, 

FY93 and FY93 and 

FY9%4 FY9%4 

Income Above Federal Poverty Yes No $1,075,246 | $661,075 | -39% $1,641,836 | $1,143,936 | -30% 
Line ** 

Income Below Federal Poverty No Yes $525,648 | $180,911 | -66% $1,678,353 | $1,600,515 | -5% 
Line, or Receiving Ohio General 
or Disability Assistance 

Total Uncompensated Care -- - $1,600,894 | 841,986 | -47% $3,320,189 | $2,744,451 | -17% 
  SOURCE: Table attached to testimony of Steven Volla, Chairman and Michael Sussman 

Health, Urban Health, Corporations, and Labor. 

*The dollar amounts are what the hospitals reported (FY93,FY94) or expect to report (FY96) to the Ohio Department of Human Services in order to quality for partial state reimbursement. They do not include the cost of hospital services to Medicaid patients. Under Ohio law, recipients of General Assistance and Disability Assistance are covered only for physician services, not for hospital charges. For further explanation, see text. FY’96 is PHS projection, not yet reported to State of Ohio. FY’95 is excluded because responsibility split between PHS and pnor owners and because PHS said that 
they did not write off FY95 debt until FY96. 
**Due to changes in Ohio’s reimbursement formula, hospitals are now more likely to report all the costs of uncompensated care to people above the poverty line than they were in 1993. For that reason, these numbers probably understate the size of decline in services to the uninsured 

, Vice President, Primary Health Systems, Inc, October 21, 1996, at New York State Assembly Joint Hearings of Committees on 

working poor. 

      

  

 



  
EXHIBIT B 

 



EW YORK 43 HEALTH AND HOSPITALS CORPORATION 
125 Worth Street - Room 507 « New York « New York 10013 '.. SEP23 1956 
212.788.3848 Fax: 212.788.3681 

: ) 

Walid Michelen, MD 
‘a Senior Vice President 

Gon & Professional Affairs 

LaRay Brown 

Senicr Vice President 

Corporate Planning & Behavioral Eealth 

Walid Michelen, M.D. (WYW 

September 16, 1996 

PHS SITE VIS! 

Y. Mt. Sinai 

Since this hospital was acquired by PHS in April, it is too 
early for PHS to have rad any significant impact on its 

operations. 

II. Saint Alexis 

PHS took over thie hospital about two years ago. Since that 

time they have rebuilt an outpatient onceolegy unit and an 

endoscopy suite. They plan tc rebuild the emergency room and the 

operating roomisoon. 73RHS has laid off 150 FTE's and contracted 

out laundry, dietary, and pharmaceutical services. 

Their JCAHO survey was two months ago. They received a 93, 

their highest score ever. They have a very good QA/PI plan in 

place. However, it has performed worse than expected in 

important areas such as pat.ent satisfaction, mortality, and 

length of stay in the 5/16/96 report of the Cleveland Health 

Qual.ty Choice (CHQC). It shculd be noted that the report's most 

recent date of findings is 9/95, cnly one year after PHS took it 

over. Because this report's analysis is much more outcome 

oriented than the Joint Commission, its findings are troubling. 

We should attempt to get some preliminary data from CHQC from 

more recent periods. 

St. Alexis spends about $1.2 million on ‘charity care", as 

Per the CEO. They claim not to turn anyone away. Others claim 

TOTAL P.21  



. . 
z p 3 [J ; ‘ L 

1 
- 

a 3 

that they do so subtly. It would rake more investigations to 
determine what is really the case. 

  

All the medical staZf is voluntary. Most receive a small 
stirend from the hospital. Orne physician's income, at a hospital 
clinic, is guaranteed. There are not housestaff, Thre physicians 
I spoke with favored the PHS take over. They are satisfied with 
the company, especially with the investments thev have dore. 
They clearly see an improvement ir their ability tc render 
patient care since PHS took over. 

