In early May, four dour doctors called for a meeting with the man they held responsible for trying to shut down one of the world’s premier tummy-tuck and nose-job hospitals.
They had expected a few hours of intense face time with the Manhattan Eye, Ear and Throat Hospital’s president of the board, Lindsay Herkness III, but when they arrived at his lawyer’s office, Mr. Herkness was nowhere in sight.
Not to worry, they were told, Mr. Herkness would hear their plan to save the 130-year-old institution over a conference call. But when Mr. Herkness’ voice buzzed through the speaker soon after, the doctors said, the Morgan Stanley vice president sounded blithe and distracted.
A few minutes into the conversation, Mr. Herkness, known as Dinny to his friends, abruptly halted the talk.
“He said he couldn’t stay,” said Steven Fochios, who leads a group of 300 doctors trying to keep the hospital open. “I remember his exact words. They were: ‘I have a crisis. The bartender for my cocktail party just quit.’”
Mr. Herkness did call back, presumably after quelling his single-malt rebellion. But by that time the $41 million sale of the hospital to the Memorial Sloan-Kettering Cancer Center and a luxury housing developer was already a fait accompli.
Or maybe not. Despite Mr. Herkness’ confidence, the deal faces significant obstacles. And like his little problem at the cocktail party, the disturbance is coming from the hired help-in this case, agitated doctors of the hospital.
For one thing, The Observer has learned, Gov. George Pataki will oppose any fast-track shutdown of the hospital. “We are exploring a variety of options to allow the facility to continue to operate as Meeth,” said a senior aide to Mr. Pataki, using the hospital’s acronym. That’s no small threat, given that the State Health Department has ultimate approval over virtually every aspect of a hospital’s franchise.
And despite the fact that Memorial Sloan-Kettering and Meeth have formally signed their agreement, at least three other hospitals-including Mount Sinai Medical Center, Lenox Hill Hospital and the people who run Beth Israel Medical Center and St. Luke’s-Roosevelt Hospital Center-are negotiating takeovers with the doctors behind the board’s back.
What’s worse for Mr. Herkness is that these talks are proceeding with the blessing of State Attorney General Eliot Spitzer, who in his role as regulator of charities must sign off on the allegedly done deal. Mr. Spitzer is blocking Meeth from shutting its emergency room and has ordered Mr. Herkness to consider “any” new plan that would keep Meeth open and running just where it is. “The furniture,” said a source in Memorial’s camp, “is starting to fly.”
All of this action seems distinctly out of place in a placid hospital where ills are rarely life-threatening and bills are often paid promptly and out of purse.
The physicians, led by the tart-tongued Dr. Fochios, a Meeth internist who runs a department that screens patients before surgery, have delighted in their odd yet effective lobbying campaign. It has included, among other things, enlisting one of the Pope’s top men in Rome and relentlessly lampooning the board’s WASP-ness. (“Half of these guys belong to the Union Club,” Dr. Fochios maintains.)
And there seem to be no limits to the tactics they’ll employ. They said they’re even on the verge of drafting letters to Mr. Herkness’ basset hound, Beauregard.
“I hope he has more sense than his master,” Dr. Fochios said.
Help From Their Friends
To wage their war against the hospital’s trustees, the directors scoured filing cabinets for rhinoplasties and cataract operations on anyone who could exert influence for their cause. “It’s hard to come up with a poster child when you’re talking about people who have had nose jobs,” one of the doctors admitted. “It’s not an easy sell.”
Their search did yield a handful of celebrities (the doctors won’t reveal who they’ve worked on), but they eventually decided to target one particular luminary. They placed a call to American-born William Cardinal Baum, a high-ranking Vatican magistrate who had his eye patched up at the hospital a few years back, according to Meeth’s doctors.
Cardinal Baum, from his suite in the Holy See, reportedly contacted John Cardinal O’Connor’s office, which then contacted Governor Pataki’s people, who have taken an active interest in the case ever since.
Meanwhile, the doctors have worked other Pataki angles. They hired Charles Stillman, a velvet-mannered criminal lawyer who is close to Mr. Pataki-close enough to have earned him a recent appointment to the School Construction Authority. “Charlie’s got the connections,” an adversary told The Observer . “It was a very smart hire.”
