Pending regulatory approval, Hackensack Meridian Health will be the largest health system in New Jersey with about $3.5 billion in annual revenue. But according to Hackensack CEO Robert Garrett, the merger is less about financial numbers and more about broadening their accountable care networks. Hackensack operates in northern New Jersey, a stone's throw away from Manhattan, whereas Meridian is based more in New Jersey's central Atlantic coast.
More importantly, Garrett sees the partnership leading to the creation of new provider-managed health plans. “I do see more (insurance) partnerships expanding,” Garrett said in an interview. “I think there's a lot of opportunity as risk is being shared more and more by providers and insurers.”
Hackensack and Meridian already have their hands in some private Medicare insurance products, but