Several New Jersey health care sources told NJBIZ on Saturday morning that Barnabas Health and the Robert Wood Johnson Health System have been discussing a merger of their two systems over the past several months, and that if a deal materializes, it would likely occur later this year or early in 2016.“Robert Wood Johnson Health System is always evaluating strategic partnerships that may advance our academic mission and commitment to our diverse communities,” an RWJ official said in a statement. “We are currently in discussions with the leadership of Barnabas Health to assess possible opportunities for collaboration between our growing health systems and are working within the terms of a confidentiality agreement during this process.”
If the systems were to combine, they would become the biggest network in the state, topping the announced merger of Hackensack University Health Network and Meridian Health, which is expected to be approved this spring.
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New Jersey hospitals and health care systems have been on a merger march for the past few years, as the Affordable Care Act pushes them to both squeeze out costs and do a better job of keeping people healthy.
The latest deal is the one that will combine Hackensack and Meridian into a $3.4 billion revenue system that would displace a stand-alone Barnabas as the state’s largest network. Barnabas has revenue of about $3 billion, while the RWJ health system has annual revenue of about $1.5 billion.
Thus, if Barnabas and RWJ merged, their combined revenue of about $4.5 billion would make them by far the largest system in the state.
News of the Barnabas-RWJ talks was first reported by NJ Advance Media on Saturday morning. The CEOs of both organizations said discussions were underway, the online arm of The Star-Ledger said.
“We are actively in discussions with Barnabas about ways we can increase our service to the community,” Stephen K. Jones, the CEO of the Robert Wood Johnson Health System, told NJ Advance Media.
Jones, however, added that a merger is not imminent.
“I don’t expect any announcements in the short term,” he said.
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Barry H. Ostrowsky, CEO and president of Barnabas Health, released a statement echoing Jones’ comments.
“Barnabas Health is frequently in discussions with other health care providers to explore and evaluate opportunities for partnerships that would further our mission and support the diverse communities we serve,” Ostrowsky said. “At present, Barnabas Health and Robert Wood Johnson Health System are meeting to discuss potential collaboration between our health care systems. We are currently not able to speak publicly on specifics of these discussions.”
A merger would create a system that runs from Hudson to Ocean counties.
Ostrowsky has long said his goal is to transform Barnabas into a system that focuses on keeping people well, not just treating sickness.
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Experts say that a wellness approach requires replacing “sick care” with a population health management approach. By merging to create a larger system covering a wide geography and thousands of people, the two health care systems would be prepared to be compensated by health insurers, the government and other payers to improve the health of their population through preventive medicine, screening and wellness education focused on better nutrition and exercise.
Ray Castro, senior policy analyst for New Jersey Policy Perspective, said: “The possible partnership between Barnabas and Robert Wood Johnson would represent one of the biggest changes in New Jersey’s health care industry. It is consistent with an overall positive direction that the industry is taking to consolidate and create greater efficiency and effectiveness in the delivery of health care. This process has been accelerated by the Affordable Care Act, which rewards quality care over volume of care. These hospitals are correct that such consolidation could help to promote prevention.
“One of the problems hospitals and other providers have now is that any investment they make in prevention could be lost if the consumer moves on to another provider for care. That is much less likely to happen in this possible consolidation, which would cover a much bigger geographical area. Hopefully such a consolidation would make these hospitals even more interested in improving the health of the entire communities they serve.
“Nevertheless. bigger is not always better, and it will be important that such a possible change be carefully monitored to assure that there are no unintended consequences, such as higher net costs, as a result of greater bargaining power with insurers and less competition.”
Christine Stearns, vice president for health and legal affairs at the New Jersey Business & Industry Association, said Barnabas and RWJ are “two great institutions, and this would be an really interesting partnership.”
But she added that there is evidence nationwide that health care consolidation can lead to higher prices — and that outcome needs to be avoided.
“When you combine two high-quality health care organizations in a partnership, or whatever form this takes, that is the question: Will they be able to service consumers with more comprehensive, higher quality and more efficient care?”
Annette Catino is chief executive of the health plan provider QualCare, which earlier this month announced a merger with the health insurer Cigna. Catino said: “I think a lot of these system-to-system merger discussions are about trying to deal with this whole concept of taking care of the community’s health or population health management. And everybody thinks that they need to be a certain size to do that — that they need to cover a certain geography and they need to have access to a certain (share) of the population to make it work.”
She said the challenge in health care mergers is, “They’ve got to get their costs under control and they’ve got to deliver a quality product across all of their institutions.”
Regardless of where in the system the patient receives care, “you need to feel like you are getting the same treatment, and that is the challenge they have in trying to make these deals work.”
Catino said a challenge to health system integration is that “they have overlapping, competing services.” Unless health care systems centralize particular clinical expertise in certain locations, “they have to deal with all of the cultural challenges of integrating two of everything — or three of everything or four of everything.”
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A partnership of Barnabas and RWJ makes sense to Al Koeppe, who was named last week to the NJBIZ Power 100 list. Koeppe is a former chief executive of the state’s largest utility, Public Service Electric & Gas, and for a decade led the nonprofit Newark Alliance before stepping down just over a year ago. Koeppe said his wife Ann was an emergency room nurse and ER supervisor at Saint Barnabas Medical Center in Livingston for 25 years, before retiring about a dozen years ago.
He said of the two hospitals systems: “These are two very strong companies. Their culture is a patient-centric culture; both of them have that. If you look at the 21st century, you recognize that a large part of health care is being able to exploit the technology that we see all around us, and you don’t do that unless you have not just critical mass but also the ability to move forward at a lot of different levels. And the number of initiatives that you can do when you are larger rather than smaller is significant.”
He said the success of a merger often depends on whether there’s a cultural match between the two organizations. “There is a patient-centric culture in both institutions, and that gives you a lot of impetus to move forward because you have that in common. That is a really critical determinant.”
Robert Wood Johnson’s top hospital is in New Brunswick and is the principal teaching hospital of Rutgers Robert Wood Johnson Medical School. The system also has hospitals in Hamilton, Rahway and Somerset (which it acquired as part of a merger last summer).
Barnabas, whose main hospital is in Livingston, also runs hospitals in Jersey City, Belleville, Newark, Long Branch and Toms River.
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