Hospital Merger in the Garden State

Screen Shot 2016-01-04 at 4.15.25 PMSteve’s breakdown: I don’t have to tell you that a nice hospital account pays the bills. Ms. Christie A. Scott is the Vice President, Marketing and Corporate Communications. Try her at cscott@meridianhealth.com

WALL & PERTH AMBOY, NJ: Meridian Health and Raritan Bay Medical Center completed their merger, executives from the two companies said Monday, the first domino in what is expected to be a busy year for hospital consolidation in New Jersey.

The deal allows Meridian to expand into Middlesex County. And it will give Raritan Bay financial resources it needs to upgrade everything from a new emergency room to in-patient rooms, the executives said.

“I think it’s a game changer, in terms of the services that are offered now and what will be offered in the future,” said Michael R. D’Agnes, president and chief executive officer of Raritan Bay.

Wall-based Meridian adds Raritan Bay Medical Center’s hospitals in Perth Amboy and Old Bridge to its current stable of six hospitals in Monmouth and Ocean counties – Jersey Shore University Medical Center in Neptune; Ocean Medical Center in Brick; Riverview Medical Center in Red Bank; Southern Ocean Medical Center in Stafford; Bayshore Community Hospital in Holmdel; and K. Hovnanian Children’s Hospital in Neptune.

It is part of a shakeup in the hospital industry nationwide. With the Patient Protection and Affordable Care Act (better known as Obamacare) underway, independently owned hospitals have found themselves under financial pressure from both government and private insurers that are trying to cut down hospital visits. And hospital chains are trying to increase the population they serve to give them more clout.

Consolidation will continue “until there’s no one left standing, almost,” said Gary Sokolow, an analyst with Fitch Ratings in New York. “I think you have larger organizations looking for scale and smaller organizations looking for partners to make up for a lack of scale.”

The merger is a milestone for Raritan Bay Medical Center, whose history dates to 1902 with the opening of Perth Amboy General Hospital. It opened Old Bridge Regional Hospital in 1979. Combined, it has 451 beds and 2,000 employees.

The company, however, has been caught in a spiral; it had been looking for a partner for several years, D’Agnes said.

Three-quarters of its patients are covered by Medicare and Medicaid, which reimburse at lower rate than commercial insurance companies. It had to put off capital projects that it needed to stay competitive. And it repeatedly downsized, D’Agnes said.

Still, consolidation has raised concern that fewer competitors will lead to higher prices. The U.S. Federal Trade Commission recently has stepped in to block proposed mergers.

Regulators signed off on Meridian Health and Raritan Bay’s merger.

This is a developing story. Check back for more information.

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