Hadassah Hospital On Verge Of Gov’t Deal

Jerusalem — The Israeli government has agreed in principle to provide “significant” financial aid to cash-strapped Hadassah Medical Center provided the hospital cuts expenses and staff — another 350 jobs are slated to be cut by 2016 — and finds ways to increase income, according to the hospital’s director-general.

This represents an apparent about-face by the government, which, according to an August report in the Jerusalem Post, had pressed Hadassah to form a “strategic partnership” with one of the country’s four health funds (equivalent to health maintenance organizations) as a possible precondition for government funding.

At the time, Avigdor Kaplan, director-general of the Hadassah Medical Organization (HMO), said the medical center “would not forgo even partial ownership; Hadassah cannot be swallowed up by anybody.”

The government turnaround follows intense negotiations ever since between the finance and health ministries and leaders of the New York-based Hadassah, the Women’s Zionist Organization of America (HWZOA) and the Israel-based HMO.

Leaders of the HWZOA, which founded the medical center a century ago and owns it to this day, flew to Jerusalem this week for another round of urgent talks aimed at ultimately eliminating the medical center’s accumulated deficit of 1.3 billion shekels (about $371 million) as well as an annual deficit of 300 million shekels ($85.71 million).

In frank interviews during a break in the talks, Kaplan and HWZOA National President Marcie Natan told The Jewish Week that the world-renowned medical center’s crisis has been building for years, and that without an imminent fix, patient care would suffer.

Natan insisted that HZWOA is “not planning” to sell the hospital, either to a health fund or to private investors.

“We are committed to this. The medical center is our largest Israeli connection and has been a part of our organization for 100 years now. It is a matter of finding a resolution with the government.”

Kaplan said the negotiations “are going very well.

“We assume we’ll reach an agreement in the coming weeks,” he said. “We are working on the wording of the contract and all items that are important.”

Kaplan said the contract being hammered out between the HWZOA, the HMO and the government requires Hadassah to “streamline its work, cut expenses and increase income.”

Whether those steps will be enough to close the debt and the annual deficit is not known, but the Hadassah board approved in June an emergency infusion of $25 million should it be needed. Hadassah also has $400 million in reserves, half of which is for unrestricted use.

The hospital could also file for bankruptcy protection, which would allow it to reorganize without creditors breathing down its neck. But it is understood that creditors are not beating down the door and that this option is not being seriously considered.

For its part, the government will provide an as yet undisclosed amount of “support” — including “one-time payments for maintenance and severance payments” to the 350 employees who will be laid off by the end of 2016. The 350 would be on top of the 200 employees already laid off this year, Kaplan noted.

Natan acknowledged that “it won’t be an easy task” to convince leaders of the hospital’s workers committee to agree to the government deal without a fight.

“We hope at the end of the day to convince them that a compromise is better than any other alternative. We shall negotiate with them,” Natan said.

A union representative could not be reached for comment.

Kaplan said the government’s assistance will be “significant” but declined to provide a number. The Ministry of Finance refused to comment on the negotiations but a Ministry of Health spokesperson said that the government “of course wants to help, but we want to see the hospital helping itself in terms of a recovery plan.”

Hadassah has been asking for $185 million. Such government assistance would not be unprecedented, but the last time it occurred was in the 1980s and the amount of money was relatively minor.

Kaplan blamed “at least 50 percent” of the hospital’s deficit on the way the government funds — or fails to fund — a handful of nonprofit hospitals like Hadassah. Contrary to popular belief, Hadassah isn’t a private hospital, he insisted, even though it earns additional revenue from medical tourism and private medical consultations by the hospital’s top physicians via a service called Sharap.

Unlike government-owned hospitals and hospitals owned by the health funds, Kaplan said, nonprofit (also called “non-government public”) hospitals do not receive any government funding above and beyond what National Insurance (Social Security) pays the hospitals for patient care via the health funds.

As a result, Kaplan said, Hadassah has an increasingly large shortfall between the tens of millions of dollars raised by HWZOA and the money contributed by the health funds. When a roof needs repair or an MRI machine breaks, the government will not fund it.

Kaplan said governmental reimbursement caps are outdated and often don’t approach the true cost of a procedure at a top-tier medical facility such as Hadassah, whose medical professionals contribute half of all the Israeli medical journal articles published every year.

And because Hadassah isn’t aligned with the government or any one health fund, he said, it has been unable to negotiate the lower rates granted to the other facilities.

Also weighing down the hospital, Kaplan said, is a collective work agreement the government approved that greatly increased the salaries of then-underpaid physicians and nurses.

“We didn’t receive any compensation for that,” Kaplan noted.

Perhaps most aggravating of all, Kaplan said, is the fact that Hadassah receives no additional government funding even though it must accept every patient who walks in the door — unlike the few private hospitals that operate in Israel. That includes prime ministers like Ariel Sharon and, more recently, the late Rabbi Ovadia Yosef.

“Hadassah is a nonprofit public hospital that provides private-level care, and it’s owned by HWZOA. Public hospitals have an ER that accepts everyone, even if the treatment costs millions of shekels. Private hospitals don’t have an ER and they can cherry-pick patients. We can’t do that.”

Natan emphasized that Hadassah’s mission is to serve the public, and that it has no desire to go private.

“The issue is that everything other than the money received from the health funds is left on the shoulders of HZWOA,” whose mission, she said, is to maintain the hospital but not pay for patient care.

Asked whether HZWOA was planning a special fundraising campaign to reduce the deficit, Natan said the organization would concentrate on completing the Davidson Hospital Tower it built last year on the Ein Kerem campus.

About $50 million is needed to finish the $363 million project, according to Miki Schulman of Great Neck, L.I., chair of the fundraising drive. She said it would be officially launched in January at the organization’s midwinter national board meeting in Fort Lauderdale, Fla. Three floors of the 19-story tower are now open and Schulman said it is hoped that tower will be fully functional by early 2016.

Natan rejected media reports that HWZOA had bypassed the medical center’s Israeli board members in its negotiations with the government.

“I know for a fact the board of HMO was kept in the loop, that the chair of the board had regular meetings with Kaplan. I can’t speak for their interpretation of what they think they were or were not getting. Updating of the board was and continues to be ongoing,” she said.

Natan added that “the support that HWZOA is offering to the hospital is total and the HMO board in its entirety voted that the voice in the negotiations would be that of the director general.”

When there were “some differences of opinion” over how the negotiations should be handled, she said, “the chair of the board resigned with no explanation to us. The other board members also resigned,” Natan noted.

The board members could not be reached for comment.

“Two new people have already joined the board,” she said.

A source familiar with the dynamics between the parent organization in New York and the Israeli board said that HWZOA long ago warned Hadassah’s Israeli board that it lacked both the ability and the desire to fill a deficit caused by low rates of government reimbursement.

While Hadassah’s donors were eager to fund nurses’ stations, operating rooms and lounges — especially in the new tower, which is full of name plaques — finding funders willing to pay for day-to-day operations and the growing deficit was all but impossible, the source said.

Stephen Donshik, a lecturer at Hebrew University’s Non-Profit Management and Leadership program, said that unlike Israeli organizations that establish a “friends of” fundraising arm, HWZOA – an American nonprofit — created and owns an Israeli medical center.

It is therefore no wonder, he said, that the relationship between the American Hadassah and the Israeli Hadassah is “complicated.”

editor@jewishweek.org