SUNY Downstate Medical Center deal a bust, audit finds
Feb 13, 2018
Struggling SUNY Downstate Medical Center paid a “restructuring” consultant $34 million to help come up with plans to trim costs — but a stinging audit charged the deal was a bust.
Pitts Management Associates claimed the restructuring plan saved the Brooklyn hospital $128 million.
But a review by state Comptroller Tom DiNapoli shot down that claim as illusory and based on inflated or unsupported figures.
“SUNY Downstate’s fiscal problems were severe and it needed help. But it failed to monitor PMA’s $34 million contracts and did not get what it paid for,” DiNapoli said.
“Specifically, we could not verify the accuracy of $65,442,000 in savings PMA claimed for labor reductions because PMA’s methodology was flawed and Downstate could not provide sufficient information.”
Some of the reported savings were inflated or misleading because some positions weren’t eliminated as claimed and some workers were reassigned, not laid off, the audit said.
At best, Downstate realized $32 million in savings — or $2 million less than the consultant was paid.
In one case, PMA claimed $4.9 million savings for a reduction in patients’ length-of-stay.
But the auditors said they found the opposite.
“In fact, we found that inpatient length of stay actually increased during the examination period (2012-2014),” the auditors said. “Not only do we question whether Downstate achieved any savings, we find LOS costs may have actually increased.”
DiNapoli recommended that SUNY Downstate establish clear agreements with vendors on performance goals and include clawback provisions in future contracts.
In a response to the draft audit, SUNY chief financial officer Eileen McLoughlin said she “generally agrees” with the recommendations.
But she took issue with some of the findings.
“In general the cash flow improvements were realized,” McLoughlin said.
She also defended the reported labor savings cited by Pitts but concurred with auditors said that reported reductions for impatient length of stay visits was “miscalculated.”
Baton Rouge, La.-based Pitts Management was roasted in a previous 2016 audit for billing the state for over $83,000 for lavish travel, lodging and dining expenses, including for stays at the Carlyle Hotel on the Upper East Side and a “team dinner” at Docks Oyster Bar in Midtown.
That audit also slammed former Downstate President John Williams for charging his state-issued credit card for his airfare and some of his lodging in Bermuda to a six-day birthday bash for company CEO David Pitts in July 2014.
The Joint Commission on Public Ethics subsequently found that Pitts violated the public officers law to secure “unwarranted privileges” and he paid a $3,000 fine.
Pitts Management CEO David Pitts Tuesday night said he hadn’t seen the audit and declined comment.
A statement issued Tuesday night by the hospital said, “Downstate is committed to making sure that appropriate fiscal control measures and processes are in place that minimize risk, promote efficiency, and strengthen accountability. We agree with the recommendations of the Office of the State Comptroller’s audit of the Pitts Management contracts which were in place from 2011 to 2014, prior to Dr. [Wayne] Riley’s 2017 appointment as president of SUNY Downstate.”