With another round of sacrifice coming in Albany, likely to be shared among those with less political clout, the Greater New York Hospital Association has started dishing out the propaganda. And with the New York Times no longer simply repeating what it says as fact, the factoids instead appear in this New York Magazine article.
The main GNYHA argument is apparently that because those who work in or with New York hospitals get more compensation, costs are higher, and therefore the government needs to give them more. That is the same argument top executives use for their own compensation across corporate America – because I voted while on your board to pay you more, you should vote on my board to pay me more. It is the same argument that public employee unions use to ratchet up their pensions – because you cut a deal with union A, we in union B deserve that deal too. It conveniently ignores the labor market most people are in, one where pay and benefits have been cut to remain “competitive.” Competitive for what? Competitive to attract the dollars spent by those with choices. As opposed to money received from the government, into which people have to pay whether they like their deal or not.
Let’s examine the excuses in the article, which holds that “virtually every item that contributed to the hospital’s total cost… was more expensive in New York than it would have been elsewhere.”
“Labor makes up some 60 percent of a hospital’s overall expenditures, and New York has among the highest labor costs in the country—a reflection of the enduring strength of its unions.”
This is a case of “because we pay ourselves more, you have to pay us more.” As I have shown elsewhere, the average private sector worker in Downstate New York, excluding the massively overpaid Finance and Insurance sector, earns about one-third more in cash pay than the national average, a figure that has been relatively steady for decades. (It was lower in the late 1970s and early 1980s, a depression in New York, but it was still 25 percent above the U.S. average.)
As I showed in this post, “New York’s Nursing Aides, Orderlies and Attendants had a median wage of $32,030 that was 49.4% higher than the national average. Not a high wage in any event, perhaps, but higher than most people doing the same work elsewhere get, even allowing for the higher general wage level (and cost of living) here. So most get 33% more in New York, but those represented by Local 1199 get 50% more. Is that fair? Perhaps they are more productive than average? Actually, New York City accounted for 2.7% of workers in all occupations, but 3.1% of U.S. New York’s Nursing Aides, Orderlies and Attendants.
According to the health care industry, “the demands of an urban setting—more acute cases, more-diverse patients—require higher staffing levels than elsewhere, and in New York City there are 5.6 workers for every patient in the hospital on a given day, a figure about 15 percent higher than the national average.”
In almost every other sector, the efficiencies of an urban setting – with a high density of customers arriving in a steady stream – means productivity is higher here than elsewhere, not lower. Imagine the hospital industry in North Dakota, where people are spread out across a vast area. To have, at any one point, the full compliment of medical care available within a reasonably short travel time means more health care workers relative to that small number of people. Here in New York, on the other hand, retail sales per employee and per square foot (to take one example) are the highest in the U.S., because there are so many more people coming through. Shouldn’t it be easier to have fewer workers per patient when there are more patients in the hospital, and less time idle waiting for some to show up? Whatever happened to economies of scale?
Aside from the Nursing Aides, Orderlies and Attendants occupation, moreover, it isn’t clear that New York City’s hospital industry workers really are paid more. as the article claims. According to the data cited in the post linked above, with 2.8% of the nation’s population and 2.7% of its jobs, the New York City had 2.9% of its Registered Nurses (with 69,690), just a hair above average. And these nurses earned a median wage of $72,340, or 32.3% more than RNs in the nation as a whole, or almost exactly what might be expected given overall private sector wages one-third higher than the U.S. average. The city’s Practical and Vocational Nurses fared somewhat less well, with the 16,100 of them accounting for just 2.3% of the national total, and their median earnings of $42,200 just 19.8% above average.”
What about physicians? New York City had only 1,500 Family and General Practitioners, just 1.3% of the U.S. total, and their median annual wage of $131,070 is actually 6.6% lower than the U.S. Average back when I compiled the data in the post linked above. New York City’s 750 pediatricians were 2.8% of the U.S. total, but their median annual wage of $102,630 was 24.9% lower than the national average. Most New York City physicians are in specialties – the 15,980 Other Physicians and Surgeons in he city account for a whopping 8.9% of the national total. But large numbers does not equal large pay, with the median of $103,000 a stiff 28.9% lower than the national average here in high-cost New York.
