CORRECTION: 7/18/13, 1:18 p.m. EST. The original version of this article overstated the compensation earned by in-house lawyers at Continuum in 2011. The 19th paragraph of the story has been revised to include the correct information. We regret the error.

A pair of Am Law 100 firms are advising The Mount Sinai Medical Center and Continuum Health Partners in connection with a deal announced this week that will see the two entities merge to create one of the country’s largest nonprofit hospital chains.

While the transaction’s financial terms have not been disclosed, lawyers familiar with the deal say the legacy hospitals’ status as nonprofits means there is no actual purchase price and that the two will simply combine their assets under the Mount Sinai Health System banner.
 
The merger, which was unveiled earlier this year and has already received FTC approval as it awaits the go-ahead from other state and federal regulators, is tentatively slated to close sometime this fall. Operational details of the proposed tie-up are not yet known, but the two hospitals say in a joint press release touting the deal that it will benefit patients.
 
New York–based Continuum controls a network of community-focused hospitals that includes the Beth Israel Medical Center in Manhattan and Brooklyn, the St. Luke’s–Roosevelt Hospital in Manhattan, and the New York Eye & Ear Infirmary—facilities that collectively brought in an estimated $2.8 billion in gross revenue last year. Becker’s Hospital Review recently ranked Beth Israel as the 22nd-largest nonprofit hospital in the nation with 1,011 beds, while 868-bed St. Luke’s-Roosevelt landed at 47th on the list.
 
Mount Sinai, whose 1,221-bed namesake hospital on Manhattan’s Upper East Side is one of the oldest in the United States and the nation’s 14th-largest nonprofit facility, is affiliated with the Icahn School of Medicine at Mount Sinai, which took the name of the famous activist investor following his $200 million donation late last year. Mount Sinai’s system of specialized medical facilities took in $1.8 billion in 2012, according to Modern Healthcare.
 
As is true of many hospitals, legal fees are among Mount Sinai’s primary outside expenses. Federal tax filings for 2011 show that Mount Sinai paid out more than $4.8 million to Jones Day, $1.8 million to Skadden, Arps, Slate, Meagher & Flom, $886,592 to Willkie Farr & Gallagher, and $347,578 to Chicago’s Marshall, Gerstein & Borun.
 
Jones Day and Marshall Gerstein received $1.8 million and $547,368, respectively, from Mount Sinai in 2009 and 2010, according to tax filings by the nonprofit. In 2009 the hospital also paid another $470,180 to the now-defunct Dewey & LeBoeuf and $172,449 to Baker Botts.
 
Skadden, whose late name partner Joseph Flom supported cancer research at Mount Sinai, has taken the lead advising the hospital chain on its merger with Continuum. Corporate partner Richard Grossman, corporate of counsel Blaine “Fin” Fogg, antitrust partner Clifford Aronson, antitrust counsel Thomas Pak, and associates Eric de Cholnoky, Reese Fogle, Juano Queen, and Michael Sheerin are leading the Skadden team working on the matter.
 
Fogg is a member of Mount Sinai’s governing board of trustees, a position he holds along with many other individuals of prominence, including Sullivan & Cromwell chairman Joseph Shenker, Wachtell, Lipton, Rosen & Katz litigation partner Bernard Nussbaum, hedge fund billionaire and former attorney Marc Lasry, Lasry’s sister Sonia Gardiner, and Harvard Law School graduate and private equity executive Donald Gogel.
 
Manatt, Phelps & Phillips, meanwhile, is representing New York–based Continuum in connection with the Mount Sinai merger through corporate partner Peter Olberg, corporate and finance partner Dayan Rosen, and associate Michelle McGovern. Manatt, which boasts of having one of the country’s the top health care law and consulting practices, counseled private equity firm Cerberus Capital Management in 2010 on its $830 million acquisition of Caritas Christi Health Care.
 
Attorneys serving on Continuum’s board of trustees include New York City Department of City Planning vice-chair Kenneth Knuckles, local lawyers Stephen Hochman and Maury Spanier, and Proskauer Rose optional service partner Stanley Komaroff, who spends most of his time as a senior adviser to Melville, New York–based dental and medical supply company Henry Schein Inc.
 
Last year Continuum’s merger talks with the NYU Langone Medical Center collapsed after Mount Sinai submitted a competing bid in order to scuttle the potential deal involving a key local rival.
 
If completed, the merger between Continuum and Mount Sinai will create a nonprofit entity with 3,300 beds, moving it past NewYork-Presbyterian Hospital as the largest nonprofit in the country, according to Becker’s.
 
The rising cost of medical care has created a surge in health care and hospital–related deals this year. The Am Law Daily reported last month on the roles played by Skadden and Gibson, Dunn & Crutcher in advising on private equity firm The Blackstone Group’s $1.8 billion sale of Vanguard Health Services to rival hospital chain Tenet Healthcare.
 
Health Management Associates hired Weil, Gotshal & Manges in June after its largest shareholder, hedge fund Glenview Capital Management, began agitating for a board shake-up of the nation’s third-largest for-profit hospital operator amid growing takeover talk surrounding the Naples, Florida–based company. In May, Proskauer grabbed a role advising the Liberty Health/New Jersey Medical Center on its tie-up with Barnabas Health, almost a year after the latter’s merger talks with Atlantic Health collapsed.
 
Another byproduct of the increasing cost of health care in the U.S. is the varying billing rates for comparable procedures in hospitals across the country— whether in Bayonne, New Jersey, or Los Angeles—a phenomenon noted by The New York Times in May.
 
Steven Brill, founder of The American Lawyer, took his own exhaustive look at billing rates and the high salaries paid to administrators and executives at nonprofit hospitals around the country in a massive feature story published by Time magazine earlier this year.
 
Both Mount Sinai and Continuum have robust in-house legal teams. Mount Sinai’s federal tax filing for 2011 shows that Michael Macdonald, the hospital’s general counsel, received $965,154 in compensation.
 
Continuum’s top three in-house lawyers— Kathryn Meyer, Jill Clayton, and Beth Essig—received $517,747, $424,222, and $229,457, respectively, in total compensation during 2011, according to a tax filing by the nonprofit’s Beth Israel Hospital. In addition to salary, bonuses, and other compensation, those figures include deferred compensation and nontaxable benefits.
 
Essig, who wrote a book on health care law with Meyer and Macdonald nearly three decades ago, left the partnership of Epstein Becker & Green two years ago this month to replace Meyer as general counsel of Continuum. According to a Continuum spokesman, Essig’s 2012 compensation was $762,084.