N.Y. AG settles with Utica hospitals to address competitive concerns

UTICA — New York Attorney General Eric Schneiderman today announced a settlement with Utica hospitals Faxton-St. Luke’s Healthcare and St. Elizabeth Medical Center, resolving concerns that the hospitals’ proposed affiliation would adversely affect competition in the health-care market in the Utica–Rome region.

The settlement allows the two “financially troubled” hospitals to combine their operations to reduce costs and enhance the quality and availability of key health-care services for patients in the greater Utica area, the attorney general’s office said in a news release.

“This settlement allows Utica’s two biggest hospitals to combine in order to survive in a challenging economic environment, while ensuring that the hospitals will fulfill their promise to use the partnership to improve patients’ access to quality health care and not to increase prices.” Schneiderman said in the news release.

The provisions ensure that the hospitals will use their combination for the benefit of patients and not as a platform for “exerting market power and imposing higher health-care costs on patients,” the office said.

The agreement also ensures continued patient access to “key” reproductive-health services.

The settlement allows the transaction to proceed but has various provisions to ensure that the hospitals will not “abuse” their new market position by “foreclosing” competing providers from the market or excessively increasing rates directly following the combination, the attorney general’s office said.

In the settlement, the Utica hospitals agree not to require independent physicians to work exclusively at the hospitals, or to compel health plans to reimburse competing hospitals or health-care providers at the same or lower rates than the health plans reimburse the hospitals.

The Utica hospitals also commit to negotiate “in good faith” with rate payers, including commercial insurers and governmental managed-care insurers, Schneiderman’s office said.

If the insurers don’t believe that the hospitals are acting fairly, the settlement gives the payors the right to continue their currently-existing relationships with the hospitals for five years at current prices, subjected to annual increases not to exceed “historic” levels, the office said.

Additionally, the settlement allows the attorney general’s office to ensure that the hospitals have implemented their promised efficiencies prior to termination of the rate-protection provisions.

Faxton-St. Luke’s Healthcare and St. Elizabeth Medical Center operate in a “challenging economic environment” that includes an “unusually high refugee population and some of the neediest patients in the state,” Schneiderman’s office said.

The hospitals have suffered “significant” financial losses in recent years, and it is “highly questionable” that they can independently surmount these challenges without “negatively impacting” the availability of vital health-care services in the Mohawk Valley, the attorney general added.

The hospitals directly compete with one another, but also face competition from nearby community hospitals and hospitals in nearby cities such as Cooperstown, Syracuse, and Albany.

The scope of competition between the merging hospitals is “limited,” with each hospital providing services that the other does not. Most of each hospital’s patients are covered by Medicare or Medicaid, where rates are set by the federal government and not by competition between them, Schneiderman’s office said.

Contact Reinhardt at ereinhardt@cnybj.com