NP PRESENTATION 2

How New York’s Leading Health Systems

Differ on Growth Strategy

Richard D. Fenton, MBASr.Vice President, Executive Search

Tal Healthcare

New York’s leading health care systems have split into two opposing camps on the question of preparing for a long-term future in the industry.

Northwell, Montefiore, Mt. Sinai

One camp, consisting of Northwell, Montefiore and Mt. Sinai, believes in aggressive up-sizing.

Expansion through mergers with other systems and acquisition of satellite campuses• achieving administrative efficiency, • increasing bargaining power, • diversifying revenue and• gaining the ability to act as their own insurers.

New York-Presbyterian, NYU Langone

The other camp, comprised of New York-Presbyterian and NYU Langone, is more cautious – wary of affiliating with other brick-and-mortar hospitals in an era of declining utilization rates.

• NYU has shied away from affiliations outside the city• New York-Presbyterian isn’t affiliating at all. They have instead

made strategic investments and focused on ambulatory care and their traditional role as teaching hospitals.

• They have steered well clear of the insurance business.

House Calls Returning

Providers in New York and across the nation are bringing back the house call. But it’s not for when a patient is ill. These 21st century house calls are for before an exam and after a procedure.

“Your ability to take care of patients when they are not sitting across from you in the examination room becomes key,” said Montefiore Medical Center chief medical officer Dr. Andrew Racine. “We have visiting nurses out there all the time.”

Northwell (formerly North-Shore LIJ)

• Has been the most aggressively expansionist of all the systems. • Announced partnerships with The Cleveland Clinic, • Started its own insurance company (called CareConnect), • Offered help to other health systems converting to the ICD-10

disease classification system,• Took over Lenox Hill, • Turned the former St. Vincent’s into the city’s first freestanding

emergency department, • Announced a plan to open 50 ambulatory clinics across the state

and • Finalized an agreement with Phelps Memorial and Northern

Westchester Hospital

Mt. Sinai Health System

• The Brooklyn Hospital Center, which earlier this summer announced it would be affiliated with Mount Sinai.

• Mount Sinai is also affiliating with Valley Hospital in New Jersey, which ended its relationship with Presbyterian at the end of 2014.

Mt. Sinai Health SystemKenneth Davis, Mount Sinai’s C.E.O. recently explained his thinking about the new health care landscape in a controversial op-ed for the Wall Street Journal.• “To mitigate that risk, hospitals need to broaden the

populations they serve, and offer services that cover a larger geographical area.”

• “Without that wide range, there is too great a risk that costs beyond hospital walls during post-acute care, patients who are high utilizers of medical services, will unbalance the scales. Hospitals need a large pool to survive any increased medical needs and costly care.”

Mt. Sinai Health SystemMt. Sinai is beginning to blur the lines between provider and insurer. • In October: announced the establishment of a new Medicare

Advantage plan for Manhattan residents co-sponsored with Healthfirst.

• Beginning 2015, Empire BlueCross BlueShield, the largest health insurers in New York, and the Mount Sinai Health System established an accountable care arrangement which will create individualized health plans to guide Empire’s 48,000 commercial and Medicare lives attributable to Mount Sinai

Montefiore Medical Center

• Partnering with White Plains hospital in Westchester and Nyack Hospital in Rockland County.

• Bought Sound Shore in New Rochelle and Mount Vernon Hospital in 2013.

• Offering its own insurance product. The Montefiore Insurance Co., launched in January 2015, will offer coverage to small businesses.


The advantage Montefiore has over its competitors is that it has a long and successful track record of providing care to low-income patients, having dealt with a payer mix dominated by the federal government since the creation of Medicare and Medicaid in the mid-60’s.• one of 32 health systems across the country to implement

Pioneer Accountable Care Organization as part of the Affordable Care Act.

• one of a handful of few success stories, achieving costs savings of 7 percent during the first two years.

• ACOs set payment limits and force hospitals to provide care at a set cost. They function well with large patient volume.


Their gamble is that their success at managing large populations in the Bronx can be replicated in the Hudson Valley where the physicians are independent contractors used to a certain freedom to practice as they see fit, not direct employees of Montefiore.

New York-PresbyterianNew York-Presbyterian’s recent approach exemplifies the alternative, consolidationist attitude that has set it apart in recent years from North Shore-LIJ, Montefiore and Mount Sinai.• Retrenching, allowing community hospitals to affiliate with other systems

focusing greater attention on core assets such as New York Downtown Hospital in Manhattan or New York Methodist in Brooklyn.

