ALBANY — Albany Medical Center on Thursday gained near-final approval to operate a Niskayuna ambulatory surgical center that nearby Ellis Medicine says will cause it financial difficulties.
The state health commissioner still must sign off on the controversial plan, but Albany Med is optimistic that he will do so based on his staff’s favorable recommendations and two separate panel votes in favor of the plan, all of which came over Ellis’ objections.
The facility is co-located with one of Albany Med’s EmUrgentCare clinics, and already has hosted thousands of outpatient surgical procedures since opening in the spring of 2017. Ellis officials estimate that it is siphoning off more than $1 million a year in revenue that Ellis can’t afford to lose, and say that if it is upgraded to an ambulatory surgical center, Ellis could lose hundreds of thousands more each year.
Albany Med is seeking a regulatory reclassification that would allow it to perform more procedures at 1769 Union St. and potentially gain a higher rate of insurance reimbursement for them. It will need to make no physical changes to accomplish this, and the cost is estimated at $0.
Currently, the facility is primarily the venue for gastroenterological procedures such as colonoscopies. With conversion, it also will be able to offer minor general surgery, urological and gynecological procedures.
Ellis had rallied support from local elected officials for its position, and administrators of a southern Saratoga County gastroenterology facility also weighed in against Albany Med, saying its business would be hurt as well.
A state Department of Health regulatory committee in November voted 6-5 for approval, but because that was only a plurality, not a majority of the committee, the matter went before the full Public Health and Health Planning Council on Thursday.
After some discussion of the concept of competition within the health care industry, the council took a roll call vote. The initial tally was 12-6, plus a single abstention — one vote short of the 13-vote majority needed for approval. The member of the council who had abstained was again offered the chance to vote. He accepted, and voted in favor.
Albany Med’s request for a certificate of need was thus approved, 13-6, sending it to Health Commissioner Dr. Howard Zucker for final approval.
Neither Albany Med nor Ellis indicated whether they’d try to influence his decision.
On Thursday afternoon, Ellis officials said via email: “We’re disappointed in the outcome of the vote. While we appreciate the fact that the Public Health and Health Planning Council considered our opposition, our argument against this project hasn’t changed, and we continue to oppose this Certificate of Need application. … We continue to stand behind the case we laid out, and we’re sure the commissioner will weigh all the facts in his decision.”
Dr. Ferdinand Venditti, Albany Medical Center’s executive vice president for system care delivery and hospital general director, said he thought Zucker would be guided by the earlier recommendations (all three of them in Albany Med’s favor) and approve the certificate of need.
“We look forward to serving the people of Schenectady County and Schenectady proper,” he said.
Ellis raised several objections to Albany Med’s proposed ambulatory surgery center, which 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.
It said Albany Med had deliberately sited the facility in a wealthy ZIP code near Ellis to siphon off some of the most lucrative procedures away from Ellis, depriving Ellis of profit it needs to subsidize its role as a health care provider to the uninsured and underinsured residents of Schenectady County, and to counterbalance the services it provides at a loss.
Venditti told The Gazette earlier this week that Albany Med had shopped around for sites and the most viable proposal was on Upper Union Street. It is in a wealthy ZIP code, he acknowledged, but it also is very close the border of one of the poorest ZIP codes in the county, he said. He also noted Albany Med’s leading role in the Capital Region as provider of subsidized and charity care.
Ellis Medicine CEO Paul Milton said Ellis has been operating at a roughly 1.5 percent margin in recent years but will be down to less than 1 percent in 2018 with the loss of revenue to Albany Med.
Milton also raised the David and Goliath angle, noting Albany Med’s $1.37 billion in 2016 revenue was triple Ellis’ $434 million. Ellis’ revenue exceeded expenses by 1.5 percent in 2016, while Albany Med had a much-higher 2.6 percent margin. (Albany Med says its margin is actually well under 1 percent — $10.5 million on $1.4 billion in 2017 revenue — because of factors that are unique to it but not included in its expense summary.)
Milton called the upper Union Street project bait-and-switch, charging that it was labeled an office procedure center because no state approval is needed to build one. However, he said, it was built to ambulatory surgery standards, and Albany Med then sought designation as an ambulatory surgical center not even two years later.
Venditti rejected this, saying Albany Med builds all of its facilities to highest standards to make them future-compatible.
Thursday’s Health Department council meeting veered off into discussion of a topic Milton and Venditti had both raised in meetings with The Daily Gazette: competition.
Venditti said competition is good for patient and provider.
Milton said competition is good but must be fair.
Jeffrey Kraut, chairman of the Public Health and Health Planning Council, said competition is irrelevant to the regulatory body.
The council should consider only three things, he said: The competence and character of the party submitting the proposal, the financial viability of what is proposed, and the public need for its services. Albany Med had passed all three tests, Kraut said.
Competition exists and is allowed under state regulation, he added.
“We cannot use this venue to stop this from happening,” Kraut said. “You can’t use a regulatory process to stop what is inevitable.”
He also directly addressed Ellis Medicine’s financial worries, saying they had been shown to be unfounded.
If one competing ambulatory surgical center is going to cripple Ellis, he said, its board of directors should explore the options for the future.
“I also believe Ellis will survive,” Venditti told The Gazette later Thursday.
Ellis currently is pursuing a similar strategy to Albany Medical Center: Construction of a large ambulatory surgical center in a wealthier ZIP code, in hopes of creating a large new revenue stream. But its plans are in Clifton Park, and there are no hospitals in southern Saratoga County from which it would siphon revenue.