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Hospital merger smoothed by plan to share leadership, CEOs say

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Hackensack CEO Robert C. Garrett will share the CEO and president jobs of Hackensack Meridian Health with John K. Lloyd for two and a half years.
Hackensack CEO Robert C. Garrett will share the CEO and president jobs of Hackensack Meridian Health with John K. Lloyd for two and a half years. - ()

The path to the merger deal announced Thursday between Hackensack University Health Network and Meridian Health was smoothed to a large degree by having Robert C. Garrett, CEO of Hackensack, and John K. Lloyd, CEO of Meridian, share the leadership for two and a half years following the systems' merger into Hackensack Meridian Health.

“It is fair to say that each organization felt that their own CEO should lead this organization,” Lloyd said. “And the way we resolved this was rather than having the potential breakup of the merger, Bob and I came together and agreed to share the co-president position.”

In an interview with NJBIZ, the two executives, Garrett, 57, and Lloyd, 68, said they are friends as well as professional colleagues, and are looking forward to working together. They estimated that their two systems could merge as soon as a year from now, following due diligence, a definitive agreement and government regulatory approvals.

Then, for 30 months after the merger, they would serve together as co-CEO and co-president. Garrett would then take over as president and CEO of Hackensack Meridian Health.

RELATED: Hackensack, Meridian to merge, forming state's largest health system

Garrett said that, during the 30-month transition: “John and I going to spend a lot of time integrating our two systems into this new, exciting system. We have both been with our respective organizations for nearly 30 years, so what two better people to have at the table to really integrate our organizations than the two people who know these organizations inside-out.”

Lloyd added: “There is going to be a lot of work here, and Bob and I are committed to dividing up the work and working together and getting it done. It is definitely going to take two and a half years to get to where we want to be.”

Meridian Health's John K. Lloyd.
Meridian Health's John K. Lloyd. - ()

Just over a year ago, Lloyd and Garrett came together as two of the founding CEOs of AllSpire Health Partners, an alliance of seven health systems in New Jersey and Pennsylvania that are sharing best clinical and business practices. At the time AllSpire was launched, its leaders said outright mergers of hospital systems were not their goal.

Thursday, Garrett said, “I do think AllSpire gave us an opportunity to work closer together in more recent times and I think it probably did help us realize that this particular transaction and this merger made tremendous sense for both our organizations.”

Garrett said Hackensack Meridian Health “will be a game changer for the state of New Jersey. You are putting two of the best health care systems in the state together, with three goals in mind. First, through clinical integration and exchanging of best practice, we’re going to be providing superior quality care. Second, the geographical linkages that this merger provides will mean greater access to quality health care for the residents of New Jersey. And third, we will look for ways that we can deliver health care more efficiently, and keep the population healthy and well and disease-free.”

Some observers have suggested that the increased heft of the merged system also will provide leverage to negotiate higher reimbursement rates from health insurers and other players.

Lloyd said the merger “is not about getting critical mass to use for leverage purposes; it is about expanding into new geography to better serve those residents and to give them better access to (hospital) and non-hospital services.”

He noted that Meridian is expanding beyond its Monmouth and Ocean counties base into Middlesex County through the merger it announced last month with Raritan Bay Medical Center, while Hackensack is moving beyond its Bergen and Essex counties base into Hudson County with a merger with Palisades Medical Center that it announced last month.

“We are starting to move into other geographic areas,” Lloyd said. “We are looking not to concentrate only in our existing counties. We don’t want to do that. We want to take what we have been successful at and take that into new counties.”

Garrett said the success of the Medicare Accountable Care Organizations that Hackensack and Meridian each launched in 2012 provides evidence of their commitment to transforming health care into a system focused on quality and cost efficiency. New Jersey has 11 Medicare ACOs, which partner with doctors to improve care and lower costs, and the Meridian and Hackensack ACOs were among the only three in the state that have saved money for Medicare thus far.

Garrett said: “We are in the minority in the country of ACOs that have actually worked. And, as we share best practices, we will be able to extend those types of efficiencies and savings and while enhancing quality to the people of New Jersey.”

Lloyd said size can deliver efficiency through cost avoidance.

“We are both trying to develop significant infrastructures for population health. When we come together, we are not going to be spending that kind of money, because together we can be more efficient in how we build that infrastructure and how we operate that infrastructure.”

And there could be more mergers in the future for Hackensack Meridian Health.

Lloyd said, “Both of our organizations for the past few years have been in many discussions with other health systems and hospitals, and we each continue to talk to other hospitals. Whether that materializes into them joining the new combined entity, we can’t say. But we are always out there talking to potential partners.”

Garrett added, “The health care landscape continues to change and evolve, and there will be probably other opportunities for this new system to provide great services to a greater number of people.”

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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