Meet the Hospital Hatchet Man: Tough-Talkin’ Stephen Berger

Investment banker Stephen Berger was sitting in his office high above midtown Manhattan on a recent Wednesday afternoon, puffing on

Investment banker Stephen Berger was sitting in his office high above midtown Manhattan on a recent Wednesday afternoon, puffing on a fat brown stogie and painting a picture of impending doom for the state’s health-care system. “We’re driving along at 90 miles an hour on a curved road,” he said in his gravelly Lower East Side accent. “And somewhere out there, somebody’s got to brake because there’s a tractor-trailer truck in the middle of this road and we’re going to hit it. And we are not in any shape to handle that.”

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Mr. Berger is the chairman of the New York State Commission on Health Care Facilities in the 21st Century, a high-powered panel created by Governor George Pataki and the State Legislature to rein in the state’s ballooning health-care costs. Modeled after the federal military-base-closing commission that made headlines last year, this commission has been charged with cutting costs by “right-sizing” New York’s hospitals and nursing homes. It is the most far-reaching health-care initiative to hit New York in decades, but not everyone is happy about it. For while Mr. Berger has vowed that his undertaking is essentially benevolent, that he is out to heal an ailing health system, critics fear that he will prove to be less a Mr. Fix-It than a Mr. Hatchet.

“Our concern is that he’s being driven by financial considerations,” said Louis Guida, co-coordinator of Save Our Safety Net Campaign, a coalition of labor unions and community groups formed in response to the Berger commission. “Given his history as someone who is sent in to do difficult jobs that no one else wants to do, we think he’s coming in with his knives sharpened to cut down on hospitals one way or another.”

The 18-member Berger commission got its start in June 2005 and is set to release its recommendations—which the Legislature must either accept or reject in full—on Dec. 1, 2006. As that day approaches, hospital workers and health-care advocates have begun a ghoulish guessing game of which hospitals will survive and which will not, which will be shrunk to freestanding emergency-care facilities and which will be left alone. (Rumors have circulated that the commission intends to close as many as 10 percent of the nearly 900 hospitals and nursing homes in New York, a figure Mr. Berger denied to The Observer.)

For concerned watchdogs like Mr. Guida, the biggest fear is that the first hospitals to go will be the hospitals serving low-income populations; after all, they tend to have some of the poorest operating margins (serving the uninsured is worthy, but not lucrative) and their boards don’t necessarily pack a punch in Albany. At one recent hearing in Queens, 44 witnesses spent four hours begging the commission to keep the borough’s hospitals alive.

“Everybody is very, very concerned … because we’re getting some vibrations,” said Queens Borough President Helen Marshall, rattling off statistics about the borough’s already-strapped medical services: five community boards with no hospital facilities, 1.2 beds per thousand residents, etc. “These hospitals cannot close because nobody can take their patient load, and as far as beds go, their beds are full.”

But Mr. Berger denies that he is out to slash and burn the state’s crop of hospitals and nursing homes. “This is not a quote ‘closing commission,’” he said, referring to one of the more popular nicknames critics have given the panel. “Do we think we may close [some facilities]? Yeah, but the answer is, it is a commission that is looking at issues of what is appropriate care …. Part of our mandate is not merely to look at costs, it’s to look at access to care and it’s to look at quality of care.”

‘A Little Task Force’

Nonetheless, Mr. Berger—who served as Governor Hugh Carey’s director of the emergency Financial Control Board during the city’s mid-70’s budget crisis, and whose name has rarely appeared in print without words like “sharp” and “aggressive” appended to it—is among the first to acknowledge that he is a fiscal tough guy.

“I am,” said Mr. Berger, now 66, and then qualified himself a bit. “‘Tough’ is a very strange word,” he said. “I have a reputation of being honest with people, asking questions, and being willing ultimately to say what I think. I don’t think that’s particularly tough. I think that’s particularly what you need to survive in the world.”

And Mr. Berger is clearly a survivor. As a young politico managing campaigns in New York City, he made such an impression on rivals (and perhaps supporters) that he was rumored to be the inspiration for the wheeling, dealing campaign manager in the 1972 Robert Redford flick The Candidate. (Others say the role was modeled on legendary political consultant David Garth.)

Later, as the first director of the Financial Control Board from 1976 through 1977, he struck fear in the hearts of commissioners and labor leaders alike. “He really was the driving force [behind] the control board, putting a lot of pressure on the city to cut-cut-cut-cut-cut, to do all the things the city had promised to do in order to right the ship,” said Donald Kummerfeld, whose job as city budget director made him a frequent target of Mr. Berger’s criticism. As a member of the Metropolitan Transit Authority board, he nearly sparked a gray-haired revolution in 1979 when he suggested the city limit subway fare discounts for the elderly.

And as head of the Port Authority from 1985 to 1990, Mr. Berger has been accused by families of the victims of the 1993 World Trade Center bombing of putting the bottom line before security—allegedly rejecting suggestions to secure the parking garage where the bomb exploded because of “the inconvenience to tenants and substantial loss of revenue,” according to court documents. (When The Observer attempted to contact Mr. Berger about these claims, he was on vacation and could not be reached.)

