SCHENECTADY — Ellis Medicine announced Thursday that its yearlong process of seeking another hospital for merger or affiliation is over, and it will remain independent.
CEO Paul Milton said the 23-member board of directors invested extensive thought and debate before unanimously choosing this path Tuesday evening.
A radical revision of the health care landscape or a major downturn in Ellis’ fortunes could reopen the discussion, he added, but otherwise there is no plan to consider merger or affiliation again in the near future.
“I think it’s a bold and courageous decision, and we’re very confident we can do it,” he told The Daily Gazette on Thursday afternoon.
Ellis had informed employees and the community that the process was underway but had concealed most details of the process, such as the identity of its potential hospital partners. The long wait for a resolution left some employees concerned and created difficulty at times with recruitment.
Milton said he held multiple department-level staff meetings Thursday morning to inform Ellis’ roughly 3,500 employees of the decision to remain independent, and was met with relief, support and even spontaneous applause.
Ellis Medicine is surrounded by larger hospital systems in the Capital Region. If one categorizes it as an independent hospital — it is the product of the forced merger a decade ago of Ellis, St. Clare’s and Bellevue hospitals — it is one of the few independent hospitals left in the state, which gives it fewer options to negotiate better costs and build economies of scale in the increasingly expensive health care industry.
Milton said he recommended to the board, shortly after it promoted him from acting to permanent CEO in February 2016, that its members begin looking at the concept of affiliation or merger, predicting an opportunity or need would arise within the next five years.
That process began in the summer of 2016. In 2017, Ellis sent out requests for proposals to more than 20 entities, some in the Capital Region, some beyond. In 2018, it winnowed the respondents down to a short list of about eight, and then had extensive discussions with four finalists.
“We got very, very close to some agreements, but obviously not close enough that we would commit to go the next step,” Milton said.
There was grumbling from some of the suitors that Ellis was being too deliberative or methodical, he added.
So where does Ellis go from here? Forward on its own, Milton said: “We will stay focused on providing the best quality care we can provide to everybody in this community and do it at a very reasonable cost.”
One or more of the larger hospital systems in the Capital Region may have been among Ellis’ prospective partners, but the process was confidential, so Milton won’t say. Now that the process is over, those other hospital systems become potential partners in collaborations that fall short of affiliation, and they become competitors for patients and dollars.
“My first approach would be to collaborate with a competitor,” Milton said. “If that fails, then my next step would to go direct competition.
“I think it will get more competitive,” he added.
Ellis’ geographic focus will remain in Schenectady County and southern Saratoga County, he said.
“I am not putting an urgent care center, right now, down on New Scotland Avenue,” he said, referring to Albany Medical Center, which has built urgent care facilities near Ellis Hospital, in Glenville, Niskayuna and Rotterdam.
But Ellis has expanded its reach fairly recently. In 2012, it built a 38,000-square-foot multipurpose facility in Clifton Park, within a few miles of large facilities operated by Saratoga Hospital, Albany Medical Center, St. Peter’s Health Partners and Community Care Physicians. Ellis now has state approval to build a 40,000 square foot surgical center next door to its Medical Center of Clifton Park, but is putting together a business plan before doing so.
“Going up to Clifton Park and opening a surgery center is a statement that we have to be competitive and we have to be in that community,” Milton said.
The goal is to have patients from this region be treated in this region — at an Ellis facility — rather than travel to another city.
Closer to home, Ellis Medicine has taken delivery on an architectural consultant’s master plan that could entail many millions of dollars worth of upgrades to its existing facilities, some of which are decades old.
That’s just a blueprint, Milton said, reviewed by the board without final decisions on any of the work to be done.
Ellis Medicine is financially healthy, but it is a non-profit entity with a narrow operating margin.
Its Form 990 tax filing for 2016, the most recent year available, showed $433.71 million in revenue and $427.14 million in expenses, yielding net revenue of $6.57 million, a 1.51 percent margin. This compared with 1.1 percent in 2015, 3.55 percent in 2014 and 2.23 percent in 2013.
Milton said 2017 and the first half of 2018 were good for Ellis, but the margin is still only in the 1 percent range.
Ellis Hospital is the only full-service hospital within Ellis Medicine; Bellevue Woman’s Center is dedicated to care of women and newborns, and the former St. Clare’s is now the McClellan Street Health Center, site of primary care, outpatient procedures, short-term rehab and long-term nursing care. Ellis Medicine also runs a nursing school, has a few primary care offices and operates the large outpatient facility in Clifton Park.
Even with all this, it is by far the smallest of the three hospital operators in the core of the Capital Region, at 3,500 employees. The single largest hospital, Albany Medical Center, has 9,000 employees and its affiliates, Columbia Memorial and Saratoga hospitals, have thousands more employees. St. Peter’s, Albany Memorial, St. Mary’s, Samaritan and Sunnyview hospitals have all merged into the 12,500-employee St. Peter’s Health Partners, based in Albany.
At a greater distance, Cobleskill Regional Hospital is part of the Cooperstown-based Bassett Healthcare Network and St. Mary’s Healthcare in Amsterdam is part of Ascension, the world’s largest Catholic hospital system.
By Ellis’ count, less than 15 percent of New York hospitals are independent. Nathan Littauer Hospital in Gloversville and Glens Falls Hospital are the other standalone entities in this region.