Westchester Medical Center Health Network, Valhalla, N.Y., added three more hospitals with the acquisition of HeatlhAlliance, the latest deal to consolidate New York's Hudson Valley market.
The system will consolidate two hospitals acquired in the deal, leaving it with nine hospitals, including one children's hospital, one psychiatric hospital, and three hospitals owned in a recent joint venture with Bon Secours Health System, Marriottsville, Md.
The rapid growth has boosted Westchester's market share but has also added strain to the system's operations from new hospitals with a history of weak performance.
The three hospitals under the Bon Secours joint venture incurred “perennial operating losses” prior to the deal, according to Moody's Investors Service. Westchester owns 60% of the joint venture and operates the hospitals. HealthAlliance also struggled, with operating losses in 2014 and 2013, according to the latest publicly available financial statements.
Moody's analysts downgraded the Westchester Medical Center Health Network's debt early this month, citing the system's rapid growth, capital spending and dependence on Medicaid revenue.
But Westchester has produced stable results and previously improved the operations of a poorly performing acquisition, analysts said. Expansion also offers Westchester a “strong and growing market position,” they wrote.
Michael Israel, CEO of Westchester Medical Center Health Network, said efforts in the past year have produced profits at the formerly money-losing Bon Secours Charity Health System, Suffern, N.Y. Executives also have succeeded turning around operations at a hospital previously acquired out of bankruptcy, now the MidHudson Regional Hospital in Poughkeepsie, N.Y., he said.
The system reported an operating gain of $26.2 million on revenue of $1.2 billion for the year that ended Dec. 31, 2015.
HealthAlliance sought to gain the financial strength of a larger partner in a competitive market, said David Scarpino, CEO of HealthAlliance. “That was an easy one for us,” he said.
Independent hospitals can no longer compete with bigger rivals that have more cash in the bank, he said. Meanwhile, New York state's healthcare market is changing under the state's Medicaid waiver program.
HealthAlliance Hospital Broadway Campus will close inpatient services, which will be consolidated at the nearby HealthAlliance Hospital Mary's Ave Campus, Scarpino said. The hospitals have operated jointly since 2007 under a state plan to reduce excess hospital capacity and duplication of services.