How about executive pay? “Executives, too, are paid more than their counterparts in other places. In 2008, Herbert Pardes, the president and CEO of New York–Presbyterian, reportedly received $9.8 million in total compensation; Miguel Fuentes, head of the comparatively small Bronx-Lebanon, took in $4.8 million.”
By law, for profit hospital are banned from New York. These CEOs are employees of non-profit “charities.” Because they are charities, they are exempt from property taxes, and business income taxes on their “profits.” What are those working for charities doing making that kind of money? Do they choose to live in affluent neighborhoods with and socialize with those who work on Wall Street, believe their work is worth as much? Actually their work may very well be worth as much or more, but that doesn’t necessarily mean their pay should be that high; perhaps Wall Street pay should be lower.
As if I don’t have enough enemies, I’ll say it again – if anyone in your organization is making more than the President of the United States, your organization is not a non-profit charity. It is for-profit of a different kind, or a non-profiteer. The President’s salary tends to remain static for years for political reasons, and then make big leaps – it doubled in 2001. So let’s just take that 2001 salary, $400,000, and adjust for inflation. That’s about $493,000 in today’s money, plus a house. The median household income in New York City is $55,000. Do those working for charities deserve to make (by themselves and not including any spousal income) more than nine times the average income for entire households in the city where they work, and more than the President of the United States (adjusted for inflation)?
Available data, moreover, imply that aside from those at the very top NYC health care managers are not overpaid, though they may be overstaffed. Last time I checked the typical health care administrator in New York earned a median annual wage of $63,220, or about 27.5% more than the national average. But NYC had a total of 11,320 Medical and Health Services Managers, or 4.9% of the national total (vs. 2.7% of workers in all occupations).
“New York’s hospitals have the oldest ‘age of plant’ in the country, and vintage properties are expensive both to run and to retrofit to contemporary standards. The New York Building Congress reports that hospital construction in New York City costs $600 per square foot, two and a half times the national average and still 50 percent higher than in other expensive cities, like San Francisco.”
That much more than San Francisco? With its unstable ground, located on a crowded an inaccessible peninsula where construction material must enter through a handful of choke points, with those ultra tough earthquake codes and left wing rules and regulations? San Francisco, where the average person earns significantly more than in New York City, and housing prices are even higher?
So the construction industry charges 250% more than average to a NY area population that earns on average 33% more than average. Is that a rule of nature? The outcome of the free market? Or organized theft, which is wrecking the MTA capital plan and has left the transit system multi $billion in debt? And do construction workers really earn more than double what similar workers do at the national average? Even including union benefits? Even electricians? Or is the money disappearing elsewhere?
Construction cost data firm RS Means has a cost adjustment for New York City. I have a copy of the 2010 book on my bookshelf. Construction is estimated to cost 39% more than the U.S. average in Manhattan, and about 33% above average in the outer boroughs. In line with what most New York area workers earn. So if government money is involved, even indirectly, it’s 250% above average?
“Just as the price of consumer goods is higher in New York than elsewhere, so too is the cost of everything from MRI machines and CT scanners to medical supplies and linen services.”
Now hold on here. Most consumer goods produced elsewhere do NOT cost much more in New York than elsewhere. Perhaps on 5th Avenue, but not in the rest of the city. Yes retail rents are higher, and retail wages are higher, but most of the cost of goods (as opposed to services) is incurred where something is made, where rents and wages are lower, not where it was sold.
I’ve heard that high-cost, high-wage New York City is like a small country with a very strong currency. The higher cost structure means many kinds of businesses cannot produce here, sell nationally or globally, and make a profit. But when New Yorkers spend their one-third higher wages to buy goods produced elsewhere, they get a relative bargain.
“Hello, I’d like to by an MRI machine.” “That will be $5 million dollars.” “I work for a hospital in New York.” “Excuse me, that will be $10 million.” So pay someone in Pennsylvania $50,000 to take delivery for $5 million. That’s a 1.0% increase in cost. Problem solved.
