For-profit hospitals 'inevitable' for New York, LIJ chief says

The entry of for-profit hospitals into the New York State health care market is "inevitable," the chief executive of the North Shore-LIJ Health System said Thursday.

Speaking at a breakfast sponsored by the Long Island Association, the region's largest business organization, Michael Dowling said it would be "foolish" to assume that New York would continue to exclude for-profit hospitals when nearly every other state allows them.

"We've just got to be good enough to compete," he said. "They would put pressure on us, but honestly we need the pressure . . . to get better . . . and that's fine with me."

Gov. Andrew M. Cuomo included a pilot project in his 2014-15 budget proposal that would have allowed for-profit investment in two hospitals, but the provisions were stripped after a political tussle in Albany.

Still, Kevin Dahill, president and CEO of the Nassau-Suffolk Hospital Council Inc., which represents the region's hospitals, said he tends to agree with Dowling.

"It's really a question of the legislature at the state level," he said. "It's hard to . . . project whether it will be in the next year or two."

Almost 86 percent of New York's community hospitals are organized as not-for-profits like Great Neck-based North Shore-LIJ, according to 2013 data from The Henry J. Kaiser Family Foundation, with the remainder run by government entities.

Dahill said state law bars publicly traded companies from owning hospitals. But in the United States overall, more than 21 percent of hospitals in 2013 were owned by for-profit companies, according to the foundation's data.

Though North Shore-LIJ operates as a not-for-profit, it includes some for-profit units and it faces scrutiny from Wall Street as an issuer of debt.

"Two weeks ago, I spent the whole week with [rating agencies] Moody's, Fitch and Standard & Poor's," Dowling said. "We're treated like a for-profit even though we're not."

He said that if for-profit companies get a foothold in health care, North Shore-LIJ will need to have greater access to capital to fund growth.

North Shore-LIJ has been a leader in the health care consolidation trend, Dowling said, expanding to eastern Long Island, Manhattan, Brooklyn, and Westchester, and forging alliances with institutions in Cleveland, Florida and Stockholm.

"Everybody is consolidating," he said. "That will continue for a few more years, but frankly, then there won't be too much more to consolidate with unless you go outside what we consider today our natural geography."

Other health care groups like Ascension Health and Kaiser Permanente have made that leap, expanding nationwide, he said. Ascension, based in St. Louis, for instance, has facilities in 23 states and the District of Columbia, according to its website.

Dowling said the major not-for-profit health care systems like Ascension also are eyeing the New York area, though the market's high costs and tough regulatory environment "scares them a little bit."

North Shore-LIJ is New York State's largest private employer with a head count of about 55,000, and Dowling said he hires about 150 new employees a week.

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.