The idea of building a new hospital was hatched in happier economic times, but leaders at the two hospitals still think that the growing, aging suburban population in central Montgomery County can sustain a new hospital even if the sour economy depresses demand and health reform lowers insurance payments.
"I've been around long enough to know a little about measured risk, and I think this is very measured, very carefully thought out," said Barry Freedman, president and chief executive officer of North Philadelphia-based Einstein. He said he was "excited and confident this is going to work."
The project, he said, is creating 600 jobs now. When the new, as-yet-unnamed hospital opens, most Montgomery Hospital employees will work there, along with an additional 200 to 300 workers.
Einstein is footing the bill for the new facility. Montgomery Hospital will consolidate with Einstein later this year, said Tim Casey, president and CEO of Montgomery.
Casey said he knew soon after he arrived at Montgomery 16 years ago that the building had to be replaced. Parts of the medical center were built 50 to 75 years ago, and there is little physical room to expand. Montgomery needed to become part of a larger system with more resources to get the job done, he said.
Einstein saw opportunity in a region where it says 65 percent of residents bypass community hospitals such as Montgomery and nearby Mercy Suburban to go to bigger hospitals farther away. By working with Montgomery, it starts off with an established patient base and staff. It can also use Einstein doctors to enhance specialty cancer, cardiac, and orthopedic care. Einstein has already started running Montgomery's emergency services. Bucking a trend at many hospitals in the region, it plans to continue delivering babies.
The new hospital will benefit from a wealthier patient base more likely to have private insurance. Private insurance typically pays better than the government - $1.20 for every dollar of cost compared with 85 cents for Medicaid and 97 to 99 cents for Medicare, Freedman said. Only 16 percent of Einstein's patients and 31 percent of Montgomery's patients have commercial insurance. Freedman expects more than half the patients at the new hospital to have it.
While many city hospitals have seen suburban partners primarily as a way to gain a bigger referral base for the mother ship, Einstein does not expect patients to travel from East Norriton to North Philadelphia. Freedman said he thought economies of scale would benefit both hospitals.
The big unknown is how the economy and health reform will affect the project. Freedman concedes that makes him nervous. Demand for care fell when the economy tanked. Several health consultants said health reform would give more people insurance - a big plus for hospitals - but could lead to lower reimbursements.
Consultant Gerald Katz said Montgomery Hospital "desperately needs" a new building, and the deal makes sense for Einstein, but the effect of the economy is uncertain. "The economy being what it is, it's not a slam dunk, that's for sure," he said.
Alan Zuckerman, president of Health Strategies & Solutions, of Philadelphia, is more concerned about reform. "I'd be very nervous about spending multimillions as we edge closer to the impact of health reform," he said. "The one thing that's pretty clear is that we're going to have do to more with less as providers."
Contact staff writer Stacey Burling at 215-854-4944 or firstname.lastname@example.org.