Hackensack, Meridian to merge, forming state’s largest health system

Hackensack University Health Network and Meridian Health on Thursday announced merger plans that would create the state’s largest health care system: annual revenue of $3.44 billion, nine acute care hospitals and two children’s hospitals, 23,400 employees, 3,181 hospital beds and more than 130,000 patient admissions a year.

Hackensack Meridian Health would be larger than the $3 billion Barnabas Health, now the state’s largest health care system.

The nine hospitals don’t include two additional ones that Meridian would pick up in the proposed merger it announced last month with Raritan Bay Medical Center in Perth Amboy.

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Hackensack and Meridian said they’ve signed a memorandum of understanding to merge, to be followed by four months of due diligence prior to a definitive agreement.

For the first two and a half years after the merger is final, Hackensack’s Robert C. Garrett and Meridian’s John K. Lloyd would be co-presidents and co-chief executives; then Garrett takes over as president and CEO.

Garrett, who is 57, joined Hackensack in 1981 and was named CEO in 2009. Lloyd, who is 68, joined Meridian’s Jersey Shore Medical Center in Neptune as president in 1982. In 1997 he led Jersey Shore’s merger with Ocean Medical Center in Brick and Riverview Medical Center in Red Bank to create Meridian Health; Lloyd was appointed CEO of Meridian.

The two systems operate in different regions of the state, and they dominate their respective territories: Hackensack in northern New Jersey, centered in Bergen County, and Meridian in Monmouth and Ocean counties, with the Raritan Bay deal extending its reach into contiguous Middlesex.

The Hackensack Meridian Health board would have an equal number of trustees from each system.

“First and foremost, this is about delivering value to the patients we serve, which means the highest quality at the most appropriate cost,” Garrett said. “Our combined organization would serve a much broader geography, expanding access to services and developing a vast array of new non-hospital services to conveniently serve area communities.”

“Today’s announcement brings us one step closer to providing our counties and surrounding regions with a strong community and patient-focused health care system while becoming a national leader in the transformation of health care delivery,” Lloyd added.

He said the two organizations have a shared mission of “implementing innovative models of care, advancing education and research, and transforming health care delivery to thrive in the evolving environment.”

Both Hackensack and Meridian are in the vanguard of the national drive to improve health care quality and stem the rising cost of health care. In 2012 they were among nearly a dozen New Jersey health care organizations that created Medicare Accountable Care Organizations, which partner with doctors to improve the medical care of the elderly and reduce excess hospital admissions.

Hackensack and Meridian are among only three Medicare ACOs in the state that have so far saved the government money, and they are being rewarded with millions in bonuses from Medicare.

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Hackensack and Meridian already are working together as charter members of AllSpire Health Partners, a hospital system alliance created just over a year ago that includes Morristown-based Atlantic Health and four hospital systems in Pennsylvania.

When the launch of AllSpire was announced in September 2013, its leaders said they were not planning a full-blown merger of their health care assets, but rather an alliance to share best practices in clinical programs, population health management and research, as well as to explore ways to save money through joint purchasing and other business strategies.

Through the years, Garrett has orchestrated a nonstop succession of joint ventures and alliances.

The Hackensack University Health Network is led by the flagship Hackensack University Medical Center, an academic and research center affiliated with Rutgers Medical School. Through a joint venture with Texas-based LHP, Hackensack reopened Pascack Valley Hospital in Westwood and acquired Mountainside Hospital in Montclair. Palisades Medical Center in North Bergen formed an alliance with Hackensack several years ago and in September plans were announced for a full merger. The Joseph M. Sanzari Children’s Hospital also is part of the Hackensack network.

Hackensack also has several clinical and academic affiliations with Georgetown University in Washington, D.C., including cancer treatment and research, and bone and marrow stem cell transplants. It has various alliances with CentraState in Monmouth County and in New York with NYU Langone Medical Center, North Shore LIJ and Good Samaritan Regional Medical Center.

In March, Hackensack announced plans to open urgent care centers in northern New Jersey through a partnership with CityMD of New York. Hackensack already has an affiliation with MinuteClinic, the walk-in clinics at CVS pharmacies; Hackensack physicians serve as medical directors for seven North Jersey MinuteClinics.

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In 2010, Southern Ocean Medical Center in Manahawkin and Bayshore Community Hospital in Holmdel joined the Meridian system, which also includes the Hovnanian Children’s Hospital in Neptune.

Meridian provides services in 100 locations throughout the communities it serves, and has created an extensive network of services beyond the traditional acute care hospital: home care, post-acute care and rehabilitation, urgent and ambulatory care centers, and occupational health, behavioral health and fitness centers.

Meridian is also in the vanguard of the movement by health care providers to offer health insurance plans, thus taking financial risk for the care they provide. Last year, Meridian entered into a joint venture with Pennsylvania-based Geisinger to offer a Medicare Advantage insurance product, called Meridian Geisinger Gold.

Gordon Litwin, chairman of the Meridian board of trustees, said Thursday’s announcement of a proposed merger is an important milestone on “an exciting and thoughtful journey to move from a good idea to a great and formal relationship.”

Joseph Simunovich, chairman of the Hackensack board, added that, “Guided by strong executive leadership and involved voluntary boards, our health systems share cultural and strategic similarities that make exploring this merger a natural progression of our already collaborative relationship.”

Joel Cantor, director of the Rutgers Center for State Health Policy, said: “This is part of a larger trend of hospital market consolidation. Such mergers offer opportunities to improve care as hospitals pool resources to improve the delivery system. But they can also be worrisome. There is ample evidence that greater concentration in hospital markets leads to higher negotiated rates with insurers. There is potential yin and yang to current market trends.”

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