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Drop in Medicaid Rates to Push Brooklyn Hospital into Bankruptcy

December 17, 2012

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A venerable hospital that serves patients in central Brooklyn is expected to file for bankruptcy this month, according to a report from The New York Times.

Sources say Interfaith medical Center, which serves a community that consists of mostly African- and Caribbean-American families, may be forced to close or merge with another institution if it does not seek bankruptcy protection.

And, according to Nathan M. Barotz, the chairman of the hospital’s board of trustees, a merger with another hospital without a guarantee of financial aid from the state would be "tantamount to closing Interfaith."

The hospital, according to sources, has had financial trouble for several years, and has had to rely on irregular state funding in order to keep its head above water. During the recent recession, however, the state cut spending for many different social services, and medical centers like Interfaith experienced a significant amount of cuts in state aid.

The dramatic decrease in aid, as well as a 40 percent cut in the amount of reimbursements Interfaith receives from the treatment of Medicaid patients, reportedly forced the hospital to consider bankruptcy, according to Barotz.

The hospital, at 1545 Atlantic Avenue, is in such dire financial straits that it cannot currently afford medical malpractice insurance. In addition, administrators at the hospital expressed fears in August that they will not be able to meet Interfaith’s upcoming payroll obligations, according to sources.

By reorganizing through bankruptcy, hospital officials believe that Interfaith will have a better chance of long-term survival. State officials, however, would prefer that the hospital merge with other groups.

But a proposal that would have allowed Interfaith to unite with two healthier hospitals was crippled when one of the key constituents backed out of the plan.

As a result, the hospital has asked state officials for $20 million in debtor-in-possession financing to allow it to continue operating during its bankruptcy. New York, however, has not yet committed to offering this emergency aid, according to sources.


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