St. Peter’s, Ellis hospital systems agree to merger proposal

St. Peter’s Health Partners and Ellis Medicine have signed a non-binding letter of intent to merge operations, multiple sources have confirmed.

The two organizations, based in Albany and Schenectady, are among the region’s three largest hospital systems, the other being Albany Medical Center.

Born of mergers themselves, St. Peter’s and Ellis have operated independently of each other for over 100 years. They have, however, collaborated on a number of projects over the years, including joint ventures designed to lower health care costs and reduce avoidable hospital admissions in the region.

On Wednesday, St. Peter’s president and CEO Jim Reed sent a letter to colleagues announcing the intent to “integrate,” saying it signifies the “next logical step” in the organizations’ longstanding collaboration.
“Our two organizations share a vision for a more fully integrated, region-wide approach to care that aims to improve the health of our neighbors; embraces new models such as value-based care; and lowers overall health care costs for our community,” he wrote.

With the signing of a letter of intent, St. Peter’s and Ellis will now begin the process of developing an organizational structure, he said. A final agreement will require approval by the boards of both organizations, as well as regulatory agencies such as the state Department of Health.

There is no specific time frame for completion, Reed said, but added that “the rapid nature of change in health care demands expediency.”
“I would also like to underscore that, as SPHP and Ellis evaluate a path forward, it is with an eye toward respecting the heritage of all the institutions that make up SPHP and Ellis Medicine, while expanding access to care and improving outcomes for the Capital Region community,” he said.

Both Ellis and St. Peter’s health systems were created from mergers that occurred this century, but their forerunners have roots dating back to the 1800s.

The original Ellis Hospital dates back to 1885, when the Schenectady Free Dispensary opened on lower Union Street with just five beds. It grew and relocated over the years, eventually occupying a plot at the corner of Nott Street and Rosa Road. In 2006, a state commission ordered the restructuring of hospitals statewide, and Ellis Hospital, the old St. Clare’s Hospital on McClellan Street (now an outpatient center) and Bellevue Woman’s Center in Niskayuna consolidated to become Ellis Medicine. A Clifton Park urgent care location was constructed in 2012.

St. Peter’s Health Partners, which is privately owned by national Catholic health system Trinity Health, formed in 2011 from a merger of three local health systems: Northeast Health, St. Peter’s Health Care Services and Seton Health. Four legacy hospitals in Albany and Troy came with the package — St. Mary’s, which opened in 1848; Albany Memorial, which opened in 1868; St. Peter’s, which opened a year later; and Samaritan Hospital, which opened in 1898. Together, they are certified to operate over 850 beds.

At just 438 beds, Ellis remains the smaller of the two and further consolidations have been explored over the years.

Just over two years ago, however, Ellis announced that it had decided to remain independent following a two-year review that set out to determine whether a potential merger, consolidation or affiliation with another entity might better serve the organization and community.

During that time, Ellis solicited, received and considered affiliation and merger proposals from both local and out-of-state health care organizations. Leaders declined to name those behind the offers, citing confidentiality agreements, but confirmed they had received responses from within the “local market.”

Ultimately, however, the board decided that remaining a smaller, local and independent operation would be in the community’s best interest, CEO Paul Milton said at the time.

“We know it’s going against the grain,” Milton had said. “In any kind of business, there are some pros you get from being bigger, whether you’re negotiating on rates or to buy supplies, you’re probably a little bit stronger. But there are also strengths to being smaller. You’re more nimble, more creative, more in control of your own destiny.”

It’s unclear how much the coronavirus pandemic may have impacted the organization’s change of heart. Hospitals nationwide were hit hard financially as revenue-generating, non-essential procedures were halted and people began to avoid seeking care for fear of catching the virus.

By June, the pandemic had led to operating losses of about $56 million for Albany Medical Center, $50 million for Ellis Medicine in Schenectady, and $40 million for St. Peter’s Health Partners. Federal relief funds have helped to offset some of the losses, but hospital leaders said they expect to feel the pinch well into 2021.

“Our position as health care leaders in our region demands that we always look ahead with a focus on what’s best for the long-term health of our communities, and evaluate how we are delivering care today and how care can best be delivered in the future,” Reed wrote in his letter to colleagues Wednesday. “We owe it to the people of the Capital Region to do so.”

Spokespeople for the hospital systems did not respond to questions about the merger Wednesday, but said more information would be released later in the day. A media advisory was issued in the afternoon stating that Milton and Reed would hold a joint virtual news conference at 3:30 p.m.

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