The corporate merger taking shape this winter between Westchester Medical Center (WMC) in Valhalla and Sound Shore Health System (SSHS) in New Rochelle represents “the tip of the iceberg” in New York hospital consolidations on the nation’s new health care landscape, a regional hospital executive predicted.
Westchester Medical Center President and CEO Michael Israel said hospital officials should know in about 45 days what structure will best work for the two hospitals, which recently signed a memorandum of understanding to conduct exclusive talks to establish a formal corporate relationship. The hospitals then will apply for a certificate of need from the state Health Department for the consolidation.
The private, nonprofit Sound Shore Health System operates the 252-bed Sound Shore Medical Center and the Schaffer Extended Care Center in New Rochelle, the 196-bed Mount Vernon Hospital and the Hopfer School of Nursing at the downtown Mount Vernon hospital. Its operating budget is about $325 million this year, said Sound Shore Health System President and CEO John Spicer.
Spicer said SSHS was “close to break even” financially in 2011 and will end 2012 with a $3 million to $4 million deficit. The hospital system last spring agreed to pay about $2.3 million to settle the state attorney general’s claims of Medicaid program overbillings at both the New Rochelle and Mount Vernon hospitals, about 60 percent of which has been repaid, said Spicer.
A public benefit corporation, the 643-bed Westchester Medical Center operated on an $871 million budget this year. The advanced care center had close to $5 million in profits in 2011, and expects 2012 to be its sixth consecutive year of profitability, Israel said. WMC this fall agreed to a $7 million payment to settle claims of Medicaid overbillings for outpatient mental health services brought by the U.S. attorney’s office in Manhattan.
Both the SSHS hospitals, with about 500 physicians, and WMC, with about 900 physicians, are teaching affiliates of New York Medical College, which shares a Grasslands campus with WMC. Spicer and Israel said that is one of several common elements and shared services between the institutions.
“It keeps that continuity in place” for physicians, Spicer said of the shared affiliation with New York Medical College. “We do a lot of stuff together already,” including neonatal and cardiac catheter services. Both WMC and SSHS use the same emergency room physician group, he noted.
“Our mission of treating everyone who comes in regardless of ability to pay works well” with the Sound Shore system, which has the same policy, Israel said.
Israel in a joint announcement of the merger talks said the Sound Shore facilities “are critical links to quality care for everyone in southern Westchester, and we are committed to furthering the programs and services that the people of that area have come to expect and rely on.”
Spicer said finding an academic medical center partner has been part of Sound Shore’s strategic planning for about 18 months. Though partnerships with other institutions were explored, “Eventually all roads led to Westchester (Medical Center) for a number of reasons,” he said. “We think it’s very important for this community that it’s a Westchester-based hospital.”
“What you don’t have here is two community hospitals coming together,” said Israel. “This is not a marriage of like entities. This is a very complementary relationship.”
The hospital officials in their joint statement said WMC and SSHS will combine their financial resources to “provide a smooth transition toward operational and fiscal stability, consolidated services and necessary infrastructure needs.” Merged operations later will generate the capital funding to support the combined organizations, they said.
WMC and SSHH are members of the Northern Metropolitan Hospital Association (NorMet). NorMet President and CEO Kevin W. Dahill said the announcement of merger talks was “not a surprise in terms of Sound Shore desiring to get a partnership with someone else.”
“I feel it to be probably the tip of the iceberg,” Dahill said. “I think there’s going to be future consolidations over the course of the next year or two.” With federal health care legislation aimed at lowering costs and improving quality and coordination of care, “Everything that health care is all about points us in that direction.”
Dahill also heads the Nassau-Suffolk Hospital Council on Long Island, where Stony Brook University Hospital, a state facility, is preparing to take over the 168-bed Southampton Hospital. “That’s another example of a large academic center hooking up with another hospital,” he said.
“The day of the standalone hospital, the day of the standalone physician practice, is coming to an end,” said Israel. “They’re becoming more and more scarce.
“The system is changing. What you see going on here is a natural evolution regarding two great organizations.”