The New York Times describes (registration required) the fall out of political patronage, heavy government regulation, and a late 90's building boom on New York state's hospitals. In a little more than two years, 12 New York hospitals have closed, and the state estimates there may still be as many as 20,000 excess beds. On the state level, New York has 20% more hospital beds per person than the national average. New York's hospitals were deregulated in 1997, and the resulting "constructive deconstruction" brought on by market factors has been as chaotic as expected.
In study after study, the biggest difference between New York and the rest of the country is in length of stay, widely considered a measure of the quality of both care and management. Patients spend about 37 percent longer in the hospital in New York than nationally for similar cases, Solucient found, which contributes greatly to higher costs.
UPDATE: Here's an follow up article on what's happening in Buffalo, NY.
UPDATE: Here's another follow up article from the Poughkeepsie Journal.