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Saint Peter's, RWJBarnabas 'informally' exploring merger

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RWJ Barnabas Health (pictured) and Saint Peter's University Hospital are 'informally' exploring merger options.
RWJ Barnabas Health (pictured) and Saint Peter's University Hospital are 'informally' exploring merger options. - ()

The trend of big health care systems expanding through mergers should continue this year, and one of the big ones could involve Saint Peter’s University Hospital in New Brunswick and RWJBarnabas Health.

The two sides have had “very informal” conversations about a potential union, according to a person familiar with the talks. CEOs for both hospitals, however, emphasized that no formal discussions have taken place and any speculation over a possible merger deal is premature.

“Before the end of the year, there’s a very good chance that Saint Peter’s will be part of RWJBarnabas,” said the source.

“Culturally, it would be a very good fit,” said another person with inside knowledge of both hospitals. “Both hospitals have the same philosophy, both are focused on patient-driven care.”

CEO Barry Ostrowsky would neither confirm nor deny negotiations were ongoing, telling NJBIZ through a spokesperson, “RWJBarnabas Health is continually assessing opportunities for partnerships and affiliations.”

Les Hirsch, Saint Peter’s interim CEO, told NJBIZ his hospital is not involved in any formal discussions with RWJBarnabas, and is studying the future direction of the hospital.

“The governing board and leadership of Saint Peter’s Healthcare System, in cooperation with its sponsor, the Roman Catholic Diocese of Metuchen, are presently engaged in a comprehensive strategic planning process to determine Saint Peter’s future direction,” Hirsch said in an email. 

Barry Ostrowsky, CEO, RWJ Barnabas.
Barry Ostrowsky, CEO, RWJ Barnabas. - ()

“Saint Peter’s Catholic mission is of paramount importance in this process of discernment that will continue during 2018,” he continued. “Saint Peter’s has not been and is not presently engaged in formal discussions with any other organization about merger, affiliation or strategic partnership. In this regard, we have not made any decisions about our future.”

Any consolidation would strengthen RWJBarnabas Health’s presence in New Brunswick and central New Jersey, as both Robert Wood Johnson University Hospital and Saint Peter’s are within a mile of each other.

A merger, if consummated, would add 448 beds and roughly $417 millin total revenue to RWJBarnabas Health, based on 2015 financial results. Saint Peter’s would become RWJBarnabas’ 17th hospital.

The added financial strength of Saint Peter’s would also be a bonus for RWJBarnabas, as RWJ University Hospital’s New Brunswick and Somerset campuses, the flagship hospital of Robert Wood Johnson Health System, had $1.5 billion dollars in revenue, more than 10,100 employees, 3,250 medical staff members and 1,733 beds combined in 2016.

Financial debt analysts at Moody’s Investors Service, in a Dec. 18 report, warned that the inability to improve financial results at RWJ University Hospital could lead to a ratings downgrade of RWJBarnabas Health’s $1.6 billion in outstanding debt, which currently holds an A1 rating from Moody’s.

It would also give additional scale to RWJBarnabas, especially considering its biggest rival, Hackensack Meridian Health, became the state’s largest health system last month when it finalized its merger with JFK Health in Edison, increasing HMH’s network to a total of 4,520 beds, more than 160 patient care locations, nearly 33,000 employees — including 6,500 staff physicians — and revenue of roughly $5.5 billion.

Hackensack Meridian Health’s expansion is continuing, as it recently announced the investment of $12 million to expand its cardiac catheterization lab at JFK Medical Center, to be completed this year pending regulatory approval. It also is planning to open the new Seton Hall Hackensack Meridian School of Medicine in Nutley and Clifton and expand the research and treatment capabilities of its John Theurer Cancer Center.

Comparatively, RWJBarnabas Health’s partnership in 2016 with Rutgers University has increased its offerings, especially in cancer research and treatment. The system currently has 16 hospitals, 5,066 beds and roughly 33,000 employees, including 9,000 physicians. Its revenue in 2016 was just under $5 billion.

Whether Saint Peter’s would agree to such a merger depends on various factors, a source said, as the hospital faces tough challenges in the year ahead. Consolidation in the state’s health care industry is continuing, and thereby presenting independent hospitals with increased competition.

Most recently, the University of Pennsylvania Health System finalized its merger with Princeton HealthCare System.

After HMH’s merger with JFK Medical Center, Saint Peter’s is just one of 13 independent, acute care hospitals left in New Jersey to compete with the bigger health care systems.

Saint Peter’s is still advocating for the state to ease regulations so independent hospitals can conduct elective angioplasties — a lucrative, life-saving procedure for people with heart disease — and also is embroiled in an ongoing lawsuit against Horizon Blue Cross & Blue Shield of New Jersey, claiming Horizon breached its contract with Saint Peter’s when it excluded the hospital from the Tier 1 portion of its Omnia Health plan and its Medicare Blue Advantage plan.

“A merger with RWJBarnabas could solve some of those problems,” the source said. “The legal battle with Horizon is costly and might not result in Saint Peter’s favor.”

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Vince Calio

Vince Calio

Vince Calio covers health care and manufacturing for NJBIZ. You can contact him at vcalio@njbiz.com.

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