HealthAlliance decides it can no longer go it alone

David Lundquist. (Photo by Dan Barton)

After a year of virtual silence about its long-term plans, HealthAlliance of the Hudson Valley late last week accepted the resignation of its CEO, David Lundquist, and disclosed that it’s been having affiliation talks for several months with potential merger partners. It appears that HealthAlliance of the Hudson Valley, the Kingston-based integrated healthcare system which operates the two Kingston hospitals, Margaretville Hospital and Mountainside Care Center in Margaretville, and Woodland Pond, a continuing care community in New Paltz, has definitively decided that in the present dynamic healthcare environment, it can no longer go it alone.

David Scarpino, chief financial officer and a veteran financial administrator who has served at several HudsonValley hospitals, was named acting president and chief executive officer.

For the past year, now-former HealthAlliance president and CEO Lundquist has maintained that talks with the state health department regarding funding for its transformation plan to renovate the Mary’s Avenue facility formerly occupied by Benedictine Hospital and to relocate hospital services to that facility, including the emergency room considerably expanded at Kingston Hospital just a few years ago, were going well. Funding was not yet in place, Lundquist told a breakfast meeting of the Ulster County Regional Chamber of Commerce last month. Until it was, he said, details of what was being discussed could not be made public.

Behind the scenes, it had become obvious that the original approximately $46.5 million funding request submitted by HealthAlliance to the state needed to be scaled back. That was not unexpected.

At press time, an inquiry to the state health department about the situation had not been returned.

HealthAlliance has been working with the design-build firm HBE Corporation to assess current infrastructure and determine necessary renovations. Those “conceptuals,” as Lundquist called them at the chamber breakfast, have not been made public.

According to HealthAlliance board president Kevin Ryan, $8 million of state money has been set aside for the Kingston project — available once an acceptable plan is approved by the state.

It’s now been over a year since the application was filed. There’s no time deadline for a state decision.

The lowest amount for even a scaled-back project would be not less than $20 million, Ryan said last Thursday. And that’s likely to be a lowball figure. Lundquist has estimated that the relocation of the emergency room to the Mary’s Avenue facility would alone cost about $12 million.

The rest of the $20 million-plus would have to come from other sources, including HealthAlliance’s own borrowing. Meanwhile, the financially challenged healthcare system also needs to raise money in an uncertain marketplace to fund operating deficits, to build its financial reserves, for cash-flow purposes, and to fund other talks with possible partners seemed a prudent step. “In a reconfigured state we see ourselves as profitable,” said Ryan. An affiliation could range from a loose alliance for specific limited purposes to an outright merger.

A tie-in with other small hospital systems in the region did not seem an adequate solution, said Ryan. An affiliation with a large downstate multi-hospital system raised the spectre that HealthAlliance might be swallowed up as a distant province of a metropolitan owner. To the HealthAlliance board and administration, the most promising choices for affiliation seemed to be either HealthQuest, the successful Poughkeepsie-based three-community-hospital system that in terms of revenues is now almost three times as big as HealthAlliance. Another option is linking up with one of the Albany tertiary hospital systems, St. Peter’s or Albany Medical.

HealthAlliance is talking to all three, said Ryan.

HealthQuest had leadership change earlier this year. Denise George and Donna McGregor are the new interim acting co-CEOs. Rob Dyson, the chairman of the board, is also president of the local Dyson Foundation, which at the end of last year had an investment portfolio of $235 million. Discussions with HealthQuest have been taking place at a board level.