Northwell-Nuvance health systems merger clears federal and state antitrust reviews

Northwell Health is two approvals away from merging with the Connecticut-based health system Nuvance Health, according to Barbara Osborn, a spokeswoman for the New Hyde Park-based health system.

Northwell, the largest health system in the state, announced plans in February to affiliate with Nuvance, a nonprofit network seeking financial stability while struggling with competition from private equity-backed groups and hardships brought on by the COVID-19 pandemic. Federal and state antitrust regulators have concluded reviews of the proposal to expand Northwell's reach from 21 hospitals on Long Island and in New York City and Westchester to 28 hospitals that span the Hudson Valley and western Connecticut.

The Federal Trade Commission, which enforces antitrust law, ended its examination in July, and the merger may now move forward, Osborn said. Health executives made specific clinical commitments by signing an "agreement of assurances" last month that concluded state antitrust investigations launched by the New York and Connecticut attorneys general. The proposal still needs approval from both states' health regulators, who are examining how the arrangement may impact the quality and accessibility of medical care.

To assure the attorneys general the deal would be beneficial, the health systems committed to expanding maternity, labor, delivery and women's health services at Sharon Hospital in Connecticut for at least five years. They pledged to maintain the staffing levels and array of services offered at Putnam Hospital in the Hudson Valley for at least one year. Northwell agreed to invest about $200 million to establish a unified electronic medical system at Nuvance facilities within three years.

"This agreement underscores our shared vision to expand and enhance affordable access to healthcare services for patients," Northwell president and CEO Michael Dowling said in a statement. "We look forward to building on the world class care that Nuvance’s staff members and providers deliver each and every day."

The arrangement would make Northwell the parent organization for Nuvance, which has corporate headquarters and four hospitals in Connecticut and three hospitals in upstate Rhinebeck, Carmel and Poughkeepsie. Nuvance also runs primary and specialty care offices and employs about 15,000 people, while 85,000 work for Northwell. 

The two groups have little geographic overlap. Even when two organizations operate in distinct markets, their merger can push up prices, according to research from KFF, a nonprofit, nonpartisan health research group. These sorts of deals also can benefit patients by empowering health systems to act more efficiently, and reduce costs, KFF noted.

The attorneys general offices addressed this concern by requiring the newly merged health group to negotiate rates for its Connecticut and New York facilities separately for five years. This will prevent the larger health group from using its size to compel health plans to sign contracts in areas where they don't require service or where they can secure more competitive rates, said John Rizzo, a health economist who teaches at Stony Brook University.

"If they negotiate separately in each state, that in effect reduces their bargaining power. So that’s an important provision," said Rizzo, who said he was initially skeptical of the proposal, but thinks the agreement with the attorneys general addressed his concerns while avoiding a costly, time-consuming court case. "Northwell stepped up and put it in writing, in a contract that we're going to do A, B, C … that changes the game."

But these sorts of agreements are "relatively common" and can be challenging to oversee, said Jamie Godwin, a KFF senior analyst who focuses on the business practices of hospitals and medical providers.

"Generally, their potential effectiveness in preventing price increases tied to such mergers may hinge on how effectively the provisions can be monitored and enforced," Godwin wrote in an email. "Price negotiations between providers and health plans occur behind closed doors, which may make it difficult for the states' attorneys general to provide oversight." 

The affiliation could secure New York State approval on Sept. 12 when the New York Public Health and Planning Council is slated to consider it. The proposal also must be approved by the Connecticut Office of Health Strategy.

Over the course of 2023, Northwell reported net operating revenue of $197.7 million and total gains of $915.2 million across its system, according to its application to New York health regulators. 

Nuvance reported operating losses of more than $164.2 million across its system for the year ending Sept. 30, 2023, according to its application.

By Sarina Trangle

sarina.trangle@newsday.comSarinaTrangle

Sarina Trangle covers affordability and cost of living issues and other business topics. She previously worked as an editor and reporter at amNewYork.