If Allan Atzrott, president and chief executive officer of St. Luke's Hospital, Newburgh, N.Y., desires a surreptitious glimpse of the chief executive of his closest hospital neighbor, Cornwall (N.Y.) Hospital, he only has to peek in the mirror.
The two respective hospital boards that appointed Atzrott as their president and CEO last November know a little about split personalities themselves. While they are legally separate and distinct, the two boards have been composed of the same 16 people since May 2000. They call themselves "mirror boards."
Atzrott runs between two offices and two secretaries 6.2 miles apart in Orange County, about 50 miles north of New York City. The boards of the two hospitals meet regularly at the same place and time, conducting the business of one hospital and adjourning before immediately commencing the business of the other.
It's all part of a plan to merge as one hospital by January 2002. But in a departure from the usual merger strategy, 184-bed St. Luke's and 125-bed Cornwall are trying to accomplish last things first and first things last. Although the highest tiers of the two administrations are effectively one and the same, the would-be partners have yet to file the necessary applications for regulatory approval with either the state's health department or attorney general. They said they hope to do that sometime in February.
"I thought it was a pretty gutsy, symbolic decision on the part of the board," Atzrott said. "This is courageous governing."
Remarkably, this upside-down scenario is being duplicated about 25 miles to the west where 168-bed Horton Medical Center, Middletown, N.Y., and 176-bed Arden Hill Hospital, Goshen, N.Y.--also about six miles apart--are taking the same giant steps first with the intent to merge. Last November, they, too, established mirror boards, then swiftly appointed Jeffrey Hirsch as president and CEO and Wayne Becker as executive vice president and chief operating officer of each hospital. Before the appointments, Hirsch had headed up Horton while Becker was the interim chief executive at Arden Hill. The hospitals have yet to formally state their intentions to state authorities.
Officials on all four sides deny they are jumping the gun and insist that by getting the big, potentially political stuff out of the way first, they are sending a powerful message about their commitment to merge.
"By creating mirror boards and (appointing one) CEO, they have really assured themselves that this will move forward and be successful," said Chris Panczner, a lawyer with Epstein, Becker & Green, New York, who is representing Cornwall and St. Luke's. "And I think it will help ease the path toward the integration of the two hospitals once the merger is completed."
Hospitals living together before a state-sanctioned marriage can pose a risky situation in New York, where Attorney General Eliot Spitzer historically has taken seriously his authority over hospital mergers. Last summer the only two facilities in Poughkeepsie, N.Y.--Saint Francis Hospital and Vassar Brothers Hospital--were ordered by the U.S. District Court to dissolve their 8-year-old joint operating company as punishment for fixing prices and allocating services in violation of antitrust laws, the result of a lawsuit filed by Spitzer (July 3, 2000, p. 2).
The four Orange County hospitals said they are worry-free because their common denominator is Greater Hudson Valley Health System in Newburgh, a holding company founded in 1998 by three of the four hospitals. Arden Hill joined about a year later. Short of merging assets, all four hospitals have given the parent company broad authority to approve board appointments at the member institutions, negotiate rates with insurers, approve budgets and even approve these mergers, according to the hospitals.
"The board of Greater Hudson Valley has stronger powers than what was set up for Poughkeepsie," said Val Gray, acting president and CEO of Greater Hudson Valley. "We (Greater Hudson Valley) were reviewed by the New York state attorney general and the (Federal Trade Commission) and passed that test."
Parenthetically, the system filed an application in November 2000 with the state to become an active rather than passive parent to Arden Hill. Gray described the action as a legal technicality necessary because Arden Hill was a late arrival to the system.
Without seeing any merger applications, state officials said they could not comment on the specifics. But "antitrust is always a question when hospitals merge," said Paul Larrabee, a spokesman for the state attorney general's office. "Anytime you have previously competing hospitals affiliate and remove the competitive environment, you have a potential antitrust issue."
Both pairs said their mergers are deals conceived out of strength rather than weakness. All four hospitals are operating in the black, officials said. In 1999, Cornwall earned $488,002 on $35.4 million in patient revenue. For the same year at St. Luke's, patient revenue of $70.6 million dipped below $72.8 million in expenses, but when all revenue sources were factored in, the hospital was left with a $1.4 million cushion.
Horton earned $6.9 million on total revenue of $105 million in 1999. Arden Hill earned $178,000 on $56.6 million in operating revenue that same year.
Both pairs said they are not necessarily looking to consolidate clinical operations.