• That has in turn allowed the people who run New York-Presbyterian to maintain greater control of all the elements of their system. They aren’t interested in affiliations; they want asset-based mergers.

• New York-Presbyterian took over Lawrence Hospital Center in Bronxville in July. And in November, Hudson Valley Hospital Center in Cortlandt

• Divested from its insurance companies SelectHealth in 2012, Community Health Plan, a Medicaid managed care plan, in 2009.

New York-PresbyterianThat gave New York-Presbyterian less of an incentive to branch out. While it still needs volume and administrative efficiencies, it doesn’t need a million customers like Montefiore does, because Presbyterian’s payer mix is so much wealthier, or like LIJ does, because Presbyterian has no insurance company to peddle.

New York-Presbyterian embarked on a $2 billion capital campaign, supported by a $100 million gift from businessman-activist David Koch, to build an ambulatory care center on York Avenue less than two miles north of NYU Langone, and about two miles south of Mount Sinai.

NYU LangoneNYU Langone has taken a similar tack.“Hospitals are in no way shape or form the primary strategy,” Brotman said. “It’s not that you can do without any hospitals but we are extremely selective in thinking about relationships with hospitals.”Executives at Langone don’t believe that adding more brick-and-mortar hospitals to the portfolio will pay off in the long run, they said.“The need for hospital beds is dropping rapidly and being in a state where it’s not so easy to close or modify a hospital, and the notion of acquiring X hospitals and assuming that you are going to be able to take out 50 percent of the physical assets and repurpose them for something else, we think is a very expensive, highly risky proposition,” No interest in operating as an insurer, which means they have one less incentive to affiliate across the state.

NYU Langone“It’s not our core competence. … What we are interested in is moving the in-patient setting to the ambulatory setting and we’ve moved rapidly in that direction.”

• Between 52 percent and 57 percent of NYU Langone’s revenue is now in ambulatory care.

• Only one-third of NYU’s 42,000 surgeries are classified as in-patient.• Focus on out-patient ambulatory care centers, and NYU has opened nearly

three dozen during the past few years.• That explains why NYU Langone was keen to affiliate with Lutheran

Hospital, which has a robust out-patient network, including 28 school-based health centers and relationships with several federally qualified health centers.

NYU LangonePart of the hospital systems’ decision-making is guided by the simple question of how much faith they have in the ability of affiliated doctors and institutions to act efficiently as brokers.

• NYU Langone, for example, is heavily focused on affiliating with physician practices and medical groups, and counts on physicians to manage the primary care and refer patients back to them for anything major. That gives them the advantage of a referral service without the financial commitment of a community hospital.

• We think it’s the doctor, not the hospital. So if a doctor in Queens, one of our doctors, says to a patient, ‘You need a cardiac cath, I want you to go to NYU,’ or, ‘You have pneumonia, I want you to go to New York Hospital Queens right down the road,’ we think that patient is going to agree.


Northwell executives see it a bit differently.In a payment model that rewards population health management, they say, vertical integration is crucial.

“The big issue is care coordination,” “The same systems mean doctors have ways to communicate with each other, share lab results, imaging.”For the vast majority of patients it really doesn’t matter whether they are treated at an LIJ facility. But for a select few—the chronically ill, co-morbid cases that are the most expensive to treat—it matters a great deal, and if LIJ isn’t ensuring that these costliest 5 percent of patients are appropriately treated, their business will suffer.


“Many of these conditions require a high degree of care coordination,” “There is a level of care management and care coordination that is required to have outcomes that yield a favorable result.”

The larger health systems can bring the capital, the staff and the expertise to develop and run programs specifically aimed at managing costly chronic diseases such as diabetes, or hypertension.“The strategy we are talking about is very long in its gestation,” Racine said. “You can’t really do care management overnight. You have to spend a long time developing architecture. You make mistakes along the way.”

Necessary Characteristics for

Health System SuccessRichard D. Fenton, MBA

Sr.Vice President, Executive SearchTal Healthcare

Necessary Characteristics for Health System Success

• Market power is key• Focusing on the total consumer experience is critical • Constantly improving operations is critical • Owning practices (a dominant physician network) is critical • The jury is out on owning an insurance plan • Bundled payment efforts are growing • A constant focus on what drives cash flow is very important • Developing and recruiting great people is critical


We also believe healthcare systems and their leadership should define clearly their core overriding goals. Ideally, the system can move beyond the first goal and focus on Nos. 2 through 4.• Financial survival • Greatness in certain specific areas • Dominant in a market • Great international brand. This often starts with first

meeting goals 1, 2 and 3.


