Big Apple Hospitals: Too Big To Fail?

New York City is a pretty big town. It thus supports more service organizations than any other American city to cater to all of its residents.

No other American city, for instance, is covered by four major daily newspapers: the Times, News, Post, and Wall Street Journal. Not to mention Long Island’s Newsday and Newark’s Star Ledger!

And no other city supports nine professional sports teams, three in the National Hockey League alone. In addition to the fledgling professional teams in the Women’s NBA and Major League Soccer, along with minor league baseball teams in Brooklyn and Staten Island.

Of course, not every resident of the Big Apple reads a newspaper or roots for a sports team, and yet each should be concerned about maintaining his (her) health. So how many major hospital networks does the Big Apple need to serve its citizens?

From Hospitals to Health Systems

Hospitals are no longer simply destinations for people who become seriously ill or who require emergency treatment. They now reside at the heart of health systems, and they are focusing on the delivery and management of preventive care services.

In addition, many health systems are now growing into full-fledged Accountable Care Organizations (ACOs), entities that are responsible for managing all care for both mainstream consumers and patients with special needs. They are incorporating Patient Centered Medical Homes into their service networks, which serve as points of access for coordinating care and navigating the provider system.

Supporters of Libertarians like Ron Paul, and even traditional conservatives like Steve Forbes, might believe that these emerging entities were introduced by the Patient Protection and Affordable Care Act of 2009. In reality, though, they were already established by 2009, and few doubt that they will continue to expand whether or not the Act survives its Supreme Court hearing and the upcoming Presidential election.

The Columbus Comparison

So how many health systems does the nation’s largest city need? How many does it require to serve a bustling population of over eight million people, many of them elderly, obese, or with other severe medical conditions?

Let’s address that question with a comparative example. Nationwide Children’s Hospital of Columbus, Ohio, for instance, has established the nation’s largest pediatric ACO in a city of less than 1 million citizens. If Nationwide can succeed in a city like Columbus, then one would surmise that New York could easily support at least half a dozen major hospital systems.

In fact, considering the stunning diversity of the citizens of the Big Apple, far more than half a dozen systems may be both sustainable and appropriate. It now appears, though, that New York is well on its way to consolidating down to a mere three hospital networks.

The Drive to Consolidate

There is no single statistic that measures the size of a hospital network. A service oriented facility may provide many primary care services to uninsured patients but receive very little revenue for its efforts, whereas a cardiology or neurology unit in a teaching and research institution may earn significant revenues from relatively few surgeries.

Last week, though, two of the “largest” (as measured by any statistic) New York health systems signed an agreement to pursue a merger. New York University’s Landone Medical Center and Continuum Health Partners, itself a result of a merger between Beth Israel Medical Center and St. Luke’s Roosevelt, were the signatories.

A merger between the two entities would allow it to join New York Presbyterian Hospital and the New York City Health and Hospitals Corporation as the three major hospital networks in the city. If that occurs, The Mt. Sinai Hospital and a handful of other remaining independent players would then experience immense pressure to merge into the troika of dominant networks.

Banks vs. Hospitals

In an era when a small number of financial service institutions has generated an immense amount of systemic risk for our society by becoming “too big to fail,” can we afford to allow a small number of health care institutions to do the same? Are the financial and health care industry sectors analogous to each other in terms of the level of risk that industry consolidation imposes on us?

Let’s assume, for the sake of argument, that the hospitals of New York City consolidate eventually into three equally sized networks. If one of the networks should fail, could the government refuse to offer it a financial bail-out? The only alternative would be to rely upon the two remaining networks to immediately expand by 50% in order to serve the failed institution’s patients, an achievement that would likely prove impossible.

On the one hand, the economic forces that are driving hospitals to consolidate with each other may indeed be inexorable. But on the other hand, they are undoubtedly generating a daunting array of social and economic risks that deserve our immediate attention.