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Syracuse Health Care Market Works to Right-Size Hospital Capacity
After Many Failed Merger Attempts, Hospitals Strike a Deal
News Release
Aug. 4, 2011
FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org
The community has long had four general acute-care hospitals—one public academic medical center and three private, nonprofit hospitals—serving a relatively small population. Previous attempts to trim inpatient capacity through consolidation all ended in failure, with merging hospitals unable to resolve differences in physician cultures, business philosophies and management styles. However, the most recent proposed merger—public Upstate University Hospital’s acquisition of private Community General Hospital—did come to fruition in mid-2011.
The Syracuse metropolitan area has been in long-term economic decline, as the community lost its manufacturing base over the past several decades. As the economy declined, so did the area’s population. In recent years, the population of the Syracuse metropolitan area has stabilized at approximately 650,000 people.
“After many failed attempts to streamline Syracuse hospital capacity, the recently completed merger looks like it will help Upstate deal with acute capacity constraints and Community to reverse the recent exodus of physicians and patients and remain a viable facility,” said HSC President Paul B. Ginsburg, Ph.D.
In October 2010, HSC researchers visited the Syracuse metropolitan area—Madison, Onondaga and Oswego counties—to study how health care is organized, financed and delivered in the community. Researchers interviewed more than 40 Syracuse health care leaders, including representatives of major hospital systems, physician groups, insurers, employers, benefits consultants, community health centers, state and local health agencies, and others.
Syracuse is one of 12 communities across the country tracked intensively as part of the Community Tracking Study site visits, which are jointly funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform. HSC has been tracking these communities since 1996. Key findings of the report, Syracuse Health Care Market Works to Right-Size Hospital Capacity, available online at www.hschange.org/CONTENT/1224/, include:
- The Upstate-Community merger was widely viewed as a net positive for the Syracuse community, although some payers were concerned that the consolidation may lead to increased hospital prices. How the merged entity will handle longstanding tensions between academic physicians and community physicians remains to be seen.
- Excellus Blue Cross Blue Shield increased its dominance in the small-to-mid-sized insurance market segments but lost some large, prominent self-insured accounts, as local employers questioned Excellus’ data-reporting capabilities and commitment to the Syracuse community.
- Despite severe budget woes, New York not only expanded already generous eligibility standards for Medicaid and related public insurance programs, but also streamlined enrollment and renewal, leading to more Syracuse residents gaining public coverage.
Historically, Syracuse has lagged other communities in health-sector developments, and this continued to hold true in recent years. Trends seen in other markets—such as hospital employment of physicians, consolidation of physician groups and the growth of consumer-driven health care—have been taking place in Syracuse but at a slower pace and with less intensity than seen elsewhere.
The recent recession did not take as heavy a toll in Syracuse as in most other metropolitan areas—a result, many observers said, of the community largely being bypassed by both the initial boom and the subsequent collapse in the credit and housing markets.
Market observers described the Syracuse health market as a paradox in that “it’s a low-cost market…in a high-cost state.” In part, because of the long-term economic downturn, resources such as land and labor tend to be inexpensive in Syracuse. At the same time, New York’s high tax rates and heavy regulation make it an expensive state to do business in.
Syracuse health care providers also are more reliant on Medicare and Medicaid revenue than those in many other areas and may have become more efficient to accommodate lower public program payment rates.
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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.
