SCHENECTADY — Ellis Medicine is trying to block what it calls a predatory move by Albany Medical Center to upgrade a surgical center in Niskayuna, siphoning away patients and money from Ellis.
Albany Med is going before a state regulatory panel Thursday seeking a certificate of need to operate an ambulatory surgical center at the 37,000-square-foot EmUrgentCare facility it opened in 2017 at 1769 Union St. in Niskayuna. Ambulatory surgery already is performed on site, just not an "ambulatory surgical center" under state regulations.
The facility stands just 0.9 miles from Ellis Medicine’s McClellan Street campus, where ambulatory surgeries are performed, and 1.5 miles from Ellis Hospital, Schenectady County’s only general-service hospital.
Ellis President and CEO Paul Milton uses terms such as “predatory,” “cannibalistic” and “bait-and-switch” to describe the proposal. It’s essentially an arcane regulatory change that will allow Albany Med to collect higher rates of reimbursement for care and therefore reap higher profits.
Milton says Albany Med built the Niskayuna facility in a way that would meet the standards for higher reimbursement while stating it was seeking for a lower designation that didn’t require a certificate of need. Thus, it faced no regulatory hurdle to build the facility and faces no financial hurdle to convert it. In its application, Albany Med says it would incur zero expense in the conversion but projects conversion would generate a $551,648 annual profit.)
Already, Ellis has lost 2,300 procedures to the facility, Milton said, and about $1.2 million in revenue.
Ellis’ profit margin, the difference between revenue and expenses, has been running between 1 percent and 2 percent in recent years, Milton said. It was 1.37 percent in 2017.
Milton said there’s no need for an Albany Med ambulatory surgical center: The Ellis ambulatory surgery center is operating at only 45 percent capacity and could handle a substantial increase in procedures performed.
Albany Medical Center defends its Niskayuna facility as necessary and says its plans are neither predatory nor harmful to Ellis.
It noted Wednesday that the Department of Health report on Albany Med’s application recommends that it be approved. That report makes note of Ellis’ opposition but rejects the basis for that opposition. The report states that Ellis already was on a four-year financial slide; that Ellis has already sustained most of the patient loss it will suffer to the Niskayuna facility; and that the Niskayuna facility is not expected to threaten Ellis' financial stability or operation of services.
Dr. Ferdinand Venditti, Albany Med executive vice president for system care delivery and hospital general director, said via email: “Albany Med looks forward to continuing our work to serve the Schenectady community and treat patients throughout the region alongside Ellis and the many other providers in our community.”
Huge sums of money are spent locally and nationally on health care, and money is at the root of this dispute.
Ellis is charging that Albany Med targeted the wealthiest ZIP code in Schenectady County for its proposed ambulatory surgery center, harming Ellis financially by siphoning away wealthier patients whose commercial insurance policies pay bills in full but not the uninsured and underinsured patients in Schenectady’s poorer neighborhoods, who sometimes can’t pay their bills.
As a safety-net hospital for the city’s poorer population, Ellis says, it needs those wealthier patients to maintain what is a delicate financial balance: Medicaid covers only 75 percent of the cost of care.
Albany Med counters that it is by far the largest provider by volume of charity care in the Capital Region and that 19 percent of the patients it serves in Niskayuna are Medicaid clients.
Milton said Wednesday he has opposed Albany Med’s plans in Niskayuna all along, though perhaps not as publicly as he has this week.
In 2017, The Daily Gazette directly asked Milton for his reaction to Albany Medical Center building EmUrgentCare facilities in Ellis’ backyard. (There are now three, one each in Niskayuna, Glenville and Rotterdam, none more than three miles from Ellis Hospital.)
A spokesman responded at the time that Ellis considered competition good for patients and Ellis alike.
"We were opposing [Albany Med's Niskayuna facility] but didn't have any ground to stand on" because it didn't required a certificate of need, Milton said Wednesday.
Meanwhile, in 2017 and 2018, Ellis was in protracted negotiations for a potential merger or affiliation with multiple health care operators. It finally decided this summer to reject them all and remain independent.
Milton won’t say if Albany Med was among those potential partners, but the Albany hospital has taken on three other hospitals as affiliates in recent years, growing into a massive health care system employing more than 10,000 people and stretching from the Hudson Valley into the Adirondacks.
Ellis itself has been expanding, but on a much smaller scale. It built a large urgent care building near Exit 9 in Clifton Park and is preparing to break ground in 2019 on a 62,000-square-foot ambulatory surgical center next door to it.
