New York University Hospitals Center is seeking additional deals in New York outside of its home borough of Manhattan, building on an agreement last quarter to affiliate with 396-bed Lutheran Medical Center in Brooklyn.
The two providers first announced their intention to combine last November. NYU detailed, in a first-quarter earnings report Tuesday, that it will commit about $150 million over five years to fund the deal.
NYU also said Tuesday that it is considering other deals with acute-care hospitals (PDF) outside of Manhattan, in areas where it has a sufficient number of affiliated physicians to support an alliance.
The Lutheran transaction, which is subject to regulatory approval, will extend NYU's market share in Brooklyn and give it access to Lutheran's network of ambulatory-care centers in four boroughs. Lutheran generated $665.7 million in revenue in the fiscal year ended Dec. 31, 2013.
Brooklyn, the city's most populous borough, has been a focus for NYU, which recently opened an 11,000-square-foot endoscopy and ambulatory surgery center in Midwood as well as diagnostic and treatment facilities in Canarsie, Midwood and Bensonhurst.
In addition, NYU plans to spend $170 million on a medical services building, which will include a freestanding emergency department, on the site of the former Long Island College Hospital, which the State University of New York plans to divest to NYU and private real estate developer Fortis Property Group.
NYU is adding to its portfolio at a time when its financial performance continues to improve. NYU reported an operating margin of 10.4% compared with 9.5% in the prior-year period for the first quarter ended Nov. 30. The improvement came as it resumed full-scale operations following Superstorm Sandy, which battered its main hospital in October 2012 and shut down its emergency department for 18 months.
NYU's operating surplus increased to $64.9 million on $625 million in revenue for the quarter compared with the prior-year period's $53 million operating surplus on $560.4 million in revenue.
The system attributed its revenue growth to higher inpatient and outpatient volume as well as growth in its ambulatory surgery, cardiac catheterization, cardiac electrophysiology, cancer center and musculoskeletal service lines. Discharges increased 8.2% while outpatient visits were up 5.5% year over year.
NYU estimated that it lost about $400 million in revenue because of the storm, but the system has continued to rebuild its facilities thanks to more than $1.1 billion in funds from the Federal Emergency Management Agency. The campus renovations are expected to be completed in 2017 or 2018.
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