Hospital disruption

Mount Kisco Medical Group recently moved into an 84,000-square-foot four-story medical office building costing around $25 million. It’s opposite the Adams Fairacre Farms facility on Route 9W in Ulster. Across the river in Rhinebeck, Northern Duchess Hospital is adding a $47-million 87,000-square-foot medical pavilion scheduled for completion next year. On Ulster Avenue toward Kingston, Orthopedic Associates of Dutchess County a few years ago renovated a former storage facility for office space.

These are not the only nor will they be the last major capital projects by medical groups, specialist groups and urgent-care facilities in the greater Kingston area. The day of Kingston specialists clustering in or close to the community’s two hospitals within a mile of each other is over. Their expansions are unlikely to go as near afield in the future as Pine Street, Hurley Avenue and Washington Avenue.

The past decade has been a disruptive time in the healthcare industry in the Hudson Valley and throughout the nation. We’ve probably seen nothing yet. If anything, structural change in the region is going to move faster than ever before in the next five years as the classical fee-for-service model gives way under federal and state pressure to population management structures.

Where will that leave the public hospitals, the providers of last resort of community care that have dominated the New York State healthcare scene for more than the past century? Who will they affiliate with, and why? How will the transition be managed, and what will happen to the less nimble and more precariously positioned players?

The handwriting is on the wall. Most of the hospitals in the small cities that dot the Hudson Valley landscape, including Kingston-based HealthAlliance of the Hudson Valley (HAHV), will cease to exist as independent entities. Among the hospitals, the big expansionist player appears right now to be Valhalla-based Westchester Medical Center (WMC).

Last year WMC swallowed up the bankrupt St. Francis Hospital in Poughkeepsie, and on May 20 completed what it described as a joint venture with the Bon Secours hospitals in Suffern, Warwick and Port Jervis. WMC described the move as part of a long-term, broad strategic planning effort for WMC to invest in the Hudson Valley.

“The Hudson Valley is our home and our commitment continues to be making sure that our friends and neighbors have access to the best care right here, without having to leave the region,” said WMC board chairman Mark Tuis at the time. “Our vision is to build on Bon Secours’ strong foundation, enhance what is available, and foster integration and coordination, which will ensure the long-term viability of these partners and more.”

In January HAHV announced it had entered into exclusive discussions regarding a merger into WMC. Financial information has been exchanged, but the affiliation has not yet been consummated. Given the Kingston-based entity’s precarious financial condition and its own Medicaid partnership with WMC, a merger seems all but inevitable.

According to new HAHV board chair Tom Collins, the board approved the plans for clinical integration prepared for the state by HAHV vice president of innovation Josh Ratner under the guidance of CEO Dave Scarpino earlier this year. The question of the extent to which WMC will buy into HAHV’s innovative strategic plan, which places emphasis on a local integrated healthcare network centered on primary care, is still under negotiation. Collins called it a “fantastic plan” the board fully supports.

WMC president and CEO Mike Israel referred in the Bon Secours agreement to “our significant profile in New York State’s DSRIP program.” WMC, Bon Secours and HAHV are heavily engaged in the big-bucks state Delivery System Reform Incentive Payment system. The state government is spending $6.42 billion through a Medicaid waiver program from the federal government to buttress its support for hospital care during the transition period. The public hospitals have been receiving funding from the program, which aims to develop an integrated delivery system that will improve coordination and focus on the healthcare problems of the Medicaid recipients in the Hudson Valley.

The DSRIP program (New York’s is one of four nationwide) has promised fundamentally to restructure the local healthcare delivery system in exchange for substantial up-front money. The primary goal is to reduce avoidable hospital use by 25% over five years. In the transition process a large proportion of DSRIP funds will be going to the public hospitals. The healthcare players old and new are struggling to find their opportunities in the new world. In five years they’ll probably need to support themselves.

Those who stand pat will probably find themselves left behind. “The rapid pace of implementation is straining the ability of stakeholders to keep pace,” a Kaiser Health study explained in April, “including consumer advocates who are hard-pressed to track and respond to the DSRIP-driven changes that are fundamentally re-shaping the way that care is delivered to Medicaid beneficiaries.”

Kaiser Health asked how DSRIP will fit into other efforts to transform the Medicaid delivery system. “In particular, DSRIP waivers often share many of the same goals as Medicaid managed care programs — slowing the rate of growth in spending, improving care and offering greater accountability,” the Kaiser paper pointed out. “DSRIP offers providers — rather than health plans — the opportunity to change the way that they provide care, but, even so, the relative roles of DSRIP-funded provider networks and managed-care plans remains unclear in many instances.”

Finally, Kaiser tossed New York an accolade, saying the state had made “the most progress in articulating the relative roles as a result of the work it has done on planning (required in the waiver) to ensure that managed-care companies work more over time with the provider networks established by the DSRIP waiver.”