The odd math behind the LICH bidding process

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Dan Goldberg

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After much negotiation and with great ceremony, the final evaluation of bids to redevelop the financially troubled Long Island College Hospital was given over earlier this year to a committee representing the state entity that runs the hospital and the groups that were fighting to keep it open.

But it turns out that committee's evaluations of the nine proposals to purchase and redevelop LICH were based on an arbitrary scoring system that entailed 18 judges, some of whom had no health care experience, ranking bids by whatever means they liked, a comprehensive review of the scoring sheets has revealed.

The scoring sheets, obtained by Capital, show the evaluators awarded drastically different scores to several bidders even when their thoughts on a proposal were very similar. Several scorers complained of not having had enough time or detail to understand fully the implications of a specific bid. 

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Few of the judges thought Brooklyn Health Partners, the highest-scoring bid, was the best choice, and the evaluators instructed to review and rank the financial aspects of the proposal warned that the company’s proposal was long on promise and short on details.

The B.H.P. proposal offered “only generalities,” one of the evaluators wrote, while another was dubious that their proposal to build a brand new 300-400 bed hospital and 1,000 housing units could be constructed for the amount the company claimed, saying the "project cost is based on erroneous assumption(s)."

At stake is the sale of a publicly owned hospital on land worth hundreds of millions of dollars, the possibility that high-rise luxury towers would redefine the Brooklyn landscape and whether residents of Cobble Hill will have a full-service hospital or something considerably less.

It has been 14 months since officials from SUNY, the state entity in charge of LICH, announced plans to close the hospital, which they said was losing $13 million per month. During that time, there were protests and lawsuits, highlighted by the arrest of Bill de Blasio during the mayoral campaign.

SUNY, anxious to leave the property and fearful of a contempt hearing, agreed to a unique legal settlement, which de Blasio described as “historic.”

The litigants would help craft a request for proposal and have a say in picking the winner.

But there was little guidance given to these judges and no requirement they be well-versed in hospital management, real estate transactions or finances. 

Now, SUNY finds itself negotiating with a partner it did not choose, a company with no history and a C.E.O. who has never run a hospital.

The nine proposals were ranked by three different committees. The first was a financial committee made up of five SUNY scorers who could award each bid a maximum of 30 points. The second was a technical committee made up of six SUNY representatives who were supposed to evaluate the proposals based on their quality and could award each bid a maximum of 70 points. The third group was made up of representatives chosen by the litigants who sued SUNY to keep LICH open. The public advocate, community groups and labor unions all had representatives. 

Some of the scorers were academics, some were physicians, some were elected officials, including City Councilman Carlos Menchaca and Brooklyn Borough President Eric Adams. 

There were seven community reps and they too could award a total of 70 points based on the proposal. The scores were then weighted to give the SUNY judges a slight edge.

While a majority of the scorers, whose names were redacted, appear to have come to the same conclusion regarding the different proposals, a few outliers were enough to skew the final score, vaulting Brooklyn Health Partners, a three-month old company created only to bid on the hospital, to the top, and giving The Peebles Company a second place score despite the fact that the two companies have very different visions of what LICH should become.

De Blasio, who declined to comment for this story, recently defended the scoring.

The mayor admitted he hasn't "looked into the intricacies of the process" but went on to say "the fact that the process yielded a facility with a very substantial health care element speaks volumes."

He noted that community members had input.

"Always the name of the game to find something that would have a lasting positive health care impact on this community and be economically viable and from what I can see of the process that's exactly what it's yielding," de Blasio added.

But people who were familiar with the intricacies appear far less sanguine and raised warning signs that might have proven fatal to B.H.P.’s bid had SUNY’s hands not been tied by litigation.

SUNY's financial committee raised concerns about B.H.P.'s ability to finance a deal, with one scorer writing a “lack of experience in financing and building comparably-sized projects.” A second scorer noted that “deed restrictions are not answered” and “health partner is consultant not operator.”

Another scorer wrote, “Project cost is based on erroneous assumption of construction cost for a new hospital.”

At least one member of the SUNY technical committee was even more skeptical of this offer, awarding Brooklyn Health Partners 0 points out of a possible 70, and writing, “Who will they maintain the existing facility with? Who will they establish a full-service hospital with? No details only generalities.”

Another SUNY scorer, who awarded the bid 24 points, wrote that B.H.P.'s “ability to maintain health care operations during the interim period between SUNY's withdrawal and implementation of the ultimate plan is less certain. … Although the offering price is attractive, however there is minimum documentation on its financial strength.”

Yet another complained that “the proposal has no health care partner so it is not clear how they would, as proposed, maintain a bridge facility.”

Those predictions proved prescient.

Last week, Capital first reported that SUNY's attorneys wrote a letter stating they do not believe B.H.P. will be able to obtain a license to run bridge services by the time SUNY is legally allowed to walk away from the hospital on May 22.

B.H.P.'s proposal stated that the company had “contracted with [Quorum Health Resources] to act as the sole operator of LICH during the initial phase of the transition. … B.H.P. will ensure the continued operation of the existing emergency department and maintain a bridge medical facility consistent with the existing services provided. The facility will be implemented and managed by QHR.”

Last week, a spokeswoman for B.H.P. admitted to Capital that wasn't going to happen.

