Cobble Hill

SUNY board officially approves sale of Long Island College Hospital to Fortis

The end of historic LICH in Brooklyn; Cobble Hill development to come

June 25, 2014 By Mary Frost Brooklyn Daily Eagle
Long Island College Hospital. Photo: Mary Frost
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After more than a year of community protests and litigation, trustees for the State University of New York (SUNY) voted to approve the sale of Brooklyn’s Long Island College Hospital (LICH) to developer Fortis Property Group.

SUNY’s board of trustees expressed the hopeful belief that the resolution’s approval represented an end to their admittedly bungled stewardship of the Cobble Hill hospital.

“Let me say it’s a great moment and a time of relief,” chairman H. Carl McCall told the board after their vote approving the resolution. “It’s been a long, arduous and damaging process . . .  However, it is now behind us.”

The relief was not entirely evident in Brooklyn, however. Attorney Jim Walden (Gibson, Dunn & Crutcher), who has been representing local community groups, doctors and the Public Advocate in fighting the sale, said on Wednesday, “Any damage to SUNY has been in the nature of a self-inflicted wound, or rather a long series of them.  And, I doubt this is over. Some of SUNY’s so-called caretakers may have succeeded in killing this community’s hospital, but the long trail of evidence they left will come back to haunt them. Of that, you can be sure.”

The developer said it would reach out to local residents devastated by the closure of the hospital, which served neighborhoods from Red Hook to Williamsburg along with Downtown.

A Fortis spokesperson told the Brooklyn Eagle, “We would like to thank the SUNY Board of Trustees and we look forward to creating a medical village that serves the needs of families across Brooklyn. In the coming weeks we will be meeting with community leaders to discuss additional details of our plans.”

Fortis’ plans to develop the one million-square-foot property as residential. Density, height or affordability were not discussed on Wednesday but are sure to be major topics in the days to come.

The deal still must be approved by the state Comptroller, the Attorney General and the state Supreme Court.

McCall said that SUNY reached a final agreement Tuesday night after “around-the-clock” negotiations that resolved issues including possible environmental remediation and liability issues.

Fortis is paying $240 million for the 20-building LICH campus, and will supply a $24 million deposit on Monday, June 30. NYU-Langone, Lutheran Family Services and Lutheran Medical Center will provide healthcare services in a new building to be constructed by Fortis starting six months after the deal closes.

McCall said that SUNY will continue to operate the vestigial emergency department still open at LICH until September 1, when NYU  takes over. Fortis will pay whatever operating costs the department incurs over the summer. The ED, which accepts only walk-ins, sees roughly 35 patients a day, all with minor complaints, according to SUNY.

The state appears to be pulling out all the stops to make the Fortis deal happen. NYU may be able to take over the ED’s operations earlier than September 1 since their Certificate of Need (CON) has already been approved by the state Department  of Health, and the Dormitory Authority of the State of New York (DASNY) may be prepared to overlook the defeasance of $118 million in Personal Income Tax bonds.

NYU Langone will also file an application with DOH to open an ambulatory surgery center and physician practices, and Lutheran will operate a Federally Qualified Health Center (FQHC), targeted towards underserved populations.

According to the RFP, the closing should take place in six months. However, Ruth E. Booher, SUNY’s Deputy Counsel for Health Affairs, told the board that the closing may be extended beyond that time because of the necessity to obtain “the necessary permits and approvals. But we will be working diligently to get that approval.”

Fortis will be forking over the first payment on August 1, Ms. Booher said. The last and final payment will be made at the end of year.

Fortis also promised to fund a foundation with $5 million, with $2.5 million to be supplied upon closing, and the rest after it gets established with its tax exempt status. The purpose of the foundation will be “to oversee the health care services of the community.” Booher added, “As we said, we’re not in the business of doing that.”

Fortis will also pay a state tax of $960,000 on the sale.

Environmental guarantees made

Fortis will supply “unlimited indemnity on environmental issues, including pre-existing issues,” Booher said. Initial Phase I testing showed the possibility of toxic substances on the property.

Booher said that Fortis would be depositing an extra $2 million in July in order to be allowed to carry out Phase II environmental testing. While the RFP demands that the buyer take the property “as is” — a big sticking point for second-ranked Peebles Corp., which was rejected by SUNY– she said the RFP allows testing provided they give SUNY additional security to guarantee they will close. “If they don’t close, anything they find, they guarantee they will remediate.”

Booher said that Fortis had negotiated to get its deposit back if SUNY pulled a fast one. She told the board, “There were a lot of details we described to you when we met in Buffalo regarding the refundability of the down payment. This is, if SUNY does something intentionally and it’s a bad act. These are all within our control, very unlikely and it’s more in the nature of a forfeiture than refundability.”

There was also “the defeasance issue, which was a big issue, a difficult issue because it requires the payment of $118 million dollars,” Booher said.

According to the RFP, the Dormitory Authority of the State of New York (DASNY) “may determine” that a transition that keeps “some health care operations during the interim period” would require defeasance of Personal Income Tax (PIT) bonds. “If so, such transition period must provide for the defeasance of said bonds” in the amount of $118 million.

“We have worked to avoid that payment,” Booher said. “DASNY is giving Fortis nine months from the start of the NYU lease to come to closing so we think the defeasance issue will not be there.”

In May, Peebles had asked SUNY to maintain its license at the ED because of the encumberance of the PIT bonds, something SUNY called “unacceptable.”

Any malpractice issues will be brought before the Court of Claims before September 1, until NYU’s malpractice insurance takes over, Booher said.

Responding to claims that SUNY is letting the valuable property go to a developer for a song, trustee Cary Staller asked that the resolution mention that SUNY received three appraisals.

Since SUNY closed LICH, emergency rooms across Brooklyn have been jammed and long waits have developed for admissions. The “stand-alone ER” proposed by NYU will not be allowed to respond to serious health emergencies.

Sue Raboy, spokesperson for advocacy group Patients for LICH, told the Eagle on Wednesday, “I’m so glad it’s a great moment of relief for [McCall] while those of us in Brooklyn, thanks to SUNY’s resolution are now in a medical crisis.  I do agree that it has been damaging…”

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