Mr. Berger’s sharp tongue, along with his bald head and beard (once worn pointy), inspired one old colleague to jokingly compare his looks to a devil. But, in fact, he looked more like a cross between Vladimir Lenin and Gordon Gekko as he sat in his office at Odyssey Investment Partners, where he is also chairman, his cobalt eyes holding steady beneath his smooth forehead. Dressed in a blue-and-white-striped dress shirt, cufflinks glittering at his wrists, a Starburst-orange tie around his neck, he looked every bit the power broker— except that his suspenders featured images of the Statue of Liberty. On a couch in the corner of his corner office sat a man-sized version of the red Muppet Elmo.

(“I keep Elmo around as a reminder that we humans are not infallible,” Mr. Berger said, digressing briefly into a tale of an ill-fated investment in the Sesame Street retail stores. “We did all the diligence, and it was one of the few investments we made in our history that did not make money.”)

The tenacious tactics of Mr. Berger, a Democrat, have undeniable bipartisan appeal; he ran the Republican Herman Badillo’s campaign for Mayor in 2001. Not long after, in 2002, the two men were having lunch when Mr. Berger happened to mention his latest financial disaster theory: that the expanding Medicaid budget is “going to absolutely swamp the state at some point.”

Mr. Badillo promptly mentioned the conversation to his friend, Mr. Pataki. About eight months later, the Governor phoned Mr. Berger to ask him to put together “a little task force” on Medicaid reform. When this task force (which included Mr. Badillo among its six members) recommended “right-sizing” hospitals and nursing homes as one of several solutions in its final November 2004 report, Mr. Pataki once again called on Mr. Berger to do the honors.

“The Governor could not have picked a better person to look into the questions of health-care costs,” said former Mayor Ed Koch, who goes back some 40 years with Mr. Berger and tapped him to advise his 1978 Mayoral campaign. “Lots of people would turn down a job like that, because it can only irritate people: managers, unions, advocates. You don’t make too many friends when you want to restructure.”

But Mr. Berger doesn’t mind making enemies. Indeed, he seems to enjoy the drama that comes from charging into a hive of competing interests.

“This is Rashômon squared,” he said, stubbing out his cigar in a large pewter dish and immediately reaching for another. “Providers look at it one way, institutions look at it a particular way, consumers look at it, the workforce looks at it, everybody sees the system from their point of view.

“But I don’t want anything out of this,” he continued. “So I may be right, I may be wrong, but I’m reasonably objective. And that’s a great advantage.”

Too Many Beds?

Not everyone, however, is convinced of Mr. Berger’s objectivity.

The Berger commission’s theory of New York’s health-care crisis rests chiefly on the idea that there are too many beds. Thanks to changes in medical treatment, the theory goes, people live longer and linger less in hospitals and nursing homes, leaving empty wards where there used to be full ones. Faced with the cost of keeping these ghost wards open, some hospitals have shifted their focus to providing lucrative but ultimately inessential services, while others have been forced to shut their doors. Meanwhile, the state’s health-care budget continues to grow.

“The competition to fill beds is taking dollars out of the systems and parts of institutions that ought to be supported,” Mr. Berger said. “So we’ve got to come up with some answers to core problems before we have a massive implosion.

“This is really important,” he said. “ I don’t want to see another situation like we saw in the mid-70’s where, because you delayed, you did disruptive things to the social fabric, some of which you might have been able to avoid.”

Few people disagree with this last point. But while most would agree that something needs to be done, some critics questions whether excess beds are the issue, and if “right-sizing” is the best way to tackle soaring medical costs.

“We’re concerned that there’s this idea that closing a hospital here or there is somehow going to be a panacea,” said William Van Slyke, spokesperson for the Healthcare Association of New York State, which released a report in November 2005 that placed the state’s excess bed capacity closer to 7,000 than the 20,000 cited by the Berger commission. “There are still significant, fundamental problems that are going to need to be addressed: We have woefully inadequate Medicaid reimbursements, ridiculous expenses in medical-malpractice liability, gross profiteering by health plans, gross profiteering by pharmaceutical companies. All those waves are not going to be settled by closing a hospital or two.”

But even if a few strategic nips and tucks could save the system, many of these critics said they would still worry about how Mr. Berger planned to wield his scalpel. Would he dare to take on the powerful institutions along, say, Manhattan’s Bedpan Alley along First Avenue? Or would he go after small ones with weak boards and poor bank statements?

Mr. Berger was patient with these questions at first, but eventually grew frustrated.

“This is not a closing commission,” he said. “The answer is, we understand that it’s appropriateness which is important.”

Pressed about rumors that he intended to close one major teaching hospital, he answered wryly. “Absolutely! I’m planning to close Presbyterian, Cornell—”

And then he interrupted himself: “Come on! I am not going to talk about any institution.”

Meet the Hospital Hatchet Man: Tough-Talkin’ Stephen Berger