September 2010
Breakthroughs:
Hospital
Merger and
Acquisition
Strategies
Case Study | North Shore-LIJ
This is CASE STUDY 3 OF 4 from HealthLeaders Media Breakthroughs:
Hospital Merger and Acquisition Strategies
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Case Study | North Shore-LIJ
North Shore-LIJ
Sets Sights on Care
Coordination
N
orth Shore-LIJ Health System was already one of the
expressway that splits Queens, but those on the west side often
largest health systems in the nation, with 5,600 beds in
went into Manhattan for care.
its 15 hospitals. And even with 42,000 employees mak-
ing it the ninth-largest employer in the city, North Shore-LIJ had an
identity problem as far as New Yorkers were concerned, says president and CEO Michael Dowling.
“There is part of the world that believes if you’re not in
Manhattan, you don’t exist,” Dowling says. “I mean, people who live
health system snapshot
in Manhattan think that Manhattan is the only New York.”
So when Lenox Hill Hospital on East 77th Street in Manhattan
share
At the root of North-Shore LIJ’s growth and merger strategy is
the drive to get scale—size that allows the health system to coordinate care and chop off costs that come from overlapping markets
and gaps in care. Itself the product of a 1991 merger of North Shore
University Hospital and Glen Cove Hospital, the system now has a
service area of more than 7 million people.
Robert S. Shapiro, North-Shore-LIJ’s chief financial officer, says
Lenox Hill was a standalone hospital in need a stronger financial
came looking for a merger partner, the North Shore-LIJ team saw
partner. (The deal technically was a no-cash assumption of assets
it as an opportunity to get a footprint in a coveted borough. With
and a promise of capital.) “Some merge from a position of strength,
652 beds, a 153-year-old brand, and strength in key service lines
and some merge from a position of weakness. Unfortunately for
including cardiac and orthopedic care, Lenox Hill was a good stra-
Lenox Hill, they went through many years of struggling financially.
tegic fit. North Shore-LIJ’s analysis had found that its existing
It was and is a world-class institution, providing high-quality health-
hospitals drew well from residents on the east side of the Van Wyck
care with known and named physicians.”
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Case Study | North Shore-LIJ
Shapiro’s financial due diligence requires looking at the balance
sheet, sifting through debt, analyzing if the population base is strong
enough to support positive revenue performance. With Lenox Hill,
he found that the hospital had tried to negotiate with payers back
Michael Dowling,
President and CEO,
North Shore-LIJ
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in the 1990s on its own, and without the leverage of a large system
their resulting revenue per discharge was lower than they needed to
operate. As a result, investment in capital had been down for some
time, including the loss of some administrative staff and the loss of
some key physicians.
But not all the news was bad. While the revenue cycle needed
“On the one hand, I think the net employment usually rises when
we take on an acquisition, but where we create the value is that we
create additional throughput and efficiency, so we are able to serve
more people and get more volume in a place with that increment
of staff. Because usually what happens is that when you take those
people out of the mix, the hospital operations get a little gummed up
and less efficient.”
Physician ties
were some areas that had to be improved, but all in all, it was in pretty
Mergers live and die by the will of the physicians involved. But that
good condition. There are many books that describe how organiza-
does not mean that North Shore-LIJ seeks to “own” all physicians
tions fail, and the various stages they go through; they were not near
on staff. Of the more than 9,000 physicians at the system, approxi-
the end.” While some investment to replace key positions would come,
mately 1,600 are salaried, says Dowling. North Shore-LIJ’s strategy
the need was more for investments that could be made over time and
is to create as much cultural and virtual alignment as possible with
not a large, immediate infusion of cash, Shapiro says. Mark Solazzo,
physicians, including a lot of leadership face-to-face time. The same
North Shore-LIJ’s chief operating officer, says as with many of the
was true when the Lenox Hill merger became a possibility.
“Because Lenox Hill was struggling to survive financially, they
“I don’t own them, but there is a core body of physicians at
Lenox Hill that are unbelievably loyal to the institution and have
pulled staff out of the mix that they would deem non-core, and that
stayed loyal even during a period of time when the hospital was hav-
we deem extremely core, for example, nurse educators, supervisors
ing some trouble, so there is a great foundation there,” Dowling says.
on off shifts, unit clerks that help the nurses stay at the bedside,
those types of positions,” Solazzo says.
