Update: Adds background in paragraphs five, six and 12.
The Montefiore Health System is assuming operational control of Yeshiva University’s Albert Einstein School of Medicine.
Montefiore will take responsibility for the financial management of Einstein, but Y.U. will remain the degree-granting institution with “a key role in the educational aspects of the entity,” according to a joint statement issued Tuesday by the institutions, which have collaborated on some level for 50 years.
Montefiore Medical Center in the Bronx is the teaching hospital for Einstein, which has 734 medical students, 236 doctoral students and 106 students in the combined M.D./Ph.D. program.
The announcement comes two months after a report by Moody’s Investors Service warned that Y.U. was at risk of running out of money by the end of 2015 unless operations changes were made. The report cited equipment upgrades at the Einstein school as one reason for cost overruns at Y.U. Moody's could not be reached for comment as to whether this move could cause it to upgrade or further downgrade Y.U.'s debt rating, which it put at B3, a speculative grade, in March.
Indeed, the costs of running a hospital are enormous, said Laurence McCullough, a professor of ethics at Baylor College of Medicine in Houston who has written on the relationship between teaching hospitals and medical schools. University presidents used to look at hospitals as generators of revenue; that's no longer the case, he said.
"Think about the cost of just the generators every hospital has to have in reserve in case they lose power," McCullough said. What's more, hospitals must contend with such costs even as government funding and revenue from patient care and tuitions flatten out.
The deal between Einstein and Montefiore will create a new entity, giving Montefiore “significant governance and financial responsibility.”
“We look forward to further strengthening Einstein as a major research institution that spans the scope from bench science to healthcare delivery transformation,” Dr. Steven Safyer, CEO of Montefiore, said in a statement.
Y.U. President Richard Joel called the move “a powerful and important step towards building a financially sustainable Yeshiva University.”
Under the agreement, faculty will retain academic appointments at Einstein but will be employed by Montefiore, according to the statement. Einstein also is affiliated with six other hospital systems in the New York area.
Montefiore, named for the 19th-century British Jewish philanthropist Moses Montefiore and founded by New York Jews, consists of six hospitals and an extended-care facility with a total of 2,059 beds, as well as a nursing school.
The newly announced arrangement is not uncommon, said McCullough, citing New York-Presbyterian, the independently owned hospital where medical students from both Columbia and Cornell universities train, as one example. However, Johns Hopkins University owns its medical school and hospital, as Yeshiva did Einstein, until now.
Helen Chernikoff contributed to this report.