NYU Langone Medical Center is going ahead with a full-asset merger with Lutheran Medical Center in Brooklyn, according to a spokesperson for both hospitals. Langone decided to go ahead with a full-asset merger when both hospitals decided on a coalition to expedite the growth of NYU Lutheran Medical Center as a leading site for top quality healthcare in Brooklyn and to address the mounting financial challenges it faces.
Lutheran hospital, located in Sunset Park section of Brooklyn became NYU Lutheran Medical Center in April of this year, when an affiliation was approved by state regulators. NYU Langone has committed $190 million over 5 years to Lutheran, according to NYU Langone’s financial statements.
More and more recently, community hospitals in New York are increasingly exploring strategic alliances and mergers. One incentive is the change in hospital reimbursement to a version where they are paid a pre-arranged monthly amount based on the number of patients they need to tend to. Hospitals such as NYU Langone favor this method over current service model of free-for-all, in which most hospitals get paid for each procedure performed.
Amish Mehta, a leader in nonprofit practice at accounting firm Friedman, explains the logic behind these acquisitions. He says that these type of mergers and acquisitions provide a hospital system almost a one-stop shop from service standpoint.
As a result of the merger, Lutheran patients will get greater access to specialists at the NYU Langone. The merger will also enhance the balance sheet of NYU Langone with additional assets. Through efficient IT, management, patient care, outstanding debt collection and managed-care contracts, the deal will save the integrated organization $56.9 million annually, according to the two hospitals.
On the other hand, because of the deal, NYU Langone, with 1,069-bed system, will get bigger access to patients in Brooklyn. Last year, Brooklyn residents made up 28% of its inpatient admissions and 19% of outpatient visits. The hospital with its main campus on Manhattan’s East Side, also invested heavily in the former campus of Long Island College Hospital.
NYU Langone isn’t the only hospital looking to serve Brooklyn patients. North Shore-LIJ system, a Lake Success Long Island-based 19-hospital system is in talks with Maimonides Medical Center located in Borough Park area of Brooklyn for some type of alliance. The deal is expected to be finalized within weeks.