Breaking Into Brooklyn

NY Daily News
February 4, 2015
Healthy Merge

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Crain’s New York Business
February 3, 2015
Maimonides, North Shore-LIJ in Talks
By Barbara Benson

North Shore-LIJ Health System's Michael Dowling, president and chief executive, has talked for months about setting up shop in Brooklyn, after entering the New York City market a few years back through the acquisition of Lenox Hill Hospital in Manhattan.

"We're having discussions in Brooklyn," Mr. Dowling told Crain’s in the fall. "I can't tell you [with] who yet, but we will have a substantial presence in Brooklyn. But some of the hospitals in Brooklyn are in very difficult financial straits [and] should have merged years ago."

Tuesday morning, Mr. Dowling officially revealed the object of his affections: Maimonides Medical Center, with which North Shore-LIJ signed a memorandum of understanding to enter into exclusive negotiations to explore a partnership.

Maimonides is, for the most part, an oasis of stability in Brooklyn's troubled health care delivery system. With a minimum amount of red ink, the institution is a tertiary-care teaching facility known for its cancer and cardiac care, its children's hospital and the state's largest obstetrics program. Maimonides turned a $3.1 million loss in the first half of 2014 into a $1.1 million gain by the third quarter. Year-end financials aren't yet available.

But like its Brooklyn competitors, Maimonides struggles with low reimbursement and a wave of state and federal reforms.

In October 2013, Pamela Brier , Maimonides' president and chief executive, joined with her counterparts at Brooklyn Hospital Center and Lutheran Medical Center on an op-ed on the plight of Brooklyn hospitals. 

"As CEOs of three of Brooklyn's largest hospital networks, we've seen four hospitals shut or face imminent closure. Several others are on the brink of bankruptcy," they wrote. "With Brooklyn's disproportionately high number of Medicare and Medicaid patients, reduced federal reimbursement rates have taken a severe toll."

Lutheran, which had average operating losses of $16.3 million from 2012 through 2013, responded to the turmoil by joining NYU Langone Medical Center, a deal that is in the final stages of regulatory approval. Lutheran will be renamed NYU Lutheran Medical Center.

Now it is Maimonides' turn to decide whether, like Lutheran, remaining an independent hospital is a luxury it can no longer afford.

"This preliminary announcement is the result of a focused, 12-month strategic planning process by the Maimonides board of trustees and our executive team to identify a regional partner whose vision and commitment to excellence are aligned with ours," Ms. Brier said in a statement. "We look forward to our continuing discussions with North Shore-LIJ and both agree that benefit to the communities we serve will be our highest priority."

In the announcement, Maimonides said it will continue to operate as a full-service, tertiary hospital while becoming part of a growing network that North Shore-LIJ will establish in Brooklyn.

North Shore-LIJ and Maimonides joined forces in March to bid for Long Island College Hospital in conjunction with real estate developer Don Peebles. That bid was unsuccessful. But before Maimonides gravitated closer to North Shore-LIJ as a potential partner among many suitors, its board considered other institutions.

In November 2013, Maimonides and Staten Island's Richmond University Medical Center said they were in the early due-diligence stages of establishing a partnership. Those talks didn't go far, except for an agreement for Maimonides to operate RUMC's cardiac catheterization lab.

In January 2013, state Department of Health officials asked Maimonides to evaluate a turnaround plan for Brookdale Hospital. Maimonides hired a consultant to examine possible ways to shore up ailing Brookdale, including a new partnership between the two Brooklyn institutions.

"No hospital would ever consider a partnership with another hospital—the type of which has yet to be determined—without due diligence," Ms. Brier said at the time. Her concern was what would happen if Maimonides entered into a new agreement to partner with Brookdale. For a deal to be feasible, there would have to be some advantage to Maimonides, said Ms. Brier—especially as Maimonides has managed to maintain a positive balance sheet and add to its tertiary services over the years, despite serving a large Medicaid population.