So Solazzo’s team released 110 new positions at Lenox Hill for
share
gain efficiency. Solazzo sees the opposite.
work, the hospital’s balance sheet was good, Shapiro says. “There
system’s 14 previous mergers, they found Lenox Hill understaffed.
editor’s note
ally lead to a net loss of employees, as redundancy is eliminated to
Much of the work with physicians is done during an extensive
due diligence, where the team analyzes how the physician partners
really work, says Solazzo.
hire and plans to add 100 more over the next year. On the outside it
“The part that you have to be most careful of is how you seek to
might seem counter-intuitive. Mergers in non-healthcare fields usu-
integrate the physicians into your clinical programs. We take a very
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Case Study | North Shore-LIJ
cautious and deliberate approach, really trying to understand the
physician medical staff network, because a medical staff of a hospital is very unique—how they operate, how they function, how their
referral network exists, who are the influence makers, and who are
the people in leadership positions, Solazzo says.
Dowling and Solazzo take a “go to them” approach in creating
the physician communication for a merger.
between
the lines
1,600
physicians of the more
than 9,000 at the North
Shore-LIJ system are
salaried.
“Since we started this process a number of months ago, I think
I have had about another thousand dinners and breakfasts,” Solazzo
says. “You have got to go to their office to understand where they
live and what they face. It gives you a sort of sense of who they
are and their work environment. Bringing a dozen doctors into a
boardroom tells you very little.”
Once the integration process starts, the merged physicians and
“From the very beginning we developed
our system differently than anybody
else in this region, where we have
single administration, single clinical
leadership, single board structure,
and everything is owned. We not only
have hospitals but we have the whole
continuum of care.”
Michael Dowling, President and CEO,
North Shore-LIJ
clinical staff are brought to system-level expectations of quality and
performance, but with the understanding that not everyone will get
North Shore-LIJ has seen a lot of interest from private practice
to those standards in the exact same way, says chief medical officer
physicians looking for the safety of linkage with a health system.
Lawrence G. Smith, MD.
While the system is in no rush to necessarily employ in large num-
“If you look at how we manage quality and how do we really
actually function as a system instead of a bunch of independent
hospitals, the approach is very clear, which is that we set standards
share
“
bers, Smith believes offering options for integration will serve the
private practitioner and North Shore-LIJ.
“We are trying very hard through this electronic medical record
centrally, and then we allow local solutions,” Smith says, “We are
initiative to build synergies and linkages with physicians without
pretty cognizant of the fact that you can’t impose solutions on an
them having to become a full-time employed physician, so that
individual place, because the local culture, the resources, and the
there’s the option of working together and being able to function in
traditions can be very different, hospital to hospital. But you can’t
an integrated healthcare delivery system without them having to
compromise on standards. Everybody has to get to excellence.”
give up their own personal business and become fully employed.”
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Case Study | North Shore-LIJ
Integration
The long and prestigious history
Dowling and his team say they are acutely aware of the downside
of mergers where hospitals add size without integration. “There are
The road we
have traveled
many hospital systems, even in this region, that’ll tell you they’re integrated where there is no integration at all,” Dowling says. “People collect hospitals so that they can put them on letterhead. The alternative
is that you have hospitals join you and you integrate them fully.”
The hospitals, nursing homes and other facilities that comprise
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much longer than that. And so we know each other, we know how
we operate, and we’re all singing the same tune together.”
Dowling says that from the beginning of the system North
Shore-LIJ has been moving toward a fully-integrated system “that
manages and coordinates care.” So Dowling says federal healthcare
payment reform and the creation of accountable care structures is
not a major shift for his organization.
“From the very beginning we developed our system differently
share
President’s Award for Exceptional Patient
Service established
CFAM Mammography Center opens
2007
CFAM Smith Institute for Urology opens
history of providing communities with the most innovative
2001
Cardiac Cath program established at
Huntington Hospital
2007
Pavilion at 9 Monti opens
and effective care available in the New York
2001
SI Heart Institute opens
2007
Cardiac Intervention Program established at
Southside Hospital
metropolitan area. These are the milestones
2001
Syosset Hospital transformed into a surgical
specialty hospital.
2007
First Kidney Transplant performed at NSUH
LIJ
2001
North Shore-LIJ receives Pinnacle Award
for Critical Care Quality.
