Meridian, Hackensack merge hospitals; find out why

Oct. 17--Meridian Health plans to merge with Hackensack University Health Network, the two companies said Thursday, creating a giant hospital network from Southern Ocean County to Bergen County.

The newly named Hackensack-Meridian Health would give Meridian patients access to Hackensack's expertise in cancer care, neuroscience and other specialties. And it would give Hackensack a new business model used by Merdian that is caring for patients outside the traditional hospital setting, executives said.

"There's an opportunity for us to accelerate the development of services that Hackensack already has at the highest level," John K. Lloyd, president and chief executive officer of Meridian said.

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Wall-based Meridian owns six hospitals in Monmouth and Ocean counties, including Jersey Shore University Medical Center in Neptune and Ocean Medical Center in Brick, making it the Shore's biggest hospital chain -- and biggest employer, with 12,000 workers.

Hackensack University Health Network, the largest health care system in northern New Jersey, operates four hospitals, including HackensackUMC, and has nearly 10,000 employees.

Squeezed by Obamacare

The announcement continues a wave of consolidation among hospitals as they come under more financial pressure from the Affordable Care Act, better known as Obamacare. Meridian has been particularly aggressive. Last month, it said it planned to acquire Raritan Bay Medical Center, expanding its reach into Middlesex County. And it snapped up Southern Ocean County Hospital in Stafford in 2009 and Bayshore Community Hospital in Holmdel in 2010.

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"Private insurers and Medicare are putting more and more emphasis on outcome and quality," said Mark Pauly, a professor of health care management at The Wharton School at the University of Pennsylvania. "Of course, you can't be good at everything. That's impossible. So it makes sense to ally with other hospitals."

At a press conference in East Brunswick, Lloyd and his counterpart at Hackensack, Robert C. Garrett, said the deal requires regulatory approval and could take four months to finalize.

Layoffs?

Lloyd, 68, and Garrett, 57, would share duties as president and chief executive officer for two-and-a-half years, and then Garrett would take the helm. They said they haven't decided where the company would be headquartered, but likely would look for a centralized location. And they didn't disclose whether any employees would be laid off in the consolidation.

The merger comes as Affordable Care Act tries to slow rising health care costs care by focusing on prevention so that consumers use the system less.

Hospitals feel the impact. For example, Medicare penalizes them if their patients are readmitted within 30 days of their discharge -- a move that has put an emphasis on following up with care somewhere other than the expensive hospital setting.

Meridian faces new competition, too. Memorial Sloan Kettering Cancer Center plans to open a 285,000-square-foot outpatient facility in a former Lucent Technologies building in Middletown by the end of 2016.

Lloyd said after the press conference that he and Garrett began talking in March and decided the new hospital chain could overcome obstacles that have derailed other mergers. They agreed the new board of directors would be evenly divided between Meridian and Hackensack. They agreed that Garrett would take control over the long-term. And they agreed their cultures were similar, making for a relatively seamless transition.

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Higher prices?

The impact on consumers' pocketbooks remains unclear. Studies have found that hospital mergers can lead to higher prices, since it gives hospitals more negotiating power with insurance companies.

But the two executives dismissed those concerns. They noted that they both are in a pilot project with Medicare that has helped them lower the cost of care by millions. And they plan to expand the model to private insurance companies.

Meantime, they both said this probably isn't the end of hospital consolidation in New Jersey.

"I would say John's phone and my phone are pretty busy," Garrett said.

Michael L. Diamond; 732-643-4038; [email protected]

HOSPITALS IN THE MERGER

Meridian Health operates:

--Jersey Shore University Medical Center in Neptune

--K. Hovnanian Children's Hospital in Neptune

--Ocean Medical Center in Brick

--Riverview Medical Center in Red Bank

--Southern Ocean Medical Center in Stafford

--Bayshore Community Hospital in Holmdel

Hackensack University Health Network operates:

--Hackensack UMC in Hackensack

--Hackensack UMC at Pascack Valley in Westwood

--Hackensack UMC, Mountainside in Montclair

--Palisades Medical Center in North Bergen

COMBINED FORCES

The combined chain would have:

--23,400 employees

--5,405 medical staff

--$3.4 billion in annual revenue

Source: Meridian Health and Hackensack University Health Network

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