Brookdale and Maimonides have long since dropped any formal negotiations. But the same forces that led Maimonides to announce a deal with a much larger partner have chipped away at Brookdale's ability to stay afloat as an independent hospital. No one believes Brookdale can remain independent.
With the blessing of Gov. Andrew Cuomo, state health care officials have crafted a plan to preserve Brookdale's key role in serving as a safety-net hospital for Brooklyn's underserved patients.

The executive budget released last month includes $700 million in capital funding for east and central Brooklyn, pegged for stabilizing "the health care delivery system in these communities, reduce unnecessary inpatient beds, while improving the overall quality of inpatient and outpatient services and increasing access to community-based primary and preventive health care services.”

The Cuomo administration sees the $700 million as a down payment for building a new $1 billion hospital in central Brooklyn, an idea that has been floated around for more than a year.

In January 2014, then-state Budget Director Robert Megna told Crain’s  , "There's some feeling that Brooklyn may need an additional full-service hospital because the condition, the physical plant, of some of the hospitals is so old and deteriorated. That's under discussion."

The proposal to build a new hospital in East Flatbush would be a way to replace the crumbling campuses of three existing hospitals: Downstate University Medical Center, Brookdale and Kingsbrook Jewish Medical Center.

The $700 million is a bit of a first stab at solidifying discussions about the hospital. Building a new facility—and investing in primary, urgent and ambulatory care centers in the borough—would require additional investment from either private equity or a stable health care system. A request for proposals could gauge interest in such a project.

And then there is the matter of which hospital would close. University Hospital's owner has taken a financial hit over Long Island College Hospital, so it might make sense to eliminate University to preserve Downstate's medical school. There is talk that Brookdale would close once the new hospital was built, and Brookdale's hospital license would transfer to the new facility. The state, in theory, would issue a request for proposals to attract a large health care system to step in as an active parent, streamlining operations for the new configuration of Brooklyn hospitals.

In other words, consolidation looms large in the future of health care in Brooklyn.

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Modern Healthcare
February 3, 2015
North Shore-LIJ Attempting Major Move into Brooklyn with Maimonides Deal
By Melanie Evans  

North Shore-LIJ Health System has entered exclusive talks to acquire Maimonides Medical Center, a deal which would significantly expand North Shore's market in Brooklyn.

A deal for Maimonides Medical Center would continue the Great Neck, N.Y.-based system's recent aggressive growth strategy, which includes its expansion into health insurance and hospital acquisitions.

“We've been looking for opportunity to expand,” said Terry Lynam, spokesman for North Shore-LIJ, which operates two pediatric clinics in the New York City borough with its primary market in Long Island, Staten Island and Queens. The system acquired a Manhattan hospital in 2010. The 679-bed Maimonides would become the Brooklyn hub for North Shore-LIJ, he said. “We recognize the borough as a major opportunity, Lynam said.

Negotiations are expected to last two or three months, he said.

The prospective partners have worked together previously. Maimonides Medical Center is a provider within North Shore-LIJ's insurance network. The pair also jointly bid unsuccessfully to take control of Brooklyn's Long Island College Hospital.

Maimonides Medical Center did not seek a partner because of any financial distress but because it lacked sufficient borrowing capacity to make capital investments, said Maimonides spokeswoman Eileen Tynion. “We determined that we wanted and needed to expand some of our services,” she said. The system's emergency and obstetrics departments see continued high demand. “There is a limit to how much we can expand because the margins are slim,” she said.

North Shore-LIJ ended the first nine months of last year with net income of $109.7 million on revenue of $5.4 billion, according to the system's financial statements. Maimonides Medical Center reported net income of $1.1 million on $740 million in revenue for the same period, Tynion said. Net income includes income from operations and income from other sources, such as investments.

The deal comes as Brooklyn's health system grapples with consolidation and upheaval, reports Crain's New York Business.

