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September 02, 2016 01:00 AM

Northwell Health's merger strategy adds to bottom line

Dave Barkholz
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    Northwell Health, based in Great Neck, N.Y., is starting to get an income boost from an expansion campaign that in the past two years has included three hospital mergers, the acquisition of several large physician practices, the opening of urgent-care centers and a new health insurance company.

    The health insurance arm continues to lose money, but Northwell's provider services have remained strong. In the first half of 2016, the 21-hospital Northwell posted increases in hospital admissions, emergency room visits, ambulatory surgeries and home care visits.

    “All of a sudden, all volumes came back,” said Bob Shapiro, Northwell's chief financial officer.

    The boom is padding the bottom line. Not-for-profit Northwell in the first half posted an operating surplus of $66.5 million compared with a surplus of $52.7 million in the year-earlier period, according to a recent financial filing. Revenue for the six-month period was $4.29 billion versus $3.86 billion in the first half of 2015, giving the system a similar operating margin for both comparable periods.

    Shapiro said Northwell's newest hospitals are contributing to the organization's improvements.

    In January, Northwell acquired 140-bed Peconic Bay Medical Center, located in an affluent part of Long Island.

    A year earlier, the system absorbed 238-bed Phelps Memorial Hospital and 245-bed Northern Westchester Hospital, two former rivals in suburban Westchester County that traditionally send loads of patients for specialty care into Manhattan. They were non-cash mergers.

    Not only are the Westchester County hospitals posting surpluses, but their acquisitions and that of some physician practices around them have helped Northwell's Manhattan hospital, Lenox Hill Hospital, compete for referrals that previously were dominated by Mount Sinai Hospital and New York-Presbyterian Hospital, Shapiro said.

    Northwell, an academic medical system buttressed by the Hofstra Northwell School of Medicine, has been rolling up physician practices for more than five years. It has almost doubled the number of physicians it employs over that time to 3,000 from 1,600 in 2010.

    In the first half of 2016, total hospital discharges at Northwell rose 3.3% compared with the first six months of 2015. That helped raise daily bed occupancy to 87.1% in the first half compared with 86.1% in the year-ago period. However, the broader industry push has been to reduce inpatient admissions in favor of more cost-effective outpatient care, when necessary and appropriate.

    ER visits at Northwell facilities climbed 2.5% year over year in the second quarter, while outpatient visits jumped 7.9%.

    Northwell's insurance arm, which sells plans on New York's public exchange, has remained a work in progress. It collected almost $260 million in premium revenue in the first half of the year, but losses totaled almost $48 million. Northwell Health CEO Michael Dowling has said the insurance division is a "long-term play."

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