Phelps looks to Long Island for health care parent

An aerial view of Phelps Memorial Hospital Center in Sleepy Hollow.

Joining a growing procession in American health care, Phelps Memorial Hospital Center in Sleepy Hollow is the latest community hospital in Westchester to look to affiliate with a larger and well-financed metropolitan hospital system.

For North Shore-LIJ Health System, Phelps”™ planning for the emerging new era in health care offers an opportunity to expand its metropolitan market from Long Island into Westchester and the lower Hudson Valley.

The Phelps Memorial board of directors at a special meeting May 12 approved a letter of intent to explore joining the North Shore-LIJ Health System, the state”™s largest private employer and its largest integrated health care provider. Keith F. Safian, president and CEO of Phelps Memorial, said the vote was “enthusiastic and unanimous” following a two-year period in which hospital officials considered various partnership options. North Shore-LIJ “was by far the preferred partner,” he said.

One of four Westchester hospitals in the former Stellaris Health Network, Phelps Memorial follows White Plains Hospital and Lawrence Hospital Center in Bronxville in seeking new parent companies since they and Northern Westchester Hospital in Mount Kisco disbanded Stellaris in 2013. White Plains Hospital officials expect to complete their agreement to join Bronx-based Montefiore Health System this summer. Lawrence Hospital, already an affiliate of New York-Presbyterian Healthcare System, recently received state Health Department approval of its full takeover by New York-Presbyterian Hospital. The deal is expected to close this summer. Northern Westchester Hospital also is expected to announce a new health system affiliation.

“Our board as part of our strategic planning process recognized the need to affiliate with a larger hospital system to be successful in the fast-changing health care environment,” Safian said in Sleepy Hollow.

The board”™s action allows North Shore-LIJ and Phelps Memorial to begin the due diligence process and exclusive negotiations. The hospitals in a joint press release said they aim to close on a final agreement by late summer that would make Phelps the first hospital in Westchester County owned by the Great Neck-based health care system.

“This is a very significant step,” though much remains to be worked out before the hospitals seek regulatory approval of their agreement, Safian said. “Both parties are working to try to do this expeditiously.”

Safian said the 58-year-old hospital will retain its own name and add to it the North Shore-LIJ Health System name. North Shore officials “feel that the Phelps name is a strong asset in Westchester and they want it to be preserved,” he said.

Unlike many hospitals in New York, Safian said, the 238-bed community hospital is in sound financial health, ending $4.7 million in the black in 2013 and maintaining a substantial cash balance. “It helps make Phelps an attractive partner,” he said.

The hospital has about 1,700 employees, making it the seventh-largest employer in the county, Safian said. It has about 470 physicians and treats more than 8,000 inpatients and 325,000 outpatients annually.

Safian said the Memorial Sloan-Kettering Cancer Center on the Phelps campus will continue to operate under multiple-year leases if the North Shore-LIJ deal is completed, though the outpatient center”™s future is uncertain when those leases expire.

One of the largest health systems in the U.S., North Shore-LIJ operates 17 hospitals and more than 400 outpatient physician practices on Long Island and in New York City. Its hospitals and long-term care facilities house more than 6,000 beds, employ more than 10,000 nurses and have affiliations with more than 9,400 physicians. It has about 48,000 people in its workforce.

In addition to its medical facilities, North Shore-LIJ operates The Feinstein Institute for Medical Research and the Hofstra North Shore-LIJ School of Medicine. It directly provides individual and employer health care coverage through its North Shore-LIJ CareConnect Insurance Co. Inc.

Safian said North Shore”™s insurance company, formed within the last two years, offers Phelps “a huge opportunity” to partner with its potential parent company in forming accountable care organizations designed to reduce health care costs while improving the quality of care for patients.

Phelps board chairman Richard Sinni in the announcement said the board”™s primary objective in partnering with an academic medical center is “to continue to provide the same, if not enhanced, quality services that our community has come to depend upon. Joining with this world-class health system will enable us to fulfill this objective, while helping to ensure our stability in the changing health care environment. It is an honor to be selected as North Shore-LIJ”™s first hospital partner in Westchester.”

North Shore-LIJ president and CEO Michael J. Dowling said Phelps Memorial would continue to operate as a full-service hospital for residents of Westchester and parts of Rockland, Putnam, and Dutchess counties and Fairfield County in Connecticut.

“By working in an integrated and collaborative way with clinical and administrative staff at Phelps Memorial, and investing in new initiatives and programs, we look forward to building on the hospital”™s unique operating niche as a physician- and patient-friendly facility that attracts clinical talent and patients from throughout the area,” Dowling said.