UTICA — St. Elizabeth Medical Center and Faxton St. Luke’s Healthcare, Inc. (FSLH) have decided not to merge into one large health-care organization. But the two organizations are continuing discussions on how they can implement an integration that would result in a shared governance, economic savings, and maybe even some new medical services for the Mohawk Valley.
In late 2011, the two health-care institutions announced plans to study a merger of the two organizations and a 10-member committee, with representatives from each entity, has been meeting regularly since then to study the merger option, says Richard Ketcham, president and CEO of St. Elizabeth.
During the week of Aug. 20, that committee rendered the decision to end the pursuit of a merger. The sticking point with a merger, which would combine the two health-care organizations into one, was St. Elizabeth’s desire to remain a Catholic institution and FSLH not wanting to become one, Ketcham says. In order to merge, either both organizations needed to be Catholic or both be secular institutions — a move that just wasn’t going to work, he says.
Instead, Ketcham says, the committee recommended that St. Elizabeth and FSLH move forward to study a “significant integration” of the two organizations. That would most likely result in a common CEO, shared governance, and economic integration, he says, although any details are far from ironed out at this point. But the main point is that integration would allow St. Elizabeth to remain a Catholic institution and FSLH to remain a secular organization, but still benefit from cost savings that could come from shared governance.
“We’ve gotten to an idea, a concept, and now we’re going to try to put some meat on the bones,” FSHL President Scott Perra says. Over the next two months, the committee will work to outline what an integrated organization would look like and how it would function in a memorandum of understanding. From there, the boards of both health-care organizations would have to approve the memorandum, as well as the Sisters of St. Francis (the sponsoring order for St. Elizabeth), Bishop Robert J. Cunningham of the Syracuse Roman Catholic Diocese, and the state Health Department before any further steps can be taken.
“It’s not going to be easy, and we don’t know the perfect answer,” Ketcham says. What they do know, Perra says, is that the status quo isn’t working.
The bottom line, both leaders say, is that it has become nearly impossible to operate a hospital as the federal and state governments continue to cut back the amount health-care providers are reimbursed for Medicaid.
“If economics were totally different … maybe these conversations wouldn’t be taking place,” Ketcham says, but the reality is that St. Elizabeth is staring down approximately $97 million in Medicaid cuts over the next decade, while FSLH is facing cuts of about $121 million. Those cuts will begin as early as February, when a 2 percent reimbursement reduction will go into effect unless Congress moves to change it, Ketcham notes. “The financial challenges we face are unrelenting,” he says.
According to its 2010 Form 990 on file at www.guidestar.org, St. Elizabeth reported revenue of $206.5 million and expenses of $205.5 million, while FSLH reported revenue of $280.9 million and expenses of $282.9 million.
On Aug. 29, St. Elizabeth announced it was laying off fewer than 10 people in a move to meet the financial constraints it operates under. “It is certainly a symptom of the challenges we face,” Ketcham says of the layoffs.
That’s why fully studying an integration between the two organizations is so important, he says. Such an integration would not only allow the two hospitals to share a governing body, but also provide benefits such as cost savings by purchasing supplies and equipment.
On top of that, integrating the two health-care organizations could very well lead to expanded medical services and job creation, Ketcham says. As two independent facilities, it would be difficult to have the means to bring a new medical service to the region, he says, but as a combined organization, it’s much more possible and highly likely.
There are a number of medical services not readily offered in the Mohawk Valley — such as pediatric surgery and other higher-level surgery — that force patients to seek care in other areas such as Albany or Syracuse, Perra notes. Integration could result in some of those services being launched here.
Other cost savings could come from eliminating duplication of services, Perra says. “We literally have primary-care offices across the street from each other,” he says. One option to change that could be to combine those two offices and open a new office in an underserved area, he notes.
So far, community response to combining the organizations has been fairly positive, Perra and Ketcham say. Internal reaction shows a bit more apprehension as employees wonder how any changes would affect their jobs. Perra says it’s just too early to tell what kind of employment changes would come with integration. Ketcham says it’s very likely integration would create new jobs and open up new opportunities to current employees.
“If we’re more stable, then we’re a better employer,” he adds. St. Elizabeth employs about 1,975 people, while FSLH employs about 3,100.
At this point, the integration committee will move forward with its efforts to iron out a memorandum. And, St. Elizabeth’s Ketcham is updating Bishop Cunningham in Syracuse on the process.
Headquartered at 1656 Champlin Ave., Utica, FSLH (www.faxtonstlukes.com) provides inpatient and outpatient care at its two Utica campuses, long-term care at St. Luke’s Home, and continuing-care services through Visiting Nurse Association, Senior Network Health, and Mohawk Valley Home Care. FSLH has 24 inpatient beds at its Faxton campus, 346 beds at its St. Luke’s campus, and 202 long-term-care beds. FSLH also operates regional dialysis, cancer, and rehabilitation centers.
Headquartered at 2209 Genesee St., Utica, St. Elizabeth (www.stemc.org) operates a 201-bed acute regional hospital with inpatient and outpatient services. The hospital also serves as the area’s trauma center. St. Elizabeth additionally operates five regional teaching institutions.
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