The merger creates a nearly $5 billion hospital and health care system
TRENTON -- The not-for-profit hospitals of Robert Wood Johnson Health System and Barnabas Health completed a merger Thursday that creates the state's largest hospital and medical network, capable of reaching five million people, according to a company announcement.
The new nonprofit, RWJBarnabas Health, includes 11 acute-care hospitals with a workforce of 32,000 employees, in addition to 9,000 physicians, and 1,000 residents and interns. It is the second-largest private employer in New Jersey behind Wakefern Food Corporation, the owner of ShopRite.
Barnabas Health President and Chief Executive Officer Barry H. Ostrowsky will preside over the new company. Former Robert Wood Johnson Health System and Robert Wood Johnson University Hospital President and CEO Stephen K. Jones will serve as chief academic officer.
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Discussions over the deal began as the state dissolved the University of Medicine and Dentistry of New Jersey in 2013, Ostrowsky said. Barnabas and Robert Wood shared a similar culture and mission and a desire to "strengthen our commitment to education, research and community based programs," Ostrowsky said.
"We went out and got consultants to look at it, and we were off to the races," Ostrowsky said, who called the merger "the smoothest and most agreeable" transaction he's even been involved with.
The two hospital systems announced in July they had reached an agreement on the merger but they needed approval from the state Attorney General's Office and a state judge, which they received on March 2 and March 4, respectively, according to the state.
The Federal Trade Commission also signed off on the merger last summer after verifying the deal "would not keep out any other competitors," Jones said.
A merger of this magnitude "is consistent with the trends we are seeing throughout the country," said Cynthia Keller, a hospital analyst with Standard & Poor's, a Wall Street rating agency that has viewed the pending marriage favorably.
Another large merger between Hackensack University Health Network and Meridian Health is also under state review.
The Affordable Care Act financially rewards hospitals that emphasize "population health management" and preventive care, and with the merger they will cover a wider geography, Keller said.
The Robert Wood Johnson Foundation concluded prices and insurance premiums rose after hospitals merged and gained more negotiating power, according to a 2012 report analyzing consolidations across the country. Keller said she didn't think that was a factor here.
"Both of those organizations were really quite large already," she said.
Indeed, "We had two blockbuster systems in New Jersey and now no one will be able to touch them," said Ann Kohler, New Jersey's former Medicaid director who works for the national health care consulting firm, The Marwood Group.
The merger means fewer options for consumers in north and central Jersey, Kohler said. But the public will benefit by RWJBarnabas' ability to obtain "more grants for research," and provide "more opportunity for medical students and a higher quality of health care."
Barnabas Health's holdings include Clara Maass Medical Center in Belleville, Community Medical Center in Toms River, Jersey City Medical Center, Monmouth Medical Centers in Long Branch and Toms River, Newark Beth Israel Medical Center in Newark, Saint Barnabas Medical Center in Livingston and two children's hospitals. Barnabas also has a management agreement with University Hospital in Newark.
Robert Wood Johnson's holdings include hospitals in Somerville, Hamilton, Rahway, and its flagship hospital in New Brunswick; the clinical campus of the Robert Wood Johnson Medical School; The Cancer Institute of New Jersey; and two children's hospitals.
The new company will have board of trustees, made up of an equal number of Barnabas and Robert Wood representatives. Ostrowsky declined to reveal the members at this time.
The goal is to preserve jobs, and to even add more as services are expanded, Ostrowky said. The merged company will be able to save money on joint purchases and other "back-room operations." With the formidable size of the workforce including physicians, the company can save money by not having to hire additional doctors as they expand services, he said.
"By joining together, we have created the most comprehensive health system in the state, which will enable us to effect the kind of change in the health of our communities that our two separate systems could not do alone," Ostrowsky said.
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.