Clifton Park is an area where many residents carry commercial insurance and have a higher median household income than Schenectadians. Milton freely acknowledges that the goal of setting up a surgery center there is to create a sturdy new profit stream.
That’s basically what Ellis is accusing Albany Med of doing in Niskayuna. The difference is that Ellis isn’t building a facility a mile down New Scotland Avenue from Albany Medical Center.
And there aren’t any hospitals in southern Saratoga County.
Ellis says a profitable Clifton Park surgical center will help counterbalance services that generate little profit or run at a loss in Schenectady, everything from public health initiatives to mental health care.
Milton said he’s not opposed to competition, but wants state regulators to manage it properly.
"There's a balance here. I understand that competition is a good thing and makes us all better. I'm a big advocate of that. Having said that, health care is not a retail or consumer business,” he said. “And there’s a role that I think the state has successfully played in New York to make sure that services are provided in communities and that organizations are able to do that."
If the state fails to do so, he added, there’s a risk of overcompetitive operators creating an overcrowded and unstable health care market in the state. That's what led to creation of the New York State Commission on Health Care Facilities — commonly called the Berger Commission after its chairman, Stephen Berger — and led it to order closure and merger of numerous facilities statewide in the mid-2000s.
On Thursday morning, Ellis will be making its case in Albany before the state Committee on Establishment and Project Review of the Public Health and Health Planning Council, which will rule on whether to award Albany Medical Center the certificate of need that would let it convert the Niskayuna surgical center as it proposes.
Multiple speakers will offer support for Ellis.
Among them will be Assemblyman Phil Steck, D-Colonie, whose district includes Ellis Hospital.
He said when the state Berger Commission created what is now Ellis Medicine in 2008 — by having Ellis Hospital absorb Bellevue and St. Clare’s hospitals at a cost to state taxpayers of about $80 million — it sought to create a medical system that was financially viable and yet accessible to the underserved portions of the Schenectady County community.
“Ellis Hospital is a key part of the economic and social fabric of the community,” he said. “Poaching like this creates risk to long-term care. This is not needed and just undermines the economic viability of Ellis, ... which the Berger Commission made possible.
“Albany Med obviously is trying to gain an economic advantage here. That’s where the state has to come in.”
Schenectady Mayor Gary McCarthy is out of town and has submitted his testimony in writing.
“As the Mayor of the City of Schenectady,” he wrote, “I am requesting your disapproval of this Certificate of Need application, based on the absence of need for new services combined with the high potential for affirmative harm especially to my lower income constituents.”
The mayor added: “We have seen this before in Schenectady. At one time, Ellis was the beneficiary of lucrative commercially insured patients while the cross-town hospital, St. Clare’s, struggled to survive as the ‘safety net’ hospital for people on Medicaid and without insurance.
“Thanks to the wisdom ten years ago of the state’s Berger Commission, Ellis became the community’s sole acute care hospital and largest single provider of primary care. This consolidation produced a delicately balanced payor mix which today enables Ellis to, so far, break even as a full-service inpatient and outpatient health care and mental health provider to the community’s diverse population, even while serving over 52 percent of the county’s Medicaid population.”
McCarthy also noted Ellis Medicine’s extensive involvement in community health in the city, everything from rabies and tuberculosis clinics to disaster preparedness to public school health to programs aimed at the specific needs of the large Indian-Guyanese community here.
State Sen. James Tedisco, R-Glenville, whose district includes Ellis Hospital, also submitted written opposition.
“It is my understanding that you received detailed information from Ellis — the sole remaining acute care hospital in Schenectady County — demonstrating the harmful impact of Albany Med’s current office-based surgery facility on Ellis, and projecting further harm if it is converted to an Ambulatory Surgery Center,” he wrote.
“The staff report acknowledges that 70 percent of the procedures performed or to be performed at the Albany Med facility do not reflect an unmet need, but are simply cannibalized from Ellis, which has sufficient capacity today to perform them.
“I am aware that you have seen graphs of the significant downward slope of commercially-insured and Medicare endoscopic procedures at Ellis since the Albany Med facility opened in 2017, a trend that is not mirrored during this time period for other groups of patients or other surgical procedures. And this reduction in business has already forced Ellis to terminate two full-time outpatient surgical employees and to transition two others to per diem positions.”
Ellis Medicine employed a total of 4,274 people in 2017, according to its federal financial disclosures, though the number at any one time was less, due to staff turnover. Full- and part-time employees currently total the equivalent of about 3,300 full-time employees.