Ellis Medicine on Nott Street in Schenectady.

Ellis Medicine is working with several other medical facilities to improve quality and reduce costs of government-subsidized careand will judge the results to see how to shape future collaborations.

Its a process that could lead to formal affiliations or a merger, though none is yet planned, proposed or even a concept at this point. After a decade of agreements announced by other area health care facilities, Ellis is one of the few left in this region without a formal partnership with another hospital.

It will remain that way for the short or even long term, said CEO Paul Milton.

The board is doing its homeworkand educating themselves on whats going on in health care and seeing if we need to do anything, he said. Theres no preconceived ideas that we have to do something.

In recent years:

In the wake of all this, rumors sometimes surface about an Ellis merger, but Milton said those rumors are unfounded.

What needs to happen, for Ellis and every other hospital, is to find ways to keep the patient population more healthy for less money, Milton said. If they dont, the cost of health care will rise at an unsustainably high rate.

To that end, Ellis has formed two alliances: one at federal direction to improve treatment provided through Medicare, the other at state direction to improve treatment provided through Medicaid.

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In a nutshell, what the Medicaid program is trying to do is say, Here's 100,000 lives, help us to manage them better. Try to keep them out of the ER for inappropriate ER visits and try to reduce the re-admittance ... in the next 30 days.

Its loosely referred to as 'managing population health' we're learning to do that, Milton said.

The group working to improve care and reduce costs for Medicare patients comprises Ellis, St. Peters and St. Marys Healthcare in Amsterdam. The three also are working together toward the same goal with Medicaid, joined by Hometown Health Centers in Schenectady and Whitney Young Health in Albany.

One thing that quickly became apparent through this process is how important it is for the partners to share data, and how complicated that is thanks to the differences in their computer systems, Milton said.

Its manageable but not perfect by any means, he said.

The two affiliations provide a sort of test run to see how collaboration works for Ellisand what it wants to get out of future partnerships.

It also gives Ellis a look at what Milton said will be the coming model of reimbursement for medical care, in which both government agencies and commercial insurers incentivize health care providers to keep people healthy, rather than heal those who get sick.

"Ellis looks at these changes that are coming from the insurance side, he said. Making a reasonable assumption that, in the future, theres going to be fewer health care dollars whether theyre government dollars or commercial insurance dollars and were going through the education now. Can we stay alone, and continue to be alone and independent doing this? And (can we) continue to affiliate in these kind of arrangements, or do we need to go through and do a more formal type of merger?

Ellis is looking at the mergers and affiliations that have occurred locally, as well as in other states, to see how the process has worked.

The thought process is playing out now rather than later, Milton added, because theres the luxury of time now: Were in a good position now with the services we provide and our financials;were not in a position of weakness. You really want to have this education while youre in a position of strength.

A key administrator of one of the regions largest hospital affiliations is Dr. Steven Frisch, senior vice president for integrated delivery systems at Albany Medical Center. He works closely with leaders at Saratoga Hospital and Columbia Memorial, and they have a combined service area that stretches 100 miles from north to south, through the heart of the Capital Region and beyond.

He said mergers and affiliations are a national industry trend.

Do you need to affiliate? I think its increasingly challenging to stand by yourself regardless of what size you are, he said.

External factors beyond any hospitals control federal policy changes, cost of medicine, cyberthreats, technology upgrades are evolving faster than hospitals' ability to implement programs to provide better care more efficiently at lower cost.

Is it better for us to share those costs, or is better for each of us to re-create them? Frisch said.

Albany-based health insurer CDPHP said the trend is not a positive one for its 420,000 subscribersbecause hospitals that merge or affiliate have more bargaining power and are able to negotiate higher payments for services. Insurers then pass along those higher payments to subscribers in the form of higher premiums. About 33 cents of each premium dollar goes to hospitals, CDPHP spokeswoman Ali Skinner said.

Thats always sort of the front-end messaging, she said, referring to the promise of increased efficiency and quality of care when hospitals join forces.We think thats a great thing.

"While the intentions are good, the consequences are not: Patients wind up paying more money. The literature is clear, Skinner said, citing a Robert Wood Johnson Foundation study that showed cost increases have sometimes exceeded 20 percent in markets where hospitals merged.

Its a fair statement on their part, Frisch acknowledged. He added, though, that hospital costs might well have increased even more without consolidation.

Whether or not systems are consolidating, yes, theres this phase where costs will go up. Its frustrating because we are taking costs out.

Dr. William Streck, chief medical and innovation officer at the Healthcare Association of New York State, said evidence so far indicates gains in quality and efficiency of care after mergers or affiliations, but not reductions in costs. I think it is a work in progress, he said.

HANYS is an industry group that represents 500 health care organizations across New York state, including all hospitals.

