Hackensack University Health Network and Meridian Health Merger

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). The merger was finalized on June 21, 2016 and went into effect on July 1, 2016.