In 2005, the King-Drew Medical Center in Los Angeles, which served primarily low-income African American and Latino patients, closed its trauma unit. In 2001, D.C. General Hospital, the only public medical facility in the nation’s capital, closed its doors after nearly 200 years. At least 26 urban hospitals have closed in New Jersey alone since 1992.
For a while, it seemed that the Bayonne Medical Center (or BMC for short), located in a working class community across the Hudson River from the Statue of Liberty, would be the 27th to shut down. In 2007, the hospital filed for bankruptcy, but what happened next set BMC apart from the hospitals that failed, and simultaneously made it a target for attacks from insurance companies and disgruntled unions.
Three entrepreneurs purchased BMC in bankruptcy and had to quickly figure out how to turn a profit when reimbursements from insurance companies were simply too low to keep the hospital solvent. Cutting costs was difficult: most of their workers were unionized, the hospital is in a high-cost metropolitan area, and myriad government regulations—such as the one requiring that hospitals treat every single patient coming into its emergency room—severely limited the types of cost cutting they could contemplate.
The new owners began by renegotiating nearly all their old contracts with insurance companies, and ultimately severed ties with several that balked at raising reimbursement rates. Since most of the hospital’s patients are on Medicare, Medicaid, or Charity Care, there were no other good options to boost revenue. Naturally, insurance companies were less than thrilled with this turn of events and they let the hospital’s owners know that—loudly, all over the media.
Since renegotiating its contracts, BMC has made money, but it has also been sharply criticized. A state regulation requires that insurance companies reimburse hospitals for emergency room visits, whether or not that hospital is in the patient’s insurance network, and the hospital’s ER is naturally busy. Insurance companies that no longer have a contract with BMC do not like the idea of paying sharply higher charges for treatments performed at an “out of network” hospital, which is what happens if one of their customers winds up at BMC.
The various health care unions were not keen on any radical changes the hospital’s new owners might pursue, either, especially when it came time to negotiate new contracts, and they launched an attack on the ownership in the New York media. The broadsides only ebbed after the various unions managed to reach an amicable agreement on new contracts.
But to some degree the damage is done: what should be hailed as a success story is instead seen by many as yet another excess of capitalism. The underlying assumption in complaints from unions and insurance companies seems to be that urban hospitals will somehow always survive, when history tells us otherwise.
The hospital’s survival matters not a little for New Jersey residents who have limited health care options. Outside of Bergen County, New Jersey has no county or municipal acute care hospitals to serve disadvantaged populations. BMC’s financial survival could provide a model for other struggling urban hospitals in the U.S.
The number of urban hospitals is dwindling and the number of truly successful urban hospitals is minuscule: the patients are sicker than in most places, the money–most of which comes from Medicaid or Medicare–is less, and the regulations governing hospitals can make earning a profit an altogether hopeless enterprise, as many have found out. the Bayonne Medical Center is succeeding to the point where it can invest millions in improving its operations, something that ought to be celebrated.
What the Bayonne Medical Center’s travails reveal is that even when one succeeds, it will never be easy for others to follow in its path.
Ike Brannon is president and Devorah Goldman is senior health care analyst at Capital Policy Analytics, a consulting firm in Washington, D.C.
