Garnet Health Says Planned Montefiore Affiliation Will Strengthen Local Care, Preserve Services

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Garnet Health has signed a letter of intent to pursue an affiliation with Montefiore Health System, a move leaders say will help sustain and strengthen healthcare services in Sullivan and Orange counties amid financial pressures facing hospitals nationwide.

“If you look at what’s happened across the country, most smaller hospitals have already aligned with larger health systems,” said Garnet Health Medical Center – Catskills CEO Jerry Dunlavey. “The smaller health systems and the smaller hospitals standing alone are becoming less and less of a factor.”

Dunlavey said Garnet Health — despite a strong market share — faces the same economic pressures as many community hospitals, including rising labor and supply costs, inflation, and stagnant or declining reimbursements.

“You couple that with an increased supply cost — things like pharmaceuticals, energy, electricity or gas — and then general inflation was very, very challenging,” he said. “And then there’s the issue of reimbursement, where in some cases it’s been declining or stagnant.”

He said the aging population is also affecting hospitals’ bottom lines as more patients move from commercial insurance to Medicare, which reimburses at lower rates.

Shared Services and Clinical Strength
Dunlavey said affiliating with a larger health system will allow Garnet to benefit from “shared services” such as information technology, finance, human resources, and procurement — creating “economies of scale” and stronger negotiating power for contracts.

He also highlighted Montefiore’s clinical expertise as a major benefit. “Montefiore offers really tertiary clinical expertise that will help us further develop, grow, and expand our service lines,” Dunlavey said. “A great example of that would be in cardiology and our cardiac surgery program at the Middletown campus.”

He emphasized that this agreement is an affiliation, not a merger or acquisition. “There’s been no sale. There’s been no purchase of our organization or of our assets,” Dunlavey said. “Healthcare in New York State is very highly regulated, and some of that regulation protects our community.”

Focus on Local Care
Dunlavey stressed that the intent of the partnership is to keep care local — not to funnel patients downstate.

“This isn’t a model that’s designed to take patients from our community and send them to a hospital in the city,” he said. “The plan, which is mutually agreed upon by Montefiore and us, is that wherever we can, we want to provide care locally, have easy access to care and to follow-up.”

He added that Garnet’s board made clear during negotiations that rural health and key services such as behavioral health, obstetrics and gynecology, and cardiac care must remain available in the community.

“Our Harris campus and our Callicoon campus need to stay viable,” he said. “These were important services that we wanted assurances were going to continue in the community — and that is part of both the letter of intent and our final agreement.”

Dunlavey said the affiliation also strengthens Garnet’s long-term goal of building a new replacement hospital in Sullivan County and improving physician recruitment.

Medicaid Cuts and Federal Challenges
The partnership, Dunlavey said, won’t erase the impact of upcoming federal Medicaid cuts but could help Garnet better position itself to absorb losses.

“The affiliation doesn’t alleviate those concerns, but it does offer opportunity to improve operations in other areas that could help offset some of the loss,” he said. He added that Montefiore’s experience with safety-net transformation grants could make it a strong partner for future funding applications.

What’s Next
The next phase in the process is to finalize a definitive agreement, which Dunlavey expects to take about 45 days, followed by state and federal regulatory review that could take up to two years.

“The approval has to happen at two levels — the New York State Department of Health and the Federal Trade Commission,” he said. “We’re confident that we’re in a good position to get both state and federal approval.”

As the process moves forward, Dunlavey said Garnet Health will continue to be transparent.

“Our board and our leadership team are committed to open, honest, and transparent communication throughout this process,” he said. “We live here. We want great healthcare for our community and for our families. This is a big step in ensuring our ability to provide care both now and into the future.”

Image: The Emergency Entrance at Garnet Health’s Harris location. (Credit: Garnet Health Medical Center-Catskills)