Troubled Queens Hospitals Will Receive State Aid and Review Management and Fiscal Practices

Use of Money Restricted to Payroll, Benefits and Overdue Taxes

ALBANY, March 16, 2007 - Acting New York State Health Commissioner Richard F. Daines, M.D. today announced that the State will be offering a $6 million loan to two affiliated Queens hospitals, St. John's Queens and Mary Immaculate, so that they can pay workers, continue providing employee health and pension benefits, and pay overdue taxes and penalties. Before receiving the funds, however, the hospitals and their affiliate, Wyckoff Heights Medical Center in Brooklyn, must agree to retain an independent monitor to review and reform their problematic financial operations, management practices and governance structure.

"We summoned Wyckoff's management team to come to Albany earlier this week to discuss the situation," said Dr. Daines. "We believe that the system's financial problems were caused by serious management and governance issues. Our finance and legal teams will continue to look into this situation."

St. John's and Mary Immaculate, now collectively known as Caritas Health Care, changed hands in late 2006 when they were sold by St. Vincent Catholic Medical Centers to the owners of Wyckoff as part of a bankruptcy proceeding. In the course of the Department's current inquiry, hospital officials admitted that funds had been transferred between Caritas and Wykoff, contrary to representations made earlier that they would not do so.

Dr. Daines indicated that the loan offer to Caritas will contain restrictions on how it can be spent and a list of other conditions. These include a requirement that Caritas and Wyckoff retain a management consultant, to be selected from a list provided by the Department, which will, among other things:

  • Conduct an analysis of the financial operations of the hospitals during the months leading up to the shortfalls, including a forensic audit of financial transactions and transfers between the affiliates;
  • Evaluate the adequacy of internal controls, systems and procedures and make recommendations for improvement which the hospitals must follow;
  • Assess the qualifications and performance of management, the reasonableness of compensation, and make recommendations for change;
  • Assess the composition and governance of the Boards of Trustees and recommend any needed changes.

Dr. Daines said, "Our top priority is to assure patient access to needed services. But we can no longer bail out poorly run hospitals without taking steps to improve and assure proper management. With these funds Caritas will be able to make its next payroll. We are nonetheless conducting a full investigation into what went wrong here and we are making management take responsible steps to stabilize the hospitals."