These are gut-wrenching times for Hudson Valley local hospitals. The urgent need for consolidation of cornerstone economic institutions assembled over a century or more on a community foundation is no easy concept for those in charge of their destinies to cope with, as those in charge of their destinies are well aware. But cope they must. In the next few years, virtually all the hospitals in the region are expected to align with other hospitals and other healthcare entities, such as insurers, doctors’ groups and outpatient facilities.
The big story in the world of Hudson Valley healthcare this month was the sale for $27 million plus other considerations and assurances of the Poughkeepsie-based St. Francis Hospitals and Health Centers, estimated to be $50 million in debt, to Westchester Medical Center. After a series of rapid-fire developments that favored Westchester Medical, Health Quest, the other competitor, withdrew. In deciding to withdraw from the bidding process, Health Quest’s board blamed “intervention by state and federal regulatory authorities.”
It was a dramatic and abrupt conclusion to a bruising federal bankruptcy proceeding whose outcome had seemed by no means clear. Like poker players changing their strategy after a colleague departs from the table, the other hospitals in the Hudson Valley must now be assessing what St. Francis’ fate might mean for their own.
“As national healthcare reform takes hold and new models of delivery become mainstream — accountable care organizations, medical health homes, value-based purchasing — the strain on hospitals’ budgets will intensify,” predicted Kevin Dahill of the Suburban Hospital Alliance, which maintains a Hudson Valley office in Newburgh. “The state and federal reforms emphasize a more coordinated and integrated approach to care that will improve patient safety, enhance quality care, and hopefully, achieve cost efficiencies. Achieving these goals comes with a cost — one that hospitals understand is necessary to transforming our current healthcare delivery system. Nonetheless, these reforms bring with them their own budgetary challenges for hospitals.”
How do hospitals decide on whom to partner with, if partner they must? There’s no magical formula for this untraveled territory. How this all-important decision is made can sound distressingly vague. “Sometimes it comes down to really good judgment, a good feeling,” said Dahill. “There has to be a vision for going forward.”
Several weeks ago, White Plains Hospital and Montefiore Health System announced a new healthcare partnership. On February 5, White Plains Hospital’s board had approved the agreement with Montefiore, ten miles to the south. Montefiore has been expanding quickly. This past fall, it opened Montefiore New Rochelle, Montefiore Mount Vernon and Schaffer Extended Care Center at the former Sound Shore Health Systems hospitals and nursing home in New Rochelle and Mount Vernon. It will take several months to consummate the relationship between the two health systems.
White Plains had been exploring various forms of partnership with larger hospital systems for some time. Montefiore’s stated intention has been to form an integrated system of care among a regional network of hospitals and community physicians.
Deep discussions
Meanwhile, HealthAlliance of the Hudson Valley in Kingston, which runs the former Kingston and Benedictine Hospitals, and whose board has already announced that it will seek alignment with another healthcare system, continues dialogue with a variety of institutions, including Montefiore. HealthAlliance chief strategy officer Josh Ratner has been on the road a lot, in “deep and active discussion” with various prospective regional partners.
“Everyone’s been talking with everybody,” explained Ratner recently. “Each partner has really demonstrated that no matter how big you are you need to find partners to manage your patients’ health. Regardless of where you are in the continuum of care, you need a partner. No one offers everything.”
Less than a majority of a recent $6.5 state HEAL (Health Care Efficiency and Affordability Law) grant to HealthAlliance will go for “affiliation due-diligence fees,” the hospital system’s website indicated. How long will the affiliation process take? “It is dependent on each of the potential affiliates as well as state and regulatory agencies,” the website explained, “though we expect it to take no less than two years.”
Fast changing universe
Cecilia Morris, the Poughkeepsie bankruptcy judge had a lot of leeway in deciding who ended up with St. Francis. As the headline of a Poughkeepsie Journal story by Craig Wolf (who’s done excellent reporting on the subject), “Hospital Bid Not Just about Highest Offer,” indicated, community issues such as monopoly position and service configuration could have been important in influencing the judge’s decision.
The American healthcare landscape is changing at an unprecedented speed. Besieged by a rapidly changing universe where most of the other players are putting the squeeze on their once-dominant position, hospitals find themselves in an uncomfortable position, having to subject how they do business to unprecedented degrees of self-examination. And the answer for many of them is that they can no longer go it alone. In an atmosphere of massive healthcare integration, the leaders of many systems have concluded that their advocacy of continued independence has become incompatible with their fiduciary responsibility.
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