Q&A with Northwell CEO Dowling: 'The idea of the stand-alone hospital is gone'

Northwell Health, formerly known as North Shore-Long Island Jewish Health System, continues to pursue aggressive expansion moves throughout the New York City metropolitan area. CEO Michael Dowling is also stepping up the New Hyde Park, N.Y.-based system's investment in startup firms and innovative technologies that are launched in-house. Dave Barkholz, Modern Healthcare's Southern Bureau chief, caught up with Dowling at last month's J.P. Morgan Healthcare Conference in San Francisco. The following is an edited transcript.

Modern Healthcare: Does the New York market need additional consolidation?

Michael Dowling: I absolutely believe so, and I think everybody does. All the major players in New York are continuously trying to consolidate. There are some loose arrangements in New York that will have to be tightened. People with affiliations or partnerships or relationships over the next two to three years will come together in a real consolidated way.

There are smaller systems in the New York area that have broken apart because the systems, when they came together, didn't put their infrastructures together correctly. The individual hospitals that were parts of those systems went off by themselves, or the system broke down. Now those hospitals are looking to figure out who they can partner with.

What you're going to have in New York is three to four big systems. There are a couple of hospitals in play at the moment. The question you have to ask yourself is: If you don't take a gamble at working on one of them, then your opposition is going to get it. Opportunities never disappear. Somebody takes the ones that you miss.

On the physician side, there has been increasing consolidation. It wasn't that many years ago when in our area a hundred physicians in a group was huge. Today, there is a group about a half a block from my office that has almost 700 physicians, and it's expanding. Our full-time faculty, which was about a thousand doctors six or seven years ago, today has 4,000 and we're adding about 300 a year.

MH: New York used to be characterized by many independent practices.

Dowling: The idea of the stand-alone hospital is gone. The idea of the stand-alone physician, the small practice, where the person puts up his shingle in front, in most cases, is gone also. It's just not possible in the current economic climate.

MH: What's driving the physician consolidation?

Dowling: Economics is driving it. There is also the herd factor. You have physicians watching everybody else do it and they say, “Wait a second, I better jump on the bandwagon because if I don't do it, maybe I'll be left behind.” People are finding that with increased regulation, enhanced micro-regulation, reduction in reimbursement and malpractice insurance, independence is not possible anymore. It's not possible anymore to be by yourself and afford the overhead.

When you come into a large group, you can share. People are also more and more interested in life-work balance, especially the older physicians. Their view of the world is a little bit different. They don't want to be available seven days a week, taking calls in the middle of the night on Saturday and having no time off.

Plus, more and more governments and payers are looking at improved quality metrics. The way that you can actually take advantage of that is to be part of a larger entity.

MH: Are you close to another hospital acquisition?

Dowling: I would say within the first quarter of 2017. There is a real possibility we could add one or two others.

MH: Multihospital systems?

Dowling: No, individual hospitals that were once part of other systems. Those other systems never worked well. Those individual hospitals decided that it just was not beneficial for them to be part of those other systems. Or those systems fell apart and they don't want to be alone because they are naked out there. They have no protection. Now they're reaching out to us and they're reaching out to the other players in New York to see whether or not they should join with them.

MH: Were the affiliations too loose? What was the problem?

Dowling: System is a word that gets thrown around a lot. But when you've seen one system, you've seen one system. We are highly, highly integrated. Most systems are not, even though their rhetoric may tell you that they are. Some of these other players were like a letterhead system. There wasn't much interaction going on. There wasn't much of a benefit except maybe the tertiary campus in the middle benefitted, but the hospitals that were on the edges, they maybe get a report every so often, but they didn't see the benefit of it.

You're not going to succeed long-term unless everybody sees that there's a benefit of coming together. That has been our philosophy from Day One. We never developed a loose system.

MH: You're home-growing some medical and healthcare technology. What's the strategy?

Dowling: It's one of the things that has not surprised me. When you allow your physicians and nurses and staff to be innovative and to come up with ideas, you create an incubator for discovery. You find that you have people all over the place with wonderful ideas. We unleashed it just a couple of years ago. Quite frankly, we have a problem today in being able to accommodate all of the requests and suggestions and proposals that are coming from staff within our own health system.

MH: What did you create to handle it?

Dowling: We created Northwell Ventures. We hold innovation days with our staff on a regular basis. We hold innovation days with our physicians. And we created a competent staff able to catch the ideas and figure out how to work with the people to put together a potential business proposal.

We had one of our maintenance people and one of our engineers in one of our hospitals investigate, on their own time, what happens with the curtain that goes around the bed because it has to be taken down every so often and cleaned to prevent infection. They studied this and found out that people catch the curtain on the edge. So they came up with a strip—six to nine inches on the edge—that could be taken off and washed instead of taking down the whole thing. Now we have a new business manufacturing those things, all coming from a maintenance guy who's a cleaning person on the floors, along with an engineer.

MH: And you've developed a revenue-cycle product for physicians?

Dowling: We run a very large medical group practice and have for years. We developed a very good revenue-cycle process system. We've developed a very good access system for patients. We brought in an outside company to help us investigate every other company around the country to see what they had. After a year and a half of analysis, we concluded that what we had was better. So, rather than going in and buying it from somebody else, I have my own. Now why can't I take my own and turn it into a business? And that's what we've just launched (in January with Pamplona Capital Management). It's called Formativ Health, which is our own Part B revenue-cycle company.

Tech companies, insurance companies, they know the technology, but they don't know the healthcare delivery process. They say, “Put my technology in, everything works.” Technology is a tool. If you don't have the right processes in place, and you don't have the right people in place, and you don't have the access points in place, the technology by itself just won't work. We decided that we had our own competence here. So now we have this company and if we're lucky, it'll be successful.

MH: HCA and Tenet have their own revenue-cycle companies. Do you need scale to be able to do that?

Dowling: Based upon the interest we've received from a lot of players around the country, I don't believe that will be an issue.

MH: You don't seem overly concerned about the repeal and replace of the ACA. Why?

Dowling: I spent 10 to 12 years in government. I've been on the other side. The worst thing in the world is to become catatonic thinking about what might happen out there that might affect you. My view of the world is that you keep moving forward. The ACA, for us, is a very small part of our business.

MH: How much?

Dowling: Three percent. I believe very, very strongly that when intelligent members of the Trump administration sit down and try to figure out how to take the ACA apart, they're going to realize it's going to be a lot tougher than they thought. The rhetoric is fine. They'll play the rhetoric and they'll blame the media and they'll blame everybody. But they've already agreed that they will keep pre-existing conditions; they'll keep kids on the family's plans. And when you do those two, you have to do something on the other side.

If they eliminate coverage for 20 million people, that's a real problem. But it doesn't affect New York as much as it affects other states. If you go to other states in the Midwest, the people that would be affected are the very same people that voted for Donald Trump. Is he going to gut the possibility of the people who voted for him not having insurance? I'm not so sure. I think he and Congress have got to be careful with the midterm elections coming up in two years.

I'm much more worried in terms of the overall effect to the delivery system with what they do with Medicare.