Long Island Business News
January 30, 2015
By: Claude Solnik
The North Shore-LIJ Health System has quietly been on a shopping spree, growing as healthcare increasingly becomes the largest industry on the Island.
Calling it a medical monopoly may be too strong, but North Shore-LIJ is on its biggest growth spurt since being founded in 1997.
The state’s largest private employer – 54,000 workers with more than 100 hired each week – in 2011 acquired Lenox Hill Hospital and then opened a facility in a building owned by St. Vincent’s Medical Center in Manhattan. But that was just the start.
Over the past few months, North Shore-LIJ acquired Northern Westchester Hospital and Phelps Memorial Hospital Center in Westchester and signed an alliance with the Yale New Haven Health System in Connecticut. It also inked an alliance with eight-hospital Barnabas Health in New Jersey and Boca Raton Regional Hospital in Florida.
In addition to teaming with Hofstra University to launch a medical school in Hempstead and creating
CareConnect, an insurance company based in East Hills with 20,000 customers, it’s looking at another big Long Island leap.
After years with a small Suffolk presence, North Shore-LIJ is in talks to bring on board Peconic Bay Medical Center in Riverhead and Eastern Long Island Hospital in Greenport, and it’s eyeing expanding into Brooklyn.
“It comes down to being able to survive financially,” said Terry Lynam, a spokesman for North Shore-LIJ. “There’s continuing pressure on hospitals. Healthcare providers are being squeezed on reimbursement.”
The consolidation question
North Shore-LIJ is going through a large growth spurt, but it’s part of a Long Island landscape full of massive medical mergers.
Catholic Health Services of Long Island recently acquired New Island Hospital in Bethpage, which it renamed St. Joseph Hospital, while Stony Brook University Hospital just received state approval to acquire Southampton Hospital, and South Nassau Communities Hospital in Oceanside just formally took over the shuttered Long Beach Medical Center.
But North Shore-LIJ’s growth has been by far the fastest, with officials saying it adds efficiency and strength to smaller institutions. But some worry a system on steroids could mean higher costs, fewer choices and purchases from fewer vendors.
“Consolidation scares me,” said Dr. Charles Rothberg, treasurer of the Westbury-based Medical Society of the State of New York. “Not specifically North Shore. There’s evidence it increases costs and can stifle innovation.”
Others said bigger can mean better, but it also can mean bigger costs for insurers and patients.
“Consolidation is happening,” said Dom Depiano, vice president of provider solutions at Manhattan-based Empire BlueCross BlueShield. “It remains to be seen whether it benefits the consumer.”
Michael Dowling / Photo by Bob Giglione
By the numbers
Healthcare is big business, especially on Long Island. Shital Patel, the Long Island analyst for theNew York State Department of Labor, noted that unlike many other industries, “healthcare has been growing through the recession.”
Healthcare and social assistance in December grew to 213,000 jobs on Long Island, up 3.1 percent from a year ago. Employment in the sector’s hospitals grew 1.2 percent to 47,900 jobs, while ambulatory care grew 3.7 percent to 85,000 jobs.
As healthcare grew, North Shore-LIJ morphed into the 14th largest hospital system nationwide and 11th largest nonprofit based on patient revenue. It’s budgeted to bring in revenues of $7.9 billion in 2015, up from $7.4 billion in 2014.
At a time when many hospitals are struggling, North Shore-LIJ posted $145 million in profit in 2014.
“You need the full gamut of services to succeed in this changing healthcare environment,” Lynam said. “You’d be hard-pressed to find any clinical care we can’t provide.”
The system grew by merger and brick and mortar, last year doubling the size of its cancer center in Lake Success to more than 100,000 square feet and is expanding the Southside Hospital emergency department in Bay Shore.
Is bigger better?
While some see the system as a savior, snapping up embattled hospitals, others say it’s more complicated. North Shore-LIJ is cutting back at Glen Cove Hospital, where inpatient volume is down, and many hospitals joining the system often feel they have no other options.
“New York is such a highly regulated environment,” said South Nassau Communities Hospital CEO Richard Murphy. “You have a lot of hospitals struggling. They see North Shore as an option.”
For independent hospitals, like Winthrop-University Hospital in Mineola, competing with a massive healthcare system is a tremendous undertaking, so establishing efficiencies is a must. The hospital has teamed up with other local healthcare agencies through the Long Island Health Network, an alliance that lets member organizations buy and negotiate insurance rates.
“It isn’t always about size,” Winthrop-University CEO John Collins said. “It’s more about quality and patient safety in everything we do.”
The doctor’s dilemma
While the Long Island population is aging, Long Island’s hospitals face a quandary. That doesn’t necessarily translate into more hospital care.
“The assumption is people will require greater care as they get older,” Lynam said of one change driving deals. “They won’t necessarily need inpatient care.”
Inpatient volume is down as ambulatory care increases, putting financial pressure on everyone. While North Shore-LIJ’s two flagship hospitals operate at more than 90 percent occupancy, its community hospitals are typically between 75 and 80 percent.
“Everybody’s losing inpatient volume,” Lynam said. “There are reductions in lengths of stay. People are better served.”
This means hospitals must compete more than ever to fill beds, further pressing providers to merge. If you can’t beat them, join them; but if you don’t join, you have to battle for patients.
“They have a lot of market presence and they’re not afraid to use it,” Rothberg said. “They can put pressure on practices they don’t own.”
When Rothberg, who is based in Patchogue, looked into joining CareConnect, he was told he’d need to admit patients to North Shore-LIJ hospitals located elsewhere.
“What North Shore is doing, at least in our area, is potentially disruptive to the relationship patients have with other hospitals in the community,” Rothberg said. “If I wanted to be a provider for CareConnect, I have to be able to admit to their hospitals. That’s limiting and would be pressuring our practice.”
North Shore-LIJ is working with competitors through the Delivery System Reform Incentive Payment program, a state initiative focusing on reducing avoidable admissions and unnecessary emergency room visits.
“They’re going to be collaborating partners,” Stony Brook spokeswoman Melissa Weir said. “There’s money involved if goals are met.”
North Shore-LIJ CEO Michael Dowling said affiliations let the system share without absorbing hospitals.
“We’re looking at projects we could jointly do,” Dowling said of the affiliation with Barnabas.
While expansion could mean economic clout, a healthy hospital system could benefit everyone when some hospitals are struggling.
“That gives them greater scale,” Rothberg said. “They’ll be able to throw their muscle around in a greater way. The issue is more whether their competitors will be able to survive.”