SCHENECTADY — Many aspects of Ellis Medicine’s operations will be transitioning to management by St. Peter’s Health Partners.
The two organizations last year announced their plan to merge, then put their plan on hold so Ellis can improve its finances and score higher on several quality metrics.
They announced Monday that state regulators have approved a management services agreement that is a major step in that direction — not only will it help Ellis meet the financial and quality targets for a merger, it will put in place some of the integration a merger would entail.
Ellis CEO Paul Milton and SPHP CEO Dr. James Reed, in a phone call with reporters Monday, said Ellis’ plan to become part of SPHP is perhaps two years in the future. The management agreement lasts two years.
The two put their affiliation agreement on hold when Ellis ran into financial troubles amid the pandemic. The management agreement specifies benchmarks Ellis must achieve before the merger can be formally proposed:
On finances, Ellis’ target is an operating margin at least as good as SPHP’s or as good as the goal set for SPHP by its parent, Trinity Health, whichever is less.
On quality of care, Ellis’ target is at least a C rating by Leapfrog and at least three stars by the federal Centers for Medicare and Medicaid Services. Ellis Hospital currently holds D and two-star ratings; St. Peter’s Hospital holds C and four-star ratings.
Reed said Monday that SPHP’s formation a decade ago was due to the size and complexity of challenges facing the healthcare industry. SPHP now comprises five hospitals and roughly 180 satellite facilities that benefit from the efficiency and strength of a single corporate structure.
Mergers and affiliations are a long-running trend in the hospital industry. If Ellis Medicine, which operates two hospitals and a handful of satellite facilities, joins with SPHP, every hospital in the eight-county Capital Region will be affiliated with either Saint Peter’s or Albany Medical Center.
The Schenectady Coalition for Healthcare Access formed in response to the merger plan. A primary concern is the loss of healthcare options in Schenectady County, particularly abortion, if Ellis comes under control of SPHP and must follow the Catholic directives that govern SPHP.
The coalition also is concerned that the gradual steps being taken — the management services agreement announced Monday and a provider transfer agreement finalized earlier this month that made 170 Ellis advanced care practitioners employees of SPHP Medical Associates — are a de facto partial merger, with less of the regulatory oversight and public input that would accompany a full merger.
Milton and Reed addressed the first concern Monday: Abortion and other reproductive care will continue unchanged at Ellis under the management services agreement, though abortion would halt under a full merger. SPHP will have no involvement in services Ellis provides that are banned by the Catholic directives.
“Ellis continues to do all of the services we’ve done in the past,” Milton said.
Down the road, Reed said, it’s possible a hybrid religious-secular operating model will preserve some reproductive services.
“I’d also stress: Any procedure that’s used to save the life of a woman, that we perform,” he added.
(The Catholic directives do allow abortion in those circumstances.)
The two CEOs also addressed the potential of job cuts.
A key means of cost savings is reducing the headcount, and many mergers or acquisitions involve layoffs. But both hospital organizations already are more than 10% short of their target workforce: Ellis has 445 job openings listed online and SPHP has nearly 1,200 vacancies.
There is no plan for a partial or full elimination of a department at Ellis to cut costs, Reed said, but that is not to say it never will happen.
In 2020, SPHP completed a restructuring that shifted the functions of a financial services office from SPHP to Michigan-based Trinitystate. Seventy-six jobs were eliminated in the Capital Region, though some employees had the option of working remotely for Trinity.
There was no plan to eliminate that department when SPHP formed a decade earlier, Reed said, but later on it became an obvious step toward efficiency.
Some details of the Ellis-SPHP Management Services Agreement:
- Both sides agreed Ellis needs to improve its finances and quality performance to the standards of Trinity Health before a merger could take place.
- SPHP will provide an extensive array of management services in 11 separate areas, from facility management and supply services to finance, infection prevention and nursing administration.
- SPHP will not relocate all or most of an Ellis department providing essential services.
- On at least a quarterly basis, the two organizations will review Ellis’ performance and determine what if any additional steps are needed to bring about improvement.
- To maintain competition in key areas, SPHP will have no role in Ellis’ marketing or negotiation of Ellis’ reimbursement rates.
- The agreement will not require SPHP to do anything that would violate the Catholic directives, but if a conflict arises, the two sides will discuss it promptly; if they can’t resolve the issue, SPHP will have the right to terminate the agreement.
- SPHP will provide no oversight or support for health care services such as abortion that are prohibited by the Catholic directives.
- SPHP will provide management services to Ellis and bill at 102% cost; if this exceeds 0.5% of Ellis’ net revenue, the Ellis board must approve the payment.
- SPHP will have sole discretion to appoint employees providing management services, though it must remove any appointee whom Ellis objects to with cause.
Milton said the agreement should be invisible to the public.
“I don’t think for the average patient and their family they’re going to see anything from the get-go.”
He and Reed will remain president and CEO of Ellis Medicine and SPHP, respectively.