An article breaks down strategy and certain core observations as follows:• Market Power Wins. • Know Your Business; Double Down on Cash Cows; Test New Areas. • No Single Strategy; No Static Solution. • There Will Still be a lot of Fee-For-Service. Bundled Payments are a Type of

Fee-For-Service. • Owning an Insurance Product Requires a Great Deal of Market Position

and Risk Tolerance. • Most Systems Must Own Practices. • Consumer-Driven Healthcare. • Talent Management.

AAMC Increases Estimate of Physician

Shortage: What to KnowRichard D. Fenton, MBA

Sr. Vice President, Executive SearchTal Healthcare

Physician Shortage: What to Know

• The U.S. faces a shortage of physicians ranging between 61,700 and 94,700 over the next decade, according to a new report from the American Association of Medical Colleges.

• This report updates a 2015 projection that estimated the nation would need between 46,100 and 90,400 physicians by 2025, though it is still below a 2010 estimate that projected a shortage of 130,600 physicians by 2025.


Perhaps most striking is the addition of an analysis on the needs of underserved Americans that shows how many more physicians the country would need if these patients were able to fully utilize healthcare. These numbers are not included in the overall projections because they only provide estimates for 2014 levels of care."These updated projections confirm that the physician shortage is real, it's significant, and the nation must begin to train more doctors now if patients are going to be able to receive the care they need when they need it in the near future."


• The overall physician shortage of 61,700 to 94,700 physicians by 2025, no matter the scenario, is in line with 2015 estimates, according to the AAMC.

• Primary care shortages are expected to range 14,900 to 35,600 by 2025.

• Non-primary care specialties are expected to need between 37,400 and 60,300 additional providers by 2025.


• Surgical specialists comprise the only category of physicians that is expected to decline by 2025.

• In all other categories, the number of physicians is growing, but demand is outpacing supply.

• Surgical specialties that will be affected include ophthalmology and urology. AAMC estimates the shortfall for these physicians to range 25,200 to 33,200 by 2025.


From 2014 to 2025, the U.S. population is expected to increase by about 8.6 percentthe population aged 65 and over is expected to grow 41 percent in that time. It follows that the demand for healthcare services that seniors need will be higher than the demand for pediatric services.• Due to the large numbers of aging physicians, retirement

decisions are expected to have the single greatest impact on supply.

• More than one-third of physicians will be 65 or older in the next decade, according to AAMC.

• Increasing demand can be traced to population growth and aging.


The effects of the Affordable Care Act on physician demand are small:

The AAMC expects this will only increase demand by about 10,000 to 11,000 physicians, or 1.2 percent.


If barriers to care were removed for currently underserved populations and these populations had similar patterns of use to the rest of the population, the AAMC found the nation would have needed as many as 96,200 additional physicians in 2014.

Comparing Cost of Care:

MD vs. NPRichard D. Fenton, MBA

Sr. Vice President, Executive SearchTal Healthcare

Comparing Cost of Care: MD vs. NP

Increasing the use of nurse practitioners to meet the growing demand for primary care services for Medicare beneficiaries may actually• reduce costs for the government program • while still providing beneficiaries with high-

quality care, payments to PCPs and NPs


PCP NP Difference

Inpatient services $22,898 $20,380 -11 percent

Part B services $2,955 $2,433 -18 percent

Outpatient evaluation and management $705 $498 -29 percent

Adjusted work relative value $1,911 $1,629 -15 percent

Evaluation and management relative value unit

$713 $585 -18 percent


• NPs may be providing excellent, efficient care at a lower price, as the average number of Medicare beneficiaries seen by each PCP was double that seen by each NP (367 beneficiaries compared with 183, respectively).

• While it is possible PCPs work more quickly, it is likely that NPs spend more time with each patient to provide more in-depth care, which in turn enhances quality, efficiency and better outcomes.

• On the other hand, shorter, more rushed visits may result in more diagnostic tests ordered, more medications prescribed and more referral requests.

New York Metro Market Work Place Environments

• Large, Academic Medical Systems • Faculty Practice Organizations• Community Medical Centers• Federally Qualified Health Centers• Neighborhood Health Centers• Private Practices• Other…

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NP PRESENTATION 2