New deals coming

Taken from NJBiz

January 6, 2020

By: Anthony Vecchione

Hospitals and health systems will likely continue to seek mergers or strategic partnerships

Financial pressures and an increasingly competitive market are driving the consolidation of hospitals in New Jersey. While traditional hospital mergers and acquisitions will continue, an uptick in non-traditional alliances will also occur in 2020.

Barry Ostrowsky, president and chief executive officer of RWJBarnabas Health, said in 2020 he expects there will be health systems making either acquisitions or entering into transactions with non-institutional partners such as big physician groups and outpatient programs and services.

“While I think there will continue to be transactions, acquisitions and consolidations, they will be more on the outpatient physician side rather than on the inpatient side,” said Ostrowsky.

Cathy Bennett, president and chief executive officer of the New Jersey Hospital Association, said New Jersey’s health care entities will continue to explore innovative partnerships, affiliations and collaborations that help them provide high-value care to their communities.

“That may very well include more of the traditional mergers of hospitals and health systems we’ve seen in recent years. I also think over time we may redefine what mergers look like, as health care entities look outside the four walls of the hospital to community-based providers of care – or even beyond to other new entities in the health care space, from retail providers to accountable care organizations to social service providers,” said Bennett.

As for Brian Gragnolati, president and chief executive officer of Atlantic Health, he said consolidation of health care systems will continue in some form. However, a big question is how it will benefit patients and consumers.

“Here at Atlantic, the end goal is not to pursue scale or size because the ultimate test isn’t about consolidation. Quite frankly, it is about making sure that our patients who are becoming more and more like traditional consumers are the center of everything we focus on.”

Gragnolati said Atlantic’s main focus for growth is how many patients the system reaches and what services it can provide.

“We need to make sure once we’ve had an opportunity to care for those patients, that they stay within our clinically integrated network. And if that requires us to bring in other ambulatory partners through joint ventures or acquisitions or other hospital health system partners – we will do that but it has to follow a purpose,” Gragnolati said.

Form may differ

Hackensack Meridian Health Chief Executive Officer Robert Garrett said partnerships would continue because it makes sense for hospitals or health systems to collaborate with like-minded organizations in order to achieve their mission and goals.

“But partnerships come in different forms,” Garrett said. “What is leveling-off is traditional mergers and acquisitions. I think they will still stay strong but they may not grow to the extent that they have in the past. We will likely see more non-traditional partnerships in 2020.”

But Bridget Devane, public policy director for the Health Professionals and Allied Employees union, said she does not anticipate a slowdown in mergers and acquisitions in 2020.

Devane noted that while mergers and acquisitions can be beneficial, deals also have drawbacks.

“In the early stages of affiliations or mergers our members see them as potentially positive because it potentially means greater resources – and as hospitals struggle, we were seeing this as a way for hospitals to survive.”

Devane said the coordination of services can help keep institutions viable.

However, she noted that the rise in “mega-mergers” has caused concern for her union’s members.

“Coordination among all of those facilities that were part of mega-mergers has not always benefited the workers or patients,” said Devane.

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