Middletown, N.Y.-based Garnet Health plans to affiliate with Montefiore Health System, a move that health system leaders believe will secure the future of rural healthcare across the Hudson Valley and Catskills regions.
The two organizations signed a letter of intent in October and aim to finalize a definitive agreement by the end of 2025. If approved, the deal would add Garnet Health’s three hospitals and more than 850 medical staff members to Montefiore’s academic network, bringing new scale, clinical support and financial stability to a system under mourning pressure.
“Independent hospitals just don’t have access to the kinds of resources we need to sustain care in rural New York,” Garnet Health President and CEO Jonathan Schiller told Becker’s. “This affiliation is about strengthening local care — not moving it elsewhere — and doing so with a partner that shares that commitment.”
The ‘right fit’ for rural healthcare
Montefiore, a 10-hospital academic system with more than 200 outpatient sites, sees the proposed affiliation as a natural extension of its regional footprint and mission. The New York City-based system aims to support Garnet Health with advanced clinical services and medical education while preserving the community hospital model.
That community-first mindset was a deciding factor for Garnet Health.
“We had conversations with other systems in the region, but Montefiore stood out,” Mr. Schiller said. “They’re focused on delivering care locally, in patients’ home communities — not extracting it — and that is something that not every health system was able to commit to. That’s what made it the right fit.”
He emphasized that Garnet Health feels a strong responsibility to its community, which is relying on the system to make the right decision. That means choosing a partner that will invest in strengthening care locally, rather than redirecting patients to larger, distant hospitals.
Primary care, behavioral health and physician training
Garnet Health is prioritizing growth in several key service lines as part of the affiliation, including outpatient behavioral health, primary care and obstetrics — all areas of high need in the health system’s 2,000-square-mile rural service area.
Specialty services such as neurosurgery, stroke intervention and cardiothoracic surgery are also on the roadmap, with the goal of reducing the number of patients forced to travel out of the region for advanced care.
“These are services our population needs today but often has to leave the region to receive,” Mr. Schiller said.
Graduate medical education is another core focus. Garnet Health operates seven residency programs, but its rural setting often limits rotation opportunities. Montefiore runs one of the largest graduate medical education enterprises in the country and could offer Garnet Health residents access to world-class training while helping the health system retain physicians in the region long term.
Stabilizing amid ubiquitous financial pressures
Garnet Health’s pursuit of a partner follows a period of restructuring and cost containment. The system recently laid off workers, closed underused outpatient services and continues to grapple with reimbursement challenges and thin rural margins.
Those pressures aren’t unique to Garnet Health. Nationwide, financial instability — compounded by shifting federal policy, delayed payments from government payers and the ongoing government shutdown — has made it more difficult for rural hospitals to operate predictably.
CMS recalled all furloughed employees on Oct. 27 to support Medicare and ACA Marketplace open enrollment efforts. Nearly half of the agency’s 7,700-person workforce had been furloughed since Oct. 1. The move followed rising concern over disruptions to telehealth reimbursement, hospital-at-home programs and other core healthcare operations.
“What we’re seeing in Washington is concerning. There are valid arguments on both sides, but as healthcare providers, we feel caught in the middle,” Mr. Schiller said. “It really comes down to making sure that when we expect to be paid by [government] payers for services we’ve already provided, we actually are. We’re hopeful this gets resolved soon.”
The days of the independent hospital may be numbered
Looking more broadly, Mr. Schiller said he believes more hospitals will pursue affiliations, or mergers and acquisitions — not just for financial reasons, but to better manage regulatory complexity and operational risk.
“I think the days of the independent hospital or the small health system may be numbered,” Mr. Schiller said. “With the uncertainty around federal reimbursement structures, I think one of the unintended consequences is that it can slow the development of new services for organizations that lack size and scale.”
“They just can’t take the risk,” he added. “One wrong decision, one wrong estimate, one wrong guess, and they’re knee-deep in trouble.”
He added that size and scale helps hospitals and health systems weather reimbursement swings and stay focused on quality care.
“I don’t see any of these affiliations, mergers or acquisitions being undone — not when they bring real benefits to the communities involved,” Mr. Schiller said. “I think consolidation is going to continue. Having the scale to spread overhead across a larger geography also makes care more affordable.”
