Hackensack – Meridian Merger
CORPORATE STRUCTURE
Meridian Health consists of 13 first level subsidiaries in the corporate tree, with 6 second level subsidiaries, and 5 third level subsidiaries all emanating from the second level company Meridian Health Foundation, Inc. There are six hospitals: Southern Ocean Medical Center; Bayshore Community Hospital; Riverview Medical Center; Ocean Medical Center; Jersey Shore University Medical Center; and K. Hovnanian Children’s Hospital. Now that the merger between Meridian and Raritan Bay Medical Center is completed, there will be 8 hospitals in the Meridian Health System with the addition of Raritan Bay Medical Center in Perth Amboy and Old Bridge. All of the Meridian hospitals range in distance from each other from 31 miles for 6 of the hospitals, and two outliers at 40 and then 80 miles from the closest cluster hospital in Neptune. Additionally, there are five long=term care/rehab facilities in the Meridian package: Brick; Ocean Grove; Shrewsbury; Wall; and Bayshore Health Center.
Hackensack University Medical Center (HUMC) was a subsidiary of the Hackensack University Health Network, Inc. (HUHN) There were three other first-level subsidiaries, two co-owned (with LHP Hospital Group, Inc., forming Montclair Health System, LLC) subsidiaries (Pascack Valley and Mountainside), and then HUMC had five subsidiary facilities.
Palisades Medical Center (PMC) was a subsidiary of Palisades Healthcare Systems, Inc. Other subsidiaries included: Palisades Medical Center Foundation, Inc.; Palisades General Care, Inc. (The Harborage nursing home); Palisades Medical Associates LLC; Palisades Management Enterprises, Inc., with its own subsidiary, Palisades Child Care Center, Inc.
Now that the merger is complete (as of 1 July 2016), the new entity is named Hackensack Meridian Health, Inc. (HMH). Meridian CEO John Lloyd and Hackensack CEO Robert Garrett will be co-CEOs for the first two years of operation, then Lloyd will step down and Garrett will be sole CEO.
The annual revenue generated by the merger of these two systems was estimated to be $3.4 to $3.5 billion dollars. In the first six months of operation as the new HMH entity, July 1, 2016-December 31, 2016, HMH showed an “excess of revenue over expenses” (profit) of $218.9 million.
CN EXEMPTION
Since this was a merger between two non-profit hospital entities, the deal was able to avoid the Certificate of Need (CN) process with the NJ DOH. The legal counsel to Meridian and Hackensack University Medical Center wrote a letter to Susan Dougherty, Assistant Commissioner of the Office of Certificate of Need and Healthcare Facility Licensure, confirming their understanding of the law that the Hackensack and Palisades merger was not required to undergo the CN process. Mr. John Calabria, Director of the Division of Certificate of Need and Licensing, responded by letter affirming HUMC’s and MerIdian’s interpretation.
CHAPA PROCESS
Because this was a merger between two not-for-profit entities, the merger is regulated by the CHAPA process, which requires a review by the NJ Attorney General (AG) and the Commissioner of Health. The AG must determine if the deal is “in the public interest,” and the Commissioner of Health must determine if the proposed deal “is likely to result in the deterioration of the quality, availability or accessibility of health care services in the affected communities.” As a merger between two not-for-profit systems with no purchase or sale of assets, the deal was exempt from the Certificate of Need (CN) process with the NJ Department of Health (DOH).
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