Transformative academic medical center in N.J. is 1 approval away from reality — those involved are concerned but hopeful

Leaders of RWJBH and Saint Peter’s are concerned that FTC views proposed merger as economic transaction rather than final piece to grand project

The long-stated dream of New Jersey health care officials to create a premier academic medical center — one that brings a new level of care and research to the state population, provides such care at great savings and attracts top doctors and researchers and the grants that come with them — is one approval away from happening.

Those closest to the project know there are no guarantees.

RWJBarnabas Health CEO Barry Ostrowsky and Saint Peter’s HealthCare CEO Les Hirsch — noting that their proposed merger could be viewed by federal officials as a combination of hospital systems rather than the final piece of a grand puzzle — spoke in an hourlong interview with ROI-NJ about the transaction.

Both leaders expressed an understanding and appreciation of the work that the Federal Trade Commission does when analyzing hospital mergers, but they also expressed their frustrations that the transaction, which would incorporate Saint Peter’s University Hospital into the RWJBH system, may be viewed through the lens of a high-level economic model rather than an on-the-ground assessment of health care needs and services.

A decision by the FTC that could give the go-ahead — or essentially kill the project — could come any day in the next four weeks.

Ostrowsky and Hirsch, who have provided the FTC with “thousands of pages” of documents and hours of depositions to support their position, said they are not done stating their case. They said it’s too important.

“We want to do this for the state of New Jersey,” Ostrowsky said. “We’re not-for-profit. It’s not like we have shareholders around the country who are going to make a lot of money. Our shareholders are the people in the community.”

It’s a community Ostrowsky and Hirsch feel they best know how to serve.

“The question is: Who’s making health care policy in New Jersey?” Ostrowsky asked, and then offered potential answers. “Is it the FTC, a federal agency that may not best know the needs of the people of New Jersey? Or is it the government of New Jersey and the elected officials and the people of New Jersey, who are a lot closer to the needs and the unique aspects of the population of New Jersey?

“We have a bunch of support from people at every level of elected officials, corporate interests and affinity groups, like chambers of commerce. They’re all in support of this, they’re all local, they’re all focused on the people of New Jersey — and they all think it’s the right thing to do for the people.

“Who gets the call to enable this to happen?”

That call is coming soon. The health systems have said they intend to complete the transaction on June 10, which essentially puts the FTC on the clock.

Ostrowsky and Hirsch are going public with their concerns because they said they are hearing “at staff levels” that the FTC is opposed to the merger — likely because it would put all the hospitals in New Brunswick under the control of the same system, seemingly eliminating competition, which is what the FTC looks for.

Last December, the FTC blocked a planned acquisition of Englewood Health by Hackensack Meridian Health, essentially saying the merger would hurt consumers in Bergen County, as it would limit health care choices. (The decision was affirmed by a court in March.)

Ostrowsky and Hirsch said this is the most frustrating aspect of the situation. They are eager to show how creating a premier academic medical center — something the state does not have, and does not have any other areas where it could easily be created — would not only provide superior care, but also would lower costs for such care, as residents would no longer need to go to New York City or Philadelphia when seeking this elevated care.

Ostrowsky and Hirsch said they will continue to make their case to the FTC over the coming weeks.

Here are their arguments:

On the concept

To create a premier academic medical center, you need a number of pieces — items that have been collecting in New Brunswick since even before Robert Wood Johnson Health and Barnabas Health merged in 2016 to create a super system.

You need a major research university (Rutgers University, in this case), its medical schools (the realignment of Rutgers medical schools in 2012 by former Rutgers President Robert Barchi accomplished that) and top research facilities (the Cancer Institute of New Jersey announced a major expansion last summer — and the under-construction Hub project aims to bring in more research as well as house a medical school).

Most of all, you need beds.

While RWJ University Hospital and Children’s Specialized Hospital combine to have 667 beds, they are far short of the watershed 1,000-bed mark needed to create a premier academic medical center. And both hospitals do not have logical ways to expand. Creating such an expansion could take more than a decade and cost billions of dollars.

Acquiring Saint Peter’s University Hospital, which has 478 beds and is approximately one mile away from RWJ University Hospital, provides the vital missing piece on the day the transaction is final.

“You can’t have a premier academic medical center that doesn’t have all those ingredients,” Ostrowsky said. “Research is critical. And, of course, the training platform for future clinicians at every level is equally as critical.”

You need patients to do this, they said.

“The premier academic medical center provides everything from basic to quaternary-level service in order to treat every level of every disease and condition,” Ostrowsky said.

“You really don’t have a premier academic medical center if you have to start referring people elsewhere for anything other than the most unique, esoteric service. So, when you apply that profile to what we have in the state of New Jersey, we don’t have that.”