For the corps of physicians waging the antisale battle, no cause could hit closer to home. Although many have already made alternative arrangements to preserve their practices, they still have a lot to lose if the hospital closes. Meeth is a first-tier facility with state-of-the-art operating rooms, lab facilities and beds for the cases that require an extended inpatient stay. It has also garnered an international reputation as a teaching hospital, pioneering treatments for cataracts and physical disfigurement.
Those doctors who have made their careers there are less than excited about stepping to the back of the line of seniority and privilege at other institutions.
Then there’s the small matter of location. The hospital is located right in the middle of the highest concentration of rich cosmetic surgery patients in New York. For plastic surgeons, whose procedures are not covered by standard insurance, this out-of-pocket “carriage trade” is their life blood. Apart from the 300 doctors who stand to lose their affiliations are 300 members of the unionized staff, who are represented by Local 1199.
Thus the doctors’ fierce attempt to save the hospital-and their employ of Mr. Stillman, the equivalent of a cruise missile with a legal pad. First the lawyer filed an unsuccessful lawsuit to block the sale. Then he called his Albany contacts to consider alternatives to Memorial’s plan, which includes handing over two of the hospital’s three buildings to Colony Capital Inc., a luxury condo developer.
The lobbying-along with the support of State Senator Roy Goodman-has had an effect. “The Governor wants to keep the hospital open,” Mr. Stillman told The Observer .
Acting as a fixer without portfolio, Mr. Stillman has opened negotiations with the half-dozen hospitals that had originally shown interest in the Meeth site, including Lenox Hill, Mount Sinai and Continuum Health Partners Inc., which runs St. Luke’s-Roosevelt and Beth Israel hospitals. At the same time, the doctors said they have secured a private investor who is willing to pay $1 million more for the site than Memorial’s development partner. That could allow the hospital to continue operating in some form at one of its three buildings. “These are real offers and I don’t understand why the board is turning a blind eye to them,” said Mr. Stillman, who would not reveal the investor’s name.
Meeth and Memorial brush Mr. Stillman’s dealmaking aside with contemptuous indifference.
“Despite the sentimental view of the doctors that something can be done, the numbers don’t lie,” said Meeth board member Charles Whitman, whose brother is married to Gov. Christine Todd Whitman of New Jersey. “I understand the emotion. I went to Harvard and if somebody told me Harvard had to close down because it wasn’t making money, I’d be upset, too.”
Mr. Whitman added that the board did negotiate with other hospitals before settling on the Memorial offer, which he said was “by far the most attractive.”
But that’s not the prevailing sentiment among the government officials who have to sign off on the deal. On June 23, the head of Mr. Spitzer’s charity bureau, Deputy Attorney General Bill Josephson, sent Mr. Herkness a stinging letter ordering the board to consider the counterproposals. He also chided Mr. Herkness for failing to set up a meeting with Lenox Hill officials. “We are not aware of one single shred of evidence that Meeth is actively exploring in good faith all or even any of these expressions of interest,” a piqued Mr. Josephson wrote. It would be “impossible,” he added, for Mr. Spitzer to approve the Memorial deal under present circumstances.
At press time, Mr. Herkness was in London and couldn’t be reached for comment, according to his assistant.
For his part, Mr. Whitman didn’t think much of the Attorney General’s letter. “[Mr. Josephson] is a personal friend of the doctors’ lawyer and he is basically acting as a creature of the doctors,” said Mr. Whitman. “He’s going to embarrass his boss.”
In any event, the letter doesn’t seem to have had much of an effect. A week later, Mr. Herkness and Memorial officials formally signed their agreement, a move that a Meeth source admits was intended to scare off the very hospitals the Attorney General asked them to negotiate with. “I would be surprised if, with a signed plan, the other hospitals will still be interested,” the source said.
Memorial, for its part, also plans to soldier on, regardless of what Mr. Spitzer and the Governor’s people are saying at the moment. “Memorial Sloan-Kettering is not exactly unknown in Albany,” said Avice Meehan, a spokesman for the cancer hospital. “Our case will be heard.”
