St. Joseph's Hospital Health Center, Syracuse, N.Y., is once again considering joining a larger not-for-profit health system.
“Our board continues to believe that the future environment is about scale and environment and that this opportunity will ensure our future,” Kathryn Ruscitto, the hospital's president, said during a Wednesday conference call.
The upstate New York hospital said in a recent disclosure that it has signed a non-binding term sheet with “ a large nonprofit healthcare system,” related to a proposed agreement to join that system, which it left unnamed. The two parties are completing due diligence, according to the filing.
In January, St. Joseph's entered into an affiliation agreement with Livonia, Mich.-based Trinity Health, then known as CHE Trinity Health. Since then, the two organizations have shared best practices, and St. Joseph's has joined HealthTrust, a group purchasing organization of which Trinity is a member.
CHE Trinity was expected to purchase St. Joseph's in 2013, but that deal fell through after three months of due diligence. Judy Persichilli, then president and CEO of CHE Trinity, told employees that it was “not the right time for us to come together.”
St. Joseph's needs to find a larger system to partner with if it wants to absorb the risk of an accountable care organization, said George Chapman, owner and principal of Syracuse, N.Y.-based GW Chapman Consulting, a local healthcare advisory firm.
The hospital may become the first in the city to take advantage of a partnership. Hospitals in Syracuse have remained independent while most systems in nearby Rochester and Utica have merged or created alliances, Chapman said.
“Syracuse hospitals have shown little sign of cooperation,” Chapman said. “We're surrounded by cooperation.”
A successful deal with a larger health system could put pressure on Syracuse's other two facilities, Upstate University Hospital and Crouse Hospital, to talk to each other or look for other partners, Chapman said.
St. Joseph's may need a partner to get it out of the red. The 431-bed hospital reported a $2.7 million operating deficit on $579.6 million in revenue for its 2014 fiscal year, compared to a $20.5 million operating surplus the year before on $564.8 million in revenue.
The negative results came primarily because of a 77% increase in interest expenses and a 35% increase in depreciation-related expenses. The hospital had funded a major construction project in 2013 and installation of a new electronic health-records system in 2014. St. Joseph's still managed a total surplus of $1.9 million last year, but that was down 90% from the year before.
Officials said that a parent company, St. Joseph's Health, was formed in November to facilitate potential transactions with regional partners or a national health system. It will also allow for consolidated financial reporting that includes the hospital, its property holdings company and its charitable foundation.
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