Follow Melanie Evans on Twitter: @MHmevans

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Brooklyn Eagle
February 3, 2015
Maimonides and North Shore-LIJ Hospitals Explore Partnership

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Capital NY
February 3, 2015
North Shore-LIJ Exploring Partnership with Maimonides
By Dan Goldberg

North Shore-L.I.J. and Maimonides Medical Center have entered negotiations to explore a partnership.

This is often the first step toward a more official affiliation agreement, and comes after months of not-so-secret talks between the two hospitals.

The two joined forces in 2014 to bid on the Long Island College Hospital property but lost that deal when their real-estate partner Don Peebles and SUNY could not reach an agreement.

L.I.J. is expanding its presence across the metro area, moving into Manhattan and Westchester in recent years. Maimonides joins several other Brooklyn hospitals that have recently latched onto bigger health systems. New York Methodist is part of N.Y. Presbyterian's system. N.Y.U. Langone is now an active parent of Lutheran Medical Center. The Brooklyn Hospital Center is linked with Mount Sinai.

The consolidation is the result of several factors, including incentives put in place by the Affordable Care Act and the state's Medicaid waiver program, which place greater emphasis on managing populations rather than treating individuals.

The federal government announced last week that Medicare will also try to move toward a more value-based payment model, and commercial insurers are looking to follow.

That means providers will more often be paid set amounts for services or "episodes of care," as opposed to being paid for every additional service they provide.

For those payment models to work, health systems need lots of patients—for the same reason as insurance companies—so that a few expensive outliers do not impact their bottom lines.

At the same time, the shift forces smaller hospitals that don't have the resources to set up care-management programs to align themselves with stronger partners.

“North Shore-L.I.J. has been exploring opportunities in Brooklyn for several years, as we continue to expand beyond our traditional service areas on Long Island, Queens, Staten Island and Manhattan,” Michael Dowling, president and C.E.O. of North Shore-L.I.J., said in a statement.

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Long Island Business News
February 3, 2015
North Shore-LIJ Inks Deal with Brooklyn Hospital
By: Claude Solnik 

North Shore-LIJ is  Brooklyn bound – or it will be if a deal currently in development winds up panning out.

The North Shore-LIJ Health System has reached an agreement with Maimonides Medical Center in which the two will perform due diligence as a first step for the Brooklyn hospital to possibly join the system.

North Shore-LIJ’s board on Jan.21 voted in favor of pursuing the possible partnership, and Maimonides voted to proceed with the due diligence process Monday night. Both boards would have to approve the hospital’s entry into the system.

The due diligence process will include examining financial information and capital needs, as well as ongoing meetings between the two organizations. Maimonides operates a 711-bed hospital complete with more than 70 subspecialty programs in Borough Park.

“North Shore-LIJ has been exploring opportunities in Brooklyn for several years,” North Shore-LIJ CEO Michael Dowling said in a written statement. “We believe Maimonides would be an ideal partner.”

North Shore-LIJ already operates Forest Hills Hospital in Queens, Staten Island University Hospital in Staten Island and Lenox Hill Hospital in Manhattan. It operates two pediatric practices in Brooklyn.

Maimonides CEO Pamela Brier said the hospital reached this point after a “12-month strategic planning process” designed “to identify a regional partner whose vision and commitment to excellence are aligned with ours.”

Healthcare providers in Brooklyn and in general have been under pressure to join larger systems. North Shore-LIJ, Maimonides and the Peebles Group earlier submitted a proposal to take over Long Island College Hospital in Brooklyn, which instead joined the New York University-Langone Medical Center, which is building a freestanding emergency department.

While LICH’s inpatient beds are being closed under the terms of the NYU agreement, Maimonides, the biggest provider of healthcare in Brooklyn, would continue to operate as a hospital. The largest private employer in the state with 54,000 employees, North Shore-LIJ operates 19 hospitals and more than 400 outpatient physician practices.

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Becker’s Hospital Review
February 3, 2015
North Shore-LIJ, Maimonides Medical Center Exploring Partnership

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