A Charity Case
The one thing everyone seems to agree on is that the Meeth is in deep financial trouble and must change to survive. Over the past decade, Meeth has seen an exodus of patients and doctors that generated a $3.9 million deficit last year. “It’s just the kind of place that doesn’t work in the 90′s,” said Abigale Knapp, a spokesman for Meeth. “You don’t need 25 beds, you need to deal with these patients in an outpatient environment.”
The hospital was founded in 1869 by a group of wealthy members of the Union League Club-Roosevelts and Harrimans among them-who wanted to provide free care to poor soldiers returning from the Civil War. The first Meeth opened in a 34th Street brownstone and the hospital expanded over the years, creeping uptown until it landed at its current East 64th Street location in 1906.
But times have changed. Advances in outpatient care mean that most ear, nose and throat procedures can be performed in doctor’s offices. That means, on any given day, most of the hospital’s 60 beds are empty. About the only patients who stay the night are the cosmetic surgery patients, according to the administration.
So the hospital is underused. The drop-off is especially bad in the otolaryngology department, which has lost more than 400 throat and neck cases a year since the mid-1990′s.
Last fall, the trustees commissioned a study that concluded the hospital had only one major asset: the land it sat on. The auditors recommended the board shut down the 265,000-square-foot hospital and sell it for its real estate value. Soon after, Mr. Herkness opened his closed-door talks with Memorial.
Incensed, the doctors presented their own report, slamming the hospital’s executive director, George Sarkar, for running Meeth into the ground. Mr. Sarkar, they said, had failed to attract managed care companies, failed to update outdated billing systems and wasted millions on the construction of several underused operating rooms.
Then they took up the issue of Mr. Sarkar’s paycheck: The board had voted to hike Mr. Sarkar’s salary from $292,000 to $520,000 two years earlier, at a time when the magnitude of Meeth’s problems were becoming known. “These people don’t know what the hell they are doing,” Dr. Fochios said.
Still, the Meeth officials maintain they are doing the right thing-and that they must destroy the hospital to save its mission. With the money they will make from the sale, the Meeth board plans to open four or five ear, eye and throat clinics in poor neighborhoods around the city. Mr. Sarkar has already leased 10,000 square feet in Brooklyn’s Fulton Mall and is negotiating with Con Edison to expand a small clinic it opened in Harlem several years ago. A similar health care center in the South Bronx is also in the works.
The trustees are essentially Robin Hood-ing themselves out of existence: selling off silk-stocking assets so they can open a handful of Medicaid clinics in poor neighborhoods. The clinics would bear the Meeth imprimatur, but their affiliations would be with local hospitals or networks. The central hospital would cease to exist as soon as Memorial took over.
To Meeth officials, it’s a return to their altruistic roots. “The idea is to bring the hospital back to its original mission of helping the poor,” Ms. Knapp said. “There is the thought that the plastic surgeons have gotten a great deal on this hospital. They can use these facilities and mark up their procedures a couple hundred percent.”
To the doctors, though, it’s nothing more than a devilish ruse to sell Governor Pataki and others on their plan. Throw in the clinics, and the state-always desperate to expand health care to the poor-will have to say Yes.
Of course, even with that sweetener, there’s no guarantee that Meeth will get the necessary state approval of its deal. Nonetheless, the trustees have taken steps to shutter the 130-year-old hospital as quickly as possible. In late June, Mr. Herkness and his board shut down the hospital’s prestigious residency programs, sending about 50 doctors off. Ms. Knapp said all but three of the residents have found placements in other programs. But the doctors said it was a dirty trick that effectively puts the hospital out of business by cutting off its supply of medical foot soldiers.
“It was the worst thing they’ve done,” said a frustrated Dr. Fochios. The doctor, a jazz lover who speaks in a muted bellow, believes he has finally exhausted face-to-face approaches to Mr. Herkness, a reedy patrician with a diffident manner and a prep school drawl. “I’m thinking about writing that letter to Beauregard,” he said.