New York City (with NYU Langone and New York Presbyterian) and Philadelphia (with the University of Pennsylvania and Children’s Hospital of Philadelphia) do.

Going there is a costly trip for patients, insurers and the state.

On the cost

Ostrowsky and Hirsch said this is not an acquisition that is being made to improve efficiencies.

“We’re not doing this to save costs on products or people,” Hirsch said. “This is not about price — about what we could charge. That’s never been part of the discussion.”

And, while such a premier academic medical center would only copy those already available over the border — if patients even have the wherewithal to get there, doing so would come at a huge cost to the New Jersey patient.

“Those academic medical centers in New York and Philadelphia don’t discount their rates for out-of-state consumers,” Ostrowsky said.

And those costs — which Ostrowsky estimated to be in the tens of millions annually — are picked up not only be the consumer, but by insurers. And, in the case of Medicaid patients, by the state.

It doesn’t add up, Ostrowsky said.

“From the standpoint of convenience and cost to any source of payment, the premier academic medical center outside of New Jersey is highly expensive — if it’s even accessible by people in New Jersey,” he said.

On the community

Saint Peter’s is recognized for excellence in a number of areas, most notably for the maternity care it gives its mothers, many of whom come from underserved communities that have a much higher rate of delivery issues.

It also is one of the few remaining standalone Catholic hospitals in the state — a fact born more out of economics than a desire to operate.

In order to maintain the level of care it provides to its community, Saint Peter’s went looking for a partner in 2019, an economic acknowledgement that the then-112-year-old institution couldn’t make it on its own.

“The core of our consideration is serving the community and assuring that Catholic health care is maintained in New Brunswick and in central New Jersey for many years to come,” Hirsch said.

Hirsch said the vision of RWJBarnabas Health blew away the officials at Saint Peter’s.

“The idea for a premier academic medical center was a remarkable and extraordinary vision that no one else had and, frankly, they couldn’t have had — because they’re not in New Brunswick,” he said. “There’s no one from outside of our area that would enable us to continuing serving New Brunswick in the same way.

“Seeing where the plan is, even at this point in development when there’s still a lot more to go, it’s even more obvious to me that this is the right thing to do. Long-term, we see this not only as something that will keep us viable, but enables us to thrive.”

Going forward

The transaction received CHAPA approval from Judge Lisa Vignuolo on April 26. That is, it was reviewed and cleared under the state’s Community Health Care Assets Protection Act, which was created specifically to ensure that communities do not suffer a loss of health care services — or an increased cost for them — due to a merger.

In approving the merger, Vignuolo said the transaction will serve the public interest.

The N.J. Legislative Black and Latino caucuses, as well as the heads of the African American and Hispanic chambers of commerce have written letters of support, explaining how they feel the merger will help residents in their communities.

Key political figures, including U.S. Rep. Frank Pallone (D-6th Dist.), state Senate President Nick Scutari (D-Linden), Assembly Speaker Craig Coughlin (D-Woodbridge) and New Brunswick Mayor James Cahill have offered their support — as have top officials at insurers Horizon Blue Cross Blue Shield of New Jersey (Allen Karp) and Aetna Better Health (Glen MacFarlane).

Ostrowsky and Hirsch said the uniqueness of the situation should not be overlooked.

“One of the ironies, if not frustrations, of this, is that St. Peter’s and RWJUH have been working together for years, without any fancy documents and without any fancy partnerships,” Ostrowsky said. “And it might be hyperbole, but it seems to me that, every other year, we’re getting a joint award by the hospital association for the manner in which we treat our communities.

“So, if there wasn’t any regulatory regimen, and this was based on the relationship that the two hospitals have, the idea to pursue this premier academic medical center journey would just be the natural outcome of a relationship that already exists.”

To be clear, the FTC has not issued any rulings as of now. But both Ostrowsky and Hirsch maintain they are worried that the FTC may not be seeing the big picture while making such a determination.

“While I appreciate what the Federal Trade Commission needs to do in order to conduct its job, this is not the prototypical two hospitals getting together and promising efficiencies,” Ostrowsky said. “This is about two institutions dedicated to the community getting together to build something that doesn’t exist.

“Les and I have spoken for 1,000 hours about why the Federal Trade Commission would rather trust an economic model than try to understand the impact of vulnerable communities.

“We’re sitting here saying: ‘We understand economic realities, but we’re talking about people here. What are you going to do about the people of these communities?’ That’s really the message that needs to get out. And, obviously, we’re hopeful that, eventually, the FTC will understand.”

And if it doesn’t?

“If we can’t do this, the only thing I could say is that it would be a shame — a shame for the people that we would be serving,” Ostrowsky said.