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Hospital Consolidation Dance Heats Up In NYC

The health care game of musical chairs is picking up speed in New York City, one of the most competitive markets in the country. The Mount Sinai Medical Center and Continuum Health Partners announced Thursday that their boards of trustees have reached a tentative agreement on a possible merger.

The announcement comes less than nine months after Continuum, which owns Beth Israel Medical Center, St. Luke’s Hospital and Roosevelt Hospital,  all in Manhattan, reached a similar merger agreement with NYU Langone Medical Center.  The NYU-Continuum discussions fell apart  just two weeks later, however, when Mount Sinai suddenly stepped in and made Continuum a counteroffer; NYU suspended merger discussions, suggesting that Continuum had jilted it after eight months of “good faith” negotiations.

Mount Sinai and NYU are two of the largest and most powerful hospitals in New York, and either merger would create a behemoth health care organization, rivaling current giant New York-Presbyterian, which was the result of a 1998 merger between Columbia University and Weill Cornell Medical Centers and has 2,409 beds.  A united Continuum and Mount Sinai would create a system with 3,351 beds. Any merger would need approval by government regulators.

“Our goal as an integrated health care system is to provide exceptional medical care to New Yorkers,” said Dr. Kenneth L. Davis, president and chief executive officer of The Mount Sinai Medical Center in a joint press release with Continuum. “The combination will create more economies of scale, increase efficiencies, and expand access to advanced primary and specialty care throughout this citywide network.

The pace of hospital consolidations has been picking up in the last several years as hospitals prepare for a changing health care payment landscape under the health law. And while mergers can increase efficiency and even improve quality of care, they also often result in increased prices to consumers.

“The bigger you are, the better prices you can demand” from vendors, including medical device makers, drug manufacturers, food retailers and even a laundry service, explains David Sandman, senior vice president of the New York State Health Foundation. It also gives hospitals more negotiating power with insurers, driving up the prices insurers must pay  for their services. Those increased costs are then passed onto consumers, who end up paying higher health insurance premiums.

Sandman, who also was part of the so-called Berger Commission, a panel charged with rightsizing the state’s health care system six years ago, says the New York City hospital market is on the move. A few weeks ago, the State University of New York Downstate Medical Center in Brooklyn recommended the closure of Long Island College Hospital (LICH), which it owns. And just today, the CEO of New York Downtown Hospital resigned following New York-Presbyterian’s proposal to take over the struggling hospital.

“Most people have looked into the future and think it looks different from the past,” says Sandman. “We’re going to have fewer hospitals that serve sicker patients. We’re moving toward keeping people out of the hospital and keep them from being readmitted. Hospitals want to be part of the restructuring of the payment model.”