2008
Bed Tower — Katz Women’s Hospital and
Zuckerberg Pavilion construction begins
2001
C-Port Cardiac Intervention Program
established at Southside Hospital
2008
Bioskills Laboratory opened
2002
Hillside Hosptial renamed The Zucker
Hillside Hospital Center for Learning and
Innovation (CLI) established
2008
1,000 car Parking Garage at LIJ opens
2008
50,000 sq. ft. expansion of Feinstein
Institute
2002
NSUH and LIJ faculty practices consolidated
2008
2002
Picower Institute acquired
Execute agreement to establish School
of Medicine in partnership with Hofstra
University
2002
Elmezzi Graduate School approved
2009
2002
Mirror Board established at Franklin
Hospital
Emergency and Trauma Center at SIUH
opens
2009
Mirror Board established at SIUH
2003
NSLIJ bonds receive “A” rating
2009
2003
SIUH receives HANYS Pinnacle Award for
Quailty in Falls Prevention
Construction begins at NSUH for Katz
Women’s Hospital
2009
Syosset receives JD Power Award for
Service Excellence for the 4th consecutive
year
that have shaped our journey to becoming
•
u
1990’s
1991-92 North Shore University Hospital and Glen Cove merge
1992-93 North Shore Regional Health Service Corp. renamed North
Shore Health System
1995 Hospital Huntington Hospital joins Health System
1995 Franklin Hospital joins Health System Syosset Hospital joins
Health System
1995 LaGuardia Hospital acquired and remamed Forest Hills
Hospital
2003
Research Institute receives GCRC grant
from NIH
2004
New North Shore-LIJ logo introduced
illustrating integration of the Health System
2010
North Shore-LIJ receives NQF Healthcare
Quality Award
1996 Hospice Care Network formed
2004
Huntington Surgical Building opens
2010
1997 North Shore-LIJ Health System formed through merger of North
Shore Health System and Long Island Jewish Medical Center
2004
Hospice Inn opens
$400 million investment in Electronic
Medical Record initiated
2004
System-wide Financial Assistance Policy
established
2010
Patient Safety Institute expanded
2010
1999 Research Institute created
2004
Zucker Hillside Ambulatory Pavilion opened
Children’s Hospital renamed Cohen Children’s
Medical Center of NY
North Shore Regional Health Service
Corp. formed
1999 North Shore-LIJ receives JCAHO Codman Award
2004
SIUH receives JCAHO Codman Award
Center for Extended
Care and Rehabilitation
(CECR) opens
1999 Center for Emergency Medical Services established at Syosset
2005
1999 Home Care Network consolidation
Research Institute renamed Feinstein
Institute for Medical Research
2005
Center for Advanced Medicine (CFAM)
established
1996 Southside Hospital joins Health System
1996 Staten Island University Hospital joins Health System
•
1988
1989
u
1980’s
1998 Core Laboratory established
2000 Hospice Care Network joins Health System
2010
Hofstra North Shore-LIJ School of Medicine
receives preliminary accreditation to accept
its first class of 40 students in summer 2011
2010
Lenox Hill Hospital joins North ShoreLIJ, establishing the health system’s first
hospital in Manhattan
Click the timeline to maximize.
Source: North Shore-LIJ
is owned. We not only have hospitals but we have the whole
continuum of care,” Dowling says.
In addition to hospital mergers like Lenox Hill, Dowling has
been buying other pieces of the continuum, including placing a
winning $17 million bid on the homecare license left from the bankruptcy of Saint Vincent Catholic Medical Center’s Certified Home
Health Agency based in Manhattan. The one piece of the continuum
than anybody else in this region, where we have single administra-
missing from North Shore-LIJ is a health plan, which Dowling says
tion, single clinical leadership, single board structure, and everything
is “something we are definitely planning for.”
HealthLeaders Media Breakthroughs: Hospital Merger and Acquisition Strategies
in collaboration with
©2010 HealthLeaders Media, a division of HCPro, Inc.
CLI Patient Safety Institute established
2007
Cardiac surgery program initiated at SIUH
but are converted to advisory boards only.
15 years together, and many of us have been in the organization for
CFAM Diagnostic Imaging Center opens
2006
2001
all integrated. Governing boards at the merged hospitals are kept
the management team here has worked together at a minimum of
CFAM Monter Cancer Center opens
2006
the North Shore-LIJ Health System have a long and prestigious
1994 Central General Hospital acquired and renamed Plainview
hospitals, one CFO and one COO. And I’m also very proud to say that
Mirror Board established at Southside
Hospital
2006
2007
tion is centralized. Systems from finance to procurement to IT are
Mark Solazzo,
Executive Vice President and
Chief Operating Officer,
North Shore-LIJ
Nassau University Medical Center (NUMC)
affiliation executed
2005
Hospice Care Network joins Health System
As with all hospitals in the North Shore-LIJ system, administra-
call it, ‘separateness,’ Shapiro says. “We have one CEO over all the
2000’s
CFAM Ambulatory Surgery opens
2005
2000
a national healthcare leader.
“We don’t have sponsorship agreements that provide for, I’ll
•
u
2005
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