SJ Healthcare, Underwood Plan Huge Merger

VINELAND — Cumberland County’s largest private employer is poised to become one of the region’s largest hospital systems.

South Jersey Health System signed a merger agreement with Woodbury-based Underwood-Memorial Health System, officials announced Thursday. The health systems next week plan to submit the agreement to state and federal authorities, with approvals expected this spring.
Combining the two organizations would establish a major hospital system with more patient beds than AtlantiCare. It would bolster health care services while avoiding layoffs or closures, officials said.

Through conversations about possibly combining forces, both organizations found they had similar missions and concluded a merger would strengthen them in a way that benefits the region, said Chet Kaletkowski, South Jersey Health System’s president and CEO.
“This isn’t being done just for egos. This is to improve patient care,” Kaletkowski said. “These are two organizations on the same trajectory that want to improve standard of care. We think that’s a plus.”

Kaletkowski would serve as president and CEO of the combined health system, if the merger is approved. The name of the merged organization has not been determined.

The hospital systems came together in May to discuss a potential merger, SJH spokesman Greg Potter said. Both groups spent the next seven months measuring the stability of each organization, investigating opportunities for partnerships and assessing their compatibility, he said.

South Jersey Health System is the parent company of South Jersey Healthcare, which operates the Regional Medical Center in Vineland, Elmer Hospital and other health care facilities. Underwood-Memorial Health System is the parent firm of Underwood-Memorial Hospital in Woodbury.

As part of Underwood’s strategic planning a few years back, President and CEO Eileen Cardile said, it started considering how to thrive in the future in the face of such current challenges as declining reimbursement, physician shortages and access to capital.

Discussions with various groups ranged from joint ventures to full acquisitions, Cardile said. Every health system in the Delaware Valley area is excellent, she said, but South Jersey Health System offered a similar culture and held the same beliefs.

“We had shared visions and values as two different health organizations, and the same vision of how to become better as partners,” said Cardile, who would serve as executive vice president of the merged system.

Kerry McKean Kelly, spokeswoman for the New Jersey Hospital Association, said the last completed hospital merger in the state occurred a year ago when Southern Ocean County Hospital joined Meridian Health. In North Jersey, approvals are pending for a proposed merger of Warren Hospital and St. Luke’s Hospital and Health Network, she said.

“We are in a climate where there is a lot of chatter about different hospitals joining health systems,” she said.

Kaletkowski said he’s confident all SJH and Underwood facilities would remain open and there wouldn’t be any layoffs under the merger. Recalling when the SJH Regional Medical Center opened in 2004 in Vineland, Kaletkowski noted no layoffs occurred then even though multiple hospitals were closed.

South Jersey Health System, with more than 3,500 employees, 600 physicians and 423 beds, is larger than Underwood, which has nearly 1,700 employees, a medical staff of about 400, and 305 beds.
But each system has something to gain in this merger, officials said.
The merger would provide patients with greater access to outpatient care sites and allow the organizations to enhance services, such as cardiovascular, oncology, women’s health and surgical care, they said.
It would result in one of the region’s biggest health facilities, Potter said. By comparison, AtlantiCare has 5,400 employees, about 600 physicians and 589 beds, according to AtlantiCare spokesman Frank Tedesco.

State Sen. Jeff Van Drew, D-1, said a merger could improve Cumberland County’s access to typically expensive and sparse medical technology and resources.

“In the larger picture, it could bring more professionals and more expertise,” said Van Drew, who is a dentist. “We have a wonderful health system. It would be wonderful to see Cumberland County become a hub for medical.”

Kaletkowski said a combined 700-bed hospital system would give each health system strength in the marketplace that wasn’t there before, making it easier to attract more physicians and go after better contracts.

Underwood has experience and strength in cardiology services from which SJH can benefit, he said. Underwood does emergency percutaneous coronary intervention, for which SJH has been approved but has not implemented, Kaletkowski said.

With the merger, “we can argue with critical mass of beds and capabilities, we can do more advanced cardio procedures here,” he said.

Cardile said Underwood can benefit through SJH’s residency program, which at nearly 140 members largely expands upon its own group of 15. The program not only creates a strong recruitment base for future medical professionals, but is a healthy way to energize an organization, she said.

Potter said the merger would allow the system to offer more services so people in the region can travel less at a time when significant travel can be stressful for patients and families.

“We have a mission to improve the health and well-being of the community, and adding these additional services helps us further that mission,” he said.

For example, the new, combined system also would cover a broader range of maternity services for women and children in the region, Potter said.

“With all three of those levels covered, women in our region can have access to a continuum of maternity services for whatever level of care they need, and they don’t have to travel out of our system to receive that,” Potter said. “Building those types of services throughout our system will be a benefit as time goes on.”

The approval process for the merger could take four to six months, Potter said. Until then, the two health systems will continue to act independently. Legally, he said, they cannot meet to discuss the structural details of a merger.

After approvals are in place, the two systems would look to develop a strategic plan and facility master plan to determine their next steps, Kaletkowski said.

Both organizations eventually would discuss naming the new system in a way that best represents the two brands, officials said.
Michele Silvio, registered nurse and president of the Health Professionals and Allied Employees, Local 5131, which represents 850 registered nurses at South Jersey Healthcare, said her members support the proposed merger. They feel it has the potential to enhance the delivery of patient care and community services, she said.

“We look forward to working with our nursing colleagues from Underwood to be a voice for our patients, our communities and our professions,” Silvio said. “We will monitor the regulatory process and advocate throughout the process for nursing and community input, for improved staffing and nursing involvement in quality initiatives and community services.”

Potter said each hospital will maintain its board of trustees, but a new system board would be created to oversee the new system. That board would, at least initially, have eight representatives from SJH and seven from Underwood.

SJH board Chairman Peter Galetto also would serve as that new board’s chair, and Michael McLaughlin, Underwood’s board chairman, would be vice chairman, Potter said.