III. Deaconess 

This hospital was bought by PHS about 18 months ago. Since 
then the hospital has been reorganized. 

Most of the physicians on staff are in private practice and 
admit patients to Deaconess, as it St. Alexis. The medical by - 
laws very much protected these physicians, and were exclusionary. 
PHS did away with the by-laws and invited all physicians to 
reapply. The vase majority of them did. PHS also contracted out 
radiology, pathology, and the emergency room physicians. I did 
not speak with any of the physicians. 

Their last JCAHC survey was in 1994, before the PHS 
purchase. However, their CHQC report was similar to St. 
Alexis's. The recommendations are the sane. 

es Sh TTI Ge | 
My comments on uncompensated :.gcare are the same as those om -= 

St. Alexis. - Lisiihd vids 

IV. Overall 

It 1s clear that PHS's approach is to downsize based on 
their standards and then to interfere as least as possible with 
the operations of the hospital. Some improvements are made. It 
is clear that consolidations will increase, especially in 
clinical areas, now that Mt. Sinai has joined the syscem. 

During the visit we learned that PHS sees the Coney Isiand 
Acquisition as its way to get a foothold on the New York market. 
Its president claims that the city has agreed to "relocate" 
unionized staff that will be downsized to other facilities in the 
corporation. 

 



  

Given the above, and other findings, the following issues 

should be considerec: 

*We should discuss the segue of redeplcyment with the city. 

HAC should nct bear ti2 cost of PHS downsizin 

*Can PHS handle a fhespital with so many unions? 

*Can PHS handle such 2 ~culcurally diverse paiient and staff 

population? : 

*It is highly likely that PHS will exceed the indigent care 

cap. Will the patients be sent tc King's, turned away? Wi.l the 

city ask HHC to pay for the cost of the care exceeded by the cap? 

WM/ep 

cc: Luis R. Marcos, M.C. 

Ty 57 nhs GREASE Hn 

Rt Ba ies 2 AQ EST: 

= leg em Fm GLINTES 

TOT&L P.B2 

 



  

Ld 

: 

t 
" 

SUPREME COURT OF THE STATE OF NEW YORK 
COUNTY OF QUEENS IAS Part 5 
wn a te en 2 X 

THE COUNCIL OF THE CITY OF NEW YORK, et al. 

Plaintiffs, INDEX NO. 004897-96 

Hon. Herbert Posner 
- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 

CITY OF NEW YORK, et al, 

Defendants. REPLY AFFIRMATION OF 

RACHEL D. GODSIL 
mm X 

CAMPAIGN TO SAVE OUR PUBLIC HOSPITALS - 
QUEENS COALITION, an unincorporated 
association, et al., 

Plaintiffs, INDEX NO. 10763/96 

Hon. Herbert Posner 

- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 

CITY OF NEW YORK, et al., 

Defendants. 

a a a i ee nn ee me nm a ne x 

STATE OF NEW YORK ) 

COUNTY OF NEW YORK po 

Rachel D. Godsil, Esq. hereby affirms that the following is 

true under the penalty of perjury: 

1. I am an attorney duly authorized to practice in the State 

of New York. I am Assistant Counsel to the NAACP Legal Defense and 

Educational Fund, Inc. I submit this reply affirmation in response 

to the Court’s request, made during a conference call had with 

plaintiffs’ and defendants’ counsel on November 12, .1996, for 

further submissions with respect to the issue of the legality under 

 



  

# : 
+ . ’ 

i [} 
- 

the HHC Act of defendants’ plan to sublease Coney Island Hospital 

to a for-profit corporation. I make this affirmation in support of 

plaintiffs’ motion for summary judgment and in opposition to 

defendants’ motion for summary judgment. The facts set forth below 

are within my personal knowledge or are based upon information 

obtained from books and records of New York City, the New York City 

Health and Hospitals Corporation ("HHC"), and the New York City 

Economic Development Corporation ("EDC"), or © other public 

documents. 