According to the health care industry, as relayed by New York Magazine, “The revenue side of the equation is equally unforgiving. Even as New York hospitals’ costs exceed national norms, their sources of income are being diminished…According to United Hospital Fund, close to one third of non-elderly New Yorkers were enrolled in Medicaid in 2008—a rate of public-insurance coverage that is more than 75 percent higher than that of the country as a whole. Those 2.3 million Medicaid recipients use a disproportionate amount of hospital services, making up 39 percent of the city’s hospital patients.”
A couple of points here. Medicaid patients end up at hospitals because the hospital industry has used the state legislature to gain a monopoly on them. As I showed here, in a continuation of a longstanding practice New York State’s Medicaid spending per beneficiary of physician’s services was less than half the U.S. average – in the highest spending Medicaid state in the country. It has always been low, so few physicians take Medicaid, driving the poor to hospitals and the clinics, which is just the way they like it. No wonder the doctors fear a single-payer system, in which relative pay in health care depends on political clout.
“But the hospital industry complains that since 2007 the New York State Legislature has cut Medicaid funding nine times, at a cost of $900 million to local hospitals.”
Well it is true, according to the Medicaid data in the post linked above, that New York State’s Medicaid hospital spending per Medicaid hospital beneficiary was below the national average in FY 2008, after having been nearly double years ago. But the industry made up for it by attracting more patients for more procedures. Therefore in FY 2008 with 6.5% of the total population of 48 states plus DC, New York accounted for 17.4% of the beneficiaries of Medicaid-funded In-Patient Hospital services in FY 2008. Reports have shown that follow up care for operations that take place in New York is often provided in other states, states with lower Medicaid spending and lower taxes.
“The bottom line is sobering” according to New York Magazine. “In 2008, local hospitals spent $3 billion more delivering care than they took in. Overall, they operated at a 6.0% loss—an average that masks much deeper red ink at the worst-performing places. In contrast, hospitals nationwide have earned average profits of about 4.0% percent over the past decade.”
Did I mention that all New York hospitals are non-profit charities? Many such charities are hurting as a result of the downturn, and are having to retrench. In better times, the non-profit hospitals would complain that their profits were too low, but they would have been higher if they employed fewer people.
Consider the data in the spreadsheet attached to this post. New York City had 1,899 private hospital workers per 100,000 residents in 2007, compared with a national average of 1,474. That’s 29.0% more. The city’s large public hospital system, which provides much Medicaid-funded care with far fewer private insurance payments to cross-subsidize, had 485 full time equivalent employees per 100,000 city residents, compared with a U.S. average for public hospitals of 190. New York City hospitals, it is true, also attract customers from outside the city, from the suburbs, the rest of the country, and the rest of the world. Unfortunately, anecdotal evidence suggests, some of these are receiving Medicaid funded care, with New York City and State taxpayers picking up half the tab. Even given that some hospital customers are from outside the city, however, the number of hospital workers in NYC is high relative to the city’s population.
“I’ve been doing this job since 1984, and people used to say I was crying wolf when I warned about a crisis,” the GNYHA President says.
And that’s certainly the truth. Because of what has been said over 25 years, because of the self dealing in Albany, I don’t believe a single word produced by that organization, and won’t until years of crisis have already taken place. If GNYHA and Local 1199 were to come out and say that New York’s Medicaid hospital spending per Medicaid hospital spending beneficiary was below the national average in FY 2008, I would assume it must not be true despite having calculated it myself and seen it with my own eyes. Even now, I’m wondering if they somehow came up with fake beneficiaries to get the average down in the federal data.
For decades we’ve heard the refrain – “give us substantially more money than last year, or we’ll let your babies die.” Unfortunately, because of a change in the industry classification system, it isn’t so easy to get Current Employment Survey data on the NYC Hospital industry for 1984. What I can say, taking a quick look at data on the BLS website, is that the industry employed 143,500 in July 1990. And 159,200 in July 2008. And 159,700 in July 2009. And 161,400 in July 2010. This as health care in most of the U.S. has been moving away from hospitals toward outpatient services.
The available evidence suggests its still 1984.