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July 17, 2013

Two NYC hospital giants will merge. What it means for the Big Apple.

Daily Briefing

Officials from Mount Sinai Medical Center and Continuum Health Partners have announced plans to merge the two hospital networks and create the largest hospital system in Manhattan.

The two health systems entered merger talks about one year ago, which halted Continuum's separate merger negotiations with NYU-Langone Medical Center, according to Modern Healthcare.

The boards of Mount Sinai and Continuum already have approved the deal, and Mount Sinai CEO Kenneth Davis told the New York Times that the regional Federal Trade Commission office also approves the merger. The systems now are waiting on approval from the State Health Department and the Department of Housing and Urban Development. They hope to close the deal by fall.

If approved, the Mount Sinai-Continuum merger will bring together seven hospital campuses with more than 3,300 beds across the city. The combined organization will include Beth Israel Medical Center, St. Luke's Hospital, and Roosevelt Hospital, among other facilities.

Davis said that combining Mount Sinai's specialty care and medical school with Continuum's primary care services would create "an integrated system that can take care of the patient for the whole life cycle for all degrees of problems." The agreement will establish the Icahn School of Medicine at Mount Sinai as the only academic affiliation for the combined system.

Mount Sinai board member Richard Ravitch notes that the fee-for-service model "is going to be history shortly" and will be replaced with bundled payments. "To be successful with that, you need a population that’s larger than what any one of these institutions has itself today," Ravitch told the Times.

Expert: By creating a 'must-have' system, costs may increase

Health experts warn that the move could increase health care costs for New York City residents because it will create a system with massive bargaining power with insurance companies.

"The real question is whether, after the merger, the new system is what's called a must-have, a hospital system that every insurance company must have in their network," says Martin S. Gaynor, professor of economics and health policy at Carnegie Mellon University. He adds, "The strong evidence is that these kind[s] of mergers raise prices anywhere from 20%, 30%, 40% up to 50%, if a merger strongly enhances a hospital system's negotiating power."

Davis told the Times that insurance payments were not a consideration in merger talks, noting, "In all our financial models, we have not included an increase in any commercial rates."

"We live in an environment of five excellent hospitals—Memorial Sloan-Kettering and Special Surgery, NYU, New York-Presbyterian, and Mount Sinai," says Davis, adding, "I don't know of five such good facilities within a few minutes of each other any other place on the planet. So we don't worry about any single competitor. We're not motivated by that" (Hartocollis, New York Times, 7/16; Modern Healthcare, 7/17 [subscription required]; Evans, New York Daily News, 7/17).

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  1. Current ArticleTwo NYC hospital giants will merge. What it means for the Big Apple.

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