There has been a clear impetus toward consolidation, Streck said. Its been driven by both market forces and state policy.

This wont change, he added.

There are a number of financial imperatives.

One step the hospital industry is taking to respond to the changing health care market is building urgent care facilities. These can range from storefront clinics to large standalone facilities open 24/7 and offering a wide range of services. Ellis Medicine in 2012 opened its 38,000-square-foot Medical Center of Clifton Park near Northway Exit 9, which is staffed by nurses and physicians around the clock.

Ellis said the facility fulfills several purposes: Foremost, it keeps people out of the emergency department, one of the most expensive places to provide medical care. Also, it diversifies the patient mix to increase revenue for Ellis so it can remain viable and serve its whole patient population. Finally, it provides a measure of convenience by meeting patients where they are.

Louis Lecce stands in front of the Albany Medical Center Urgent Care building at 1769 Union St. in Niskayuna on Feb. 2, 2017. (Peter R. Barber)

The move into Clifton Park brought Ellis closer to Saratoga Hospitals service area. Around the same time, Saratoga Hospital and Albany Medical Center, which were not affiliated at the time, collaborated to build an urgent care center of their own Malta Med Emergent Care near Northway Exit 12.

Albany Med also built one of its EmUrgentCare facilities in Glenville, a 4-mile drive from Ellis Hospital, and then another on Union Street in Niskayuna, not even 2 miles from the headquarters of Ellis Medicine.

Ellis leadership expresses no annoyance at thisnearby competition, which it said is happening with increasing frequency in the industry.

Ellis said this is good from the patient's standpoint, as it increases choices, and it is good from Ellis perspective, as its a reminder it must provide quality care with compassion. Doing so, it said, will keep patients coming to Ellis.

By one industry estimate, there are about 10,000 urgent care clinics nationwide and nearly 400 in New York state.

Milton said Ellis Medicine has a few factors working against it as it maps its future: Some of its facilities are decades old; it provides a significant amount of mental health care, on which it makes little profit; and it provides a significant amount of indigent and Medicaid care, on which it makes no profit.

Faced with this, and the need to move to a population health model, Ellis would consider affiliating with an entity that has developed an expertise needed in the region, rather than reinventing the wheel, Milton said.

Can a place this size do that well, or does it need to scale up to get expertise to do it? Access to capital comes up. Ive got old facilities here that are going to need some investments. And based on the scale we are on now, are we going to have access to the capital we need?

Milton joined what was then Ellis Hospital in 2008 as its chief operating officer, just as the state Berger Commission ordered a number of closures and mergers among New York hospitals. Ellis Hospital was directed to merge with St. Clares Hospital, nearby in Schenectady, and with Bellevue Womans Center, a few miles away in Niskayuna, to become Ellis Medicine.

St. Clares was renamed the McClellan Street Health Center and was converted to an outpatient care, short-term rehab and nursing home. Bellevue retained its name and its mission as a maternity hospital. Ellis Hospital is still known by that nameand is home to a wide range of services, as well as the Capital Regions second-busiest emergency department.

The process was not painless, but Ellis Medicine is better off for it, and importantly, so are its patients, Milton said: I think it was very successful for this community.

Benefit to the community will be a guiding consideration in any future affiliations Ellis contemplates, Milton said.

Were only going to do something that improves the situation in this community, he said. When we go through our education with the board, one of the things were looking at is, what can we do with a partner? Lets say if it was a full merger: What is a partner bringing here thats going to make the care in this community better for the people in Schenectady? Thats the main criterion.

Id want to be very careful that this community doesnt lose anything that it has in any kind of merger or affiliation, he said.

Streck, at HANYS, said an optimum result of any affiliation or merger is increased revenue for the larger hospital involved; increased access to technology infrastructure and patient treatment options for the smaller hospital; and improved efficiency and reduced costs for both.

Frisch, at Albany Med, said the goal with the Albany-Hudson-Saratoga Springs affiliation was first to expand the medical offerings in the three communities and second to understand how to deliver care to the 100-mile long region as a whole, more efficiently and effectively.

The three entities have more than 100 locations, he noted.

What should the right distribution be across that region? he said. Thats going to be years in figuring out.

Since the affiliation, Columbia Memorial Hospital has increased its cardiology staff, added an ear, nose and throat specialist, and begun offering foot and ankle surgery. Saratoga Hospital was able to recruit an invasive cardiologist and gain access to Albany Medical Centers analytic tools; an information technology team from Albany Med was in Saratoga on Monday morning doing demonstrations.

I think our existing affiliations are working very well, Frisch said, adding that there will likely be more partnerships in the future, perhaps involving Albany Med.

Acute care is consolidating industrywide.

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Ellis Medicine stays solo despite partnerships all around - The Daily Gazette