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New York Commission on Health Care Facilities in the 21st Century: "Rightsizing" the Hospital and Nursing Home Markets

On November 28, the New York Commission on Health Care Facilities in the 21st Century, which is charged with "rightsizing institutions," released a report recommending the closure of nine hospitals, the merger or conversion of several other facilities, and the elimination of others if they ultimately fail to merge. [1] Citing "a 20th century institutional infrastructure in the face of mounting costs, excess capacity and unmet needs for community-based alternatives," the commission concluded that, while it is not too late to act, changes must occur immediately to ward off almost certain further facility closures and bankruptcies. By designating which facilities should close or be merged with others, the commission hopes to avoid closures due to market forces alone, which may hurt access in certain communities. It also expressed concern that, without immediate action, providers will be forced to cut services and lay off workers, leading to a further downward spiral of the system. In releasing the report, the commission's executive director, David Sandman, Ph.D., noted "These recommendations will help to avoid future calamities that would further destabilize the system and compromise patient care."

After careful study of quantitative and qualitative data on each hospital and nursing home in the state, the commission concluded that excess capacity is a major driver of the current crisis. Hospital occupancy rates fell by 17.5 percent between 1983 and 2004, with some hospitals operating with only half of their beds occupied; nursing home occupancy rates have also been in decline. These trends are related to increases in outpatient care, ambulatory surgery centers, and home- and community-based care settings.

Collectively, the final recommendations will result in a reduction of inpatient capacity by approximately 4,200 beds, or 7 percent of the state's supply. Nursing home beds will be reduced by 3,000, or 2.6 percent of the supply. However, over 1,000 new non-institutional slots will be created for long-term care purposes. In some cases, the commission gave very specific recommendations, such as eliminating psychiatric, substance abuse, or maternity wards; in other cases, institutions themselves would make those decisions. [2]

Other recommendations by the commission include:

  • a review of reimbursement policy and development of payment systems that support the realignment of health services delivery;
  • a study of coverage expansions in other states, and adoption of strategies to reduce the number of uninsured New Yorkers through universal, continuous, comprehensive coverage;
  • an expansion of primary care capacity;
  • undertaking strategies to address persistent shortages in certain occupations, and to educate workers in the use of health information technology, including a retraining program for workers who are displaced due to commission recommendations;
  • development of a mechanism that would allow for niche providers, such as ambulatory surgery centers, to share the burden of paying for public health needs and charity care; and
  • a review of the future role for county-owned and -operated nursing homes, and development of policies to protect indigent residents of those homes.

Implementation of these recommendations will be financed through a $1 billion allocation from The Health Care Efficiency and Affordability Law for New Yorkers. An additional $1.5 billion in federal funds through the federal–state Health Reform Partnership came through on January 1, 2007. The state estimates that the closures, mergers, and other steps taken will result in a total savings to providers of over $15 billion over 10 years, including a savings of $8 billion to Medicaid and other payers.

[1] A Plan to Stabilize and Strengthen New York's Health Care System, December 2006
[2] R. Perez-Pena, "Plan Could Close 20 or More New York Hospitals," The New York Times, November 29, 2006.

For More Information
Contact: David Sandman, (212) 417-5544. The report can be found at

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