“After numerous discussions between Brooklyn Health Partners and SUNY regarding the issuance of a Temporary Operator (License) for LICH, in order to facilitate the continuation of health services after May 22, 2014, B.H.P. determined that it is not in its best interest to request SUNY to appoint Quorum Health Resources as Temporary Operator at LICH,” Donnette Dunbar said.

Instead, B.H.P. will focus its efforts on obtaining a full-service hospital license, which is likely to take many months.

That means the community could be left with no health care at the site for an unknown amount of time.

Last week, Capital reported that Assemblyman Karim Camara, who represents Brooklyn but whose district does not include LICH, called on SUNY to cut ties with B.H.P. because he worries it will take too long for the company to obtain an operating license.

On Saturday, City Councilman Brad Lander told Capital he was concerned that B.H.P. planned to build large towers to accommodate the 1,000 units.

“There’s a lot we don’t know about the Brooklyn Health Partners plan,” Lander said. “I would say there’s a lot more we don’t know about it than we do know about it. We don’t know who’s operating the bridge health facility, we don’t know whether they’ve applied for a license. We don’t know who would own and operate the hospital and now we don’t know how tall the buildings would be. That’s a lot not to know. We know the name of the owner and we know how many beds they proposed, and you know, I want a full service hospital. I want as much health care as we can get on the site, but I also want a real proposal with full disclosure and information we need to evaluate it, and right now we don’t know a lot more than we do know. We asked, we’re eager, look we want this site to work. We want the plan to work, you know we want to make this work together, but there’s a lot we don’t know.”

The apparent lack of detail did not dissuade the two litigants’ evaluators who awarded B.H.P. a maximum 70 points. One left the comments section blank. The other wrote “proposal substantially exceeds the critical technical objectives of the RFP.”

Despite all the warnings from their own representatives, SUNY officials were handcuffed by a process that had been negotiated in court. No matter the reservations, SUNY is forced to negotiate with B.H.P. because it was the highest scoring proposal.

Asked to comment on whether the evaluation process that selected B.H.P. as the winner was flawed, Lander paused, then responded, "I'm not going to touch that one."

SUNY and B.H.P. continue to negotiate, trying to close a deal. They have one week before SUNY is legally obligated to begin talks with The Peebles Company.

SUNY's financial scorers were impressed by the Peebles bid, giving it an average score of 29 out of 30. No other bidder cracked 24.

This was the reason Peebles came in second place even though they do not propose a full-service hospital, which was ostensibly the whole point of the new R.F.P.

That appears to have bothered the community selected representatives who gave Peebles an average score of 21.71 points out of a possible 70.

SUNY's candidates were far more enthusiastic giving an average score of 45.33. If you're wondering how two sets of evaluators looking at the exact same proposal could come up with such radically different scores, the answer is emphasis.

Essentially, SUNY evaluators felt the lack of a full service hospital should cost the Peebles bid about 25 points. But they awarded Peebles plenty of points for a long track record, a commitment to build a freestanding ER, building an urgent care center and a partnership with Maimonides and North Shore-LIJ.

Of the seven community evaluators, four dismissed Peebles' bid outright because it did not provide a full-service hospital.

One scorer gave Peebles 8 out of 70 points, simply writing “no hospital.”

Another gave Peebles 4 points out of 70, writing “fails to provide predominance of critical technical objectives of the RFP.”

Yet another community representative appeared to ding Peebles for not having community support – giving them 12 points. One scorer gave them 3 points without commenting on how or why.

But three other members of the community team, looking at the exact same proposal gave Peebles 37, 43, and 45 points.

In third place was Fortis Property group whose offer was similar to Peebles in that it does not plan for a full-service hospital.

Yet one SUNY evaluator gave it a maximum 70 points, writing “hits all the buttons.”

Another SUNY scorer, apparently did not agree, awarding Fortis only 40 points.

You might think that the community representatives would be united in their distaste for a Fortis proposal that doesn't provide a full-service hospital.

But while one representative awarded them 6 out of 70 points writing “not an acute care hospital. It's only for the real-estate,” another scorer gave Fortis 50 points, also complaining that it was not a full-service hospital, there was a lack of hospital beds and there was no teaching component.

Prime Healthcare Services, which is offering a full-service hospital and is a reputable company that operates in several states, actually scored highest among the community picks, with an average score of 54 points out of a possible 70.

But SUNY's scorers were not as kind awarding them an average score of 33.5. Prime's fourth-place fate was sealed by their relatively low bid of $220 million. That was $30 million less than B.H.P..

One SUNY scorer awarded Prime 0 out of 70 points writing, “I do not wish to buy a lawsuit. Bidder is under investigation for all 19 hospitals in California.”

Prime actually has 14 hospitals in California.

LICH advocates are now staring at two possibilities. The first is that B.H.P. moves forward, buys the hospital and must wait for a license. If the disruption in service is short, it will be written off as the birth pangs of a new hospital, the kind of modern facility many in the community say Cobble Hill needs. But if the licensing process were to take months, as many fear it could, LICH would stand as a symbol of good intentions gone awry.

The second possibility is that the bid unravels, and SUNY begins negotiating with The Peebles Company.

The only absolute requirement is that B.H.P. come up with the money—a $25 million deposit—by May 5.

But now, after 14 months of negotiation, litigation and weighing of potential solutions, it remains uncertain if LICH can stay open or what kind of health services the community will have going forward.