Big hospital merger: Barnabas, Robert Wood Johnson

Barnabas Health plans to merge with Robert Wood Johnson Health System, the two health care chains said Tuesday, in a deal that would bring together two landmark hospitals and create New Jersey's biggest health care system.

Executives said the new company, called RWJ Barnabas Health, would be in a better position to deliver high-quality care in the age of health care reform. Hospitals are being rewarded for keeping patients healthy instead of merely treating them.

"We're in the middle of that shift," said Stephen K. Jones, president and chief executive officer of Robert Wood Johnson University Hospital and Robert Wood Johnson Health System. "The need to shift in order to increase access, improve experience, manage cost."

"I think the impact on patients would be increased access to all of our clinical programs," Barry H. Ostrowsky, president and chief executive officer of Barnabas Health, said in an interview. "There isn't a level of care we don't possess in this new enterprise."

The merger of West Orange-based Barnabas and New Brunswick-based Robert Wood Johnson had long been rumored, and it continues the rapid consolidation in the hospital industry. Meridian Health signed an agreement in May to merge with Hackensack University Health Network in what was, until now, New Jersey's biggest hospital merger.

Hospitals under pressure

Hospitals have been under pressure to rein in costs since the Patient Protection and Affordable Care Act, often called Obamacare, went into effect in 2010, in part by keeping patients out of the hospital setting, where care is much more expensive.

Medicare, for example, penalizes hospitals whose patients return within 30 days of their procedure. And insurers are working with hospitals to pay them not for the services they provide but for the outcome of their patients' health.

It has pressured hospitals to find partners — physicians, urgent care facilities, other hospitals — that can provide care that ranges from the simple to the complex. And it has pressured hospitals to invest in technology so they can better manage the care they are providing, said Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, an advocacy group based in Pennington.

"I think this whole merger mania is inevitable," Schwimmer said. "I can see five or six large systems and a couple standalones being what the New Jersey landscape looks like in the next few years."

Barnabas has seven acute care hospitals, including Community Medical Center in Toms River; Monmouth Medical Center in Long Branch; and Monmouth Medical Center Southern Campus in Lakewood, formerly known as Kimball Medical Center.

Robert Wood Johnson has four acute care hospitals, including Robert Wood Johnson University Hospital in New Brunswick.

The agreement is expected to be submitted to the state Attorney General's Office for review. The two companies said the merger should be completed in 2016.

No layoff plans

If it is approved, the new health care system will be a juggernaut with annual revenue of $4.5 billion, nearly 30,000 employees and 9,000 physicians. (In a sign of the times, the company also pointed out that it has five fitness and wellness centers).

Ostrowsky, of Barnabas Health, will lead the new company. Jones will be chief academic officer, focusing on its partnership with Rutgers University.

Executives said there are no plans to shutter facilities or lay off employees. And they noted that the two companies mostly served different footprints. Barnabas has a big presence in Monmouth, Ocean, Hudson, and Essex counties; Robert Wood Johnson operates in Middlesex, Mercer and Union counties.

Hospital mergers don't come without scrutiny. Among the concerns: A bigger health care system will have more bargaining power with insurance companies and drive up costs. And it will consolidate, devoting fewer resources to low-income communities.

But consumer advocates on Tuesday were slow to criticize.

"We haven't taken an actual position on it at the moment," said Maura Collinsgru, health policy advocate for New Jersey Citizen Action, a consumer group. "But as always our radar is on ensuring that community access to quality, affordable care remains. Our experience with those two health systems has been as good community providers."

In the meantime, "This development brings an opportunity to our two New Brunswick hospitals to build upon their modest collaborative community efforts," said Ronald C. Rak, president and chief executive officer of Saint Peter's Healthcare System. "And to explore in this ever-changing health care environment how to best serve the people of New Jersey."

Michael L. Diamond; 732-643-4038; mdiamond@gannettnj.com