2. Attached hereto as Exhibit A is a copy of the By-Laws for 

the Health and Hospitals Corporation ("HHC"). 

3 On September 5, 1996, a Michigan Circuit Court held that 

it violated the state’s not-for-profit laws for a not-for-profit 

hospital to merge with a for-profit health conglomerate. Attached 

hereto as Exhibit B is a copy of Kelly v. Michigan Affiliated 
  

Health Care System, Inc., September 5, 1996 Court Ruling, Honorable   

James R. Giddings, Circuit Court for the County of Ingham, State of 

Michigan. 

4. In San Diego Hospital Ass’n et. al, California Attorney 
  

General Daniel Lungren concluded that the transfer of two not-for- 

profit hospitals into a for-profit entity violated the Articles of 

Incorporation. A copy of a November 8, 1996 letter from Attorney 

General Lungren to John F. Walker, Jr. is attached hereto as 

Exhibit C. 

5. The transcript of the September 13, 1985 Board of 

Estimate Hearing concerning the sublease of the R&S Building at the 

 



. I 
[N A 

: 4 

[ 
- 

Bellevue Hospital Center addressed in Campaign Plaintiffs’ 

  

  

Supplemental Memorandum of Law submitted to the Court on November 

19, 1996 was found at the Municipal Library on November 20, 1996. 

I provided defendants’ counsel with a copy of the transcript on or 

about November 22, 1996. A copy of the September 13, 1985 Board of 

Estimate Hearing is attached hereto as Exhibit D. 

Dated: New York, New York [ 
November 30, 1996 | (4 

  

RACHEL D. GODSIL, ESQ. 

 



    

 



    

Dated: New York, New York 

November 27, 1996 

  

JUDITH B. WESSLER 

Sworn to before me this 

27th day of November, 1996 

  

NOTARY PUBLIC 

18 

 



SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS 
DBR ae i te ep LE Sg LS Tg ie 

Plaintiffs, INDEX NO. 004897-96 

  

- against - 

RUDOLPH Ww. GIULIANI, THE MAYOR OF THE CITY OF NEW YORK, et al, 

Defendants. SECOND SUPPLEMENTAL AFFIRMATION OF 

3 : 

RACHEL D. GODSIL WITH EXHIBITS; AFFIDAVIT OF JUDITH B. WESSLER 

  

i i Caled wl do BB Th A EY Cb Re X WITH EXHIBITS 
, 4 

CAMPAIGN TO SAVE OUR PUBLIC HOSPITALS - ® 
QUEENS COALITION, an unincorporated oe 
association, et al., 

Plaintiffs, INDEX NO. 10763/96 
J 

- against - 
§ 

RUDOLPH Ww. GIULIANI, THE MAYOR OF THE CITY OF NEW YORK, et al. 
WP 

Defendants. 
Rin Se Sebo dif uf ain Tk Ta Kh Sk RAT Nt x 

KENNETH KIMERLING 
PUERTO RICAN LEGAL DEFENSE & EDUCATION FUND, INC. 99 Hudson St., 14th Floor 
New York, N.Y. 10013 

‘ 

(212) 219-3360 
+ ra 

ELAINE R. JONES 
pry 

Director-Counsel Loh 
NORMAN CHACHKIN : 
MARIANNE L. ENGELMAN LADO 

¥ &- 
RACHEL D. GODSIL oa 

NAACP LEGAL DEFENSE & EDUCATIONAL FUND, INC. 99 Hudson St., 16th Floor 
New York, New York 10013 
(212) 219-1900 

dn, 

BARBARA OLSHANSKY 
CENTER FOR CONSTITUTIONAL RIGHTS 

po : 
666 Broadway, 7th Floor 

: 

New York, New York 10012 
(212) 664-6464 

ATTORNEYS FOR PLAINTIFFS