Dr. John M. Murphy, president and CEO of Nuvance Health,...

Dr. John M. Murphy, president and CEO of Nuvance Health, left, with Northwell President and CEO Michael Dowling, at a signing ceremony to form a new integrated regional health system. Credit: Northwell Health/Lee S. Weissman

Northwell Health will seek regulators' approval to merge with Nuvance Health, another nonprofit health network and embark on an expansion that would give the state's largest private employer a presence in the Hudson Valley and western Connecticut. 

Northwell Health president and CEO Michael Dowling and Nuvance president and CEO Dr. John M. Murphy signed an agreement earlier this week to form a new regional health system, pending approval from the states of New York and Connecticut, and potentially, the Federal Trade Commission, the executives said. Formal applications haven't been submitted yet.

If approved, Northwell Health would become the parent organization for Nuvance, which has corporate headquarters and four hospitals in Connecticut, three hospitals in New York — in Rhinebeck, Carmel and Poughkeepsie — dozens of primary and specialty care offices and about 15,000 employees, according to Murphy. Northwell Health currently has 21 hospitals, hundreds of outpatient centers and a staff of more than 85,000, according to its website. The merger would be a cashless arrangement since both organizations are nonprofits, the executives said.

The combination would allow the organizations to share insight on new technology, along with clinical and administrative techniques, the CEOs said. The new group could use its size to negotiate better deals, more efficiently perform certain tasks, and invest the money back into the system, Murphy said. Research shows mergers can benefit patients, although a number of other outcomes are also possible, including higher costs.

WHAT TO KNOW

  • Northwell aims to merge with Nuvance, a health network in the Hudson Valley and Connecticut
  • The move would add seven hospitals and 15,000 employees to Northwell
  • Regulatory approval would be required from the two states and potentially the federal government 

“It made an awful lot of strategic sense for us to potentially come together,” said Dowling, noting that the health systems had collaborated on multiple initiatives over the past several years. “It broadens our catchment area. It allows two good organizations with a long history and a similar mission … to learn from one another and provide better care for people.”

Nuvance wanted to find stability by joining a larger health organization, particularly after struggling with growing expenses during the COVID-19 pandemic and encountering competition from tech firms and private equity-backed groups entering the field, Murphy said. He and his colleagues considered other potential partners, but found Northwell the most attractive candidate.

“Northwell has been very forward thinking,” Murphy said, noting the New Hyde Park-based organization has built up an outpatient network, explored emerging technologies and come up with ways to attract and retain personnel.

 “Why are we trying to reinvent the wheel, particularly in a position where, we’re relatively cash-constrained?” he added. “We thought it made sense to be part of something larger and contiguous, where the values were very much aligned.”

Both CEOs said they envisioned upgrading Nuvance facilities, but it was too soon to assess what would be appropriate. 

Researchers have found evidence that consolidation among health care providers has led to higher prices without evidence of improved quality, according to KFF, a nonpartisan health policy research group. This may occur even when the organizations involved operate in different geographic regions. These so-called cross market mergers are fairly common, and from 2010 to 2019, more than half of hospitals targeted in a merger were part of a cross-market deal, according to Jamie Godwin, a KFF senior analyst who focuses on the business practices of hospitals and providers. 

Negotiating power

Cross-market deals can help health systems contain costs, which can provide them with reserves for tough times or funds for hiring and capital projects, Godwin said. Bigger groups may be able to negotiate better rates with insurers, secure more favorable reviews from bond rating agencies, buy supplies in bulk or merge their electronic medical records system, and ultimately, reduce head count, Godwin said.

Federal regulators don't tend to raise antitrust challenges to cross-market mergers, though some experts believe these moves should be more closely monitored. Researchers say a health system that has expanded across markets could use its dominance in one region to broker higher reimbursement rates in other regions when negotiating with a health plan, KFF said.

Northwell already operates in Westchester County. Although Nuvance has a physical rehabilitation center within the county in Katonah, the bulk of its facilities are north of the area.  

Still, Northwell and Nuvance operate in markets that have some overlap, according to John Rizzo, a health economist who teaches at Stony Brook University. Rizzo said the merger would give them more market power and influence over prices, and he was skeptical such an arrangement would benefit New Yorkers. 

“They're talking about all of the things that are going to happen because they will have increased capacity,” Rizzo said. “It's not clear to me why they need to be bigger to do any of these things. They already seem to be pretty big.” 

But Nuvance and Northwell say they face competition from other health systems. Across the country, health care firms have consolidated because providers need to join forces to survive, according to Dowling. He said that Northwell's prior mergers had prevented several facilities from closing across Long Island and ensured that surrounding communities had access to health care.

“We've been working on reducing the growth in health care costs for years,” Dowling said. 

Dowling said he didn't expect the merger to lead to layoffs or other types of staff reductions. 

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