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More NJ Hospitals Merge: Trying to Improve Health — and Financial Stability

A number of forces, not least Obamacare, are prompting hospitals to consolidate. But will some communities lose out in the new healthcare landscape?

hackensack university HUMC
Hackensack University Medical Center, a member of the new Hackensack Meridian Health Network

The year of hospital mega-mergers appears to be continuing as Hackensack Meridian Health announced plans to join forces with a community hospital in Edison in order to boost patient care options in central New Jersey and further expand the reach of the state’s second-largest healthcare system.

Less than five months after itself was created, leaders are working on a deal to add JFK Health to the network of more than a dozen hospitals and 120-plus outpatient offices that stretch from Bergen to Ocean counties. JFK Health includes the nearly 500-bed JFK Medical Center, which serves patients in Middlesex, Union and Somerset, a neuroscience institute, rehabilitation facility and satellite emergency room in Plainfield, Union County.

Both systems share a vision for community health, explained Raymond Fredericks, JFK’s president and CEO, and the merger would allow JFK to invest in new programs, services and technology to better serve its patients. “Along with Hackensack Meridian Health, we will enhance our delivery of top-quality, coordinated patient care to our diverse community,” he said.

A common vision is beneficial, but experts suggest other forces are driving what has been a banner year for hospital mergers in New Jersey. Consolidations in the state’s healthcare marketplace have been building for some time, but 2016 included the final sign-off on two mega-mergers: the creation of Hackensack Meridian, with 28,000 staff members, and the birth of RWJ/Barnabas, the state’s largest system, with some 30,000 employees and 11 acute-care hospitals across the Garden State.

Experts suggest that while hospitals have worked together for decades to expand their reach and increase their negotiating leverage, the trend was accelerated by the 2010 Affordable Care Act, which tied a growing portion of reimbursements to patient outcomes. The new focus on quality, as opposed to quantity — which ruled under the increasingly outdated fee-for-service model — requires hospitals to make greater investment in community health and aspects of care outside their traditional scope.

These market forces — and the ACA’s new focus on quality — have also impacted insurance coverage, researcher Alan Baumgarten notes in a 2015 Robert Wood Johnson Foundation report. To counteract the growing power of hospital networks, these payers are creating limited or narrow networks that enable them to promise higher patient volume in exchange for lower reimbursement rates.

The Garden State’s most prominent example of this has been Horizon Blue Cross Blue Shield’s controversial OMNIA plan, which offers patients discounts for visiting select providers who are part of Tier 1. (Leaders of several Tier 2 facilities have blasted the plan, which they said never gave them a chance to compete for the preferred tier.) The plan — one of several tiered networks available in New Jersey — has been popular with consumers, attracting some 280,000 this year, with premiums at least 15 percent lower than for comparative policies.

“This is really part of the same response,” explained Ray Castro, healthcare expert with New Jersey Policy Perspective. “Hospitals are consolidating because they need additional resources to provide that community care,” he said, “and insurers are counterbalancing by creating these tiered networks.”

Last week, Horizon added a handful of additional facilities to Tier 1, the first new members since the plan was launched in September 2015. Raritan Bay Medical Center, with facilities in Perth Amboy and Old Bridge, currently is part of OMNIA’s Tier 2; Hackensack UMC Palisades, in North Bergen, currently is not a Horizon member at all. Come January, both organizations —already participants in the Hackensack Meridian Health system — will be in OMNIA’s Tier 1.

A Horizon representative said plans to add Raritan Bay and Palisades have been in the works for many months and predate the creation of Hackensack Meridian last spring — and the network is not accepting new members now. But OMNIA critics have suggested that Tier 1 was designed with a preference for large systems that are better positioned to absorb lower rates, and the news of Raritan Bay and Palisades underscores the connection.

“It’s all just about market share and market dominance,” said Michael Maron, CEO of Holy Name Medical Center, a Tier 2 facility in Teaneck. “Quality has nothing to do with it.”

Quality concerns have also sparked questions about the hospital mergers in general. While these deals have offered financial stability for certain facilities and can expand healthcare options in some areas, others fear community needs will be left behind. That worry prompted the Health Professionals and Allied Employees, the state’s largest healthcare union, to launch a “Merger Monitor” website last summer to help the public track these deals as they are reviewed by state regulatory officials.

“Within the last year New Jersey has moved into a new era of mergers as larger health systems are merging with one another,” said HPAE President Ann Twomey. “Communities should have an ability to review the details of the proposed merger in advance of community hearings, and understand they can not just learn about the merger after approval, but have input on the terms and conditions that will have long-term impacts on their community hospital.”

In addition to job cuts, the union is concerned about the quality of care that facilities provide, how these sites meet local healthcare needs and the impact closures and mergers can have on consumer costs. “As mergers move forward the State of New Jersey must take every step to evaluate the impact hospital consolidations will have on the availability of health care services and costs for consumers to ensure these changes will protect patients,” Twomey said.

“The bottom line for all this stuff is, who is measuring the health outcomes,” Castro agreed.

Size and market leverage aren’t always the driver in hospital mergers, some leaders insist, underscoring their role in improving the health of the community. Barry Ostrowsky, president and CEO of RWJ/Barnabas, said the decision to connect Robert Wood Johnson Health System and Barnabas Health — a deal that was finalized in March — was shaped in part by the ACA, but also by shared goals to improve community health and an agreement that working together would have a greater impact.

The marriage was “somewhat unique,” Ostrowsky said this spring, noting that neither RWJ nor Barnabas needed to combine to remain financially healthy. “This is based on strategy, not convenience, not just to do what’s been done in the industry,” he said. “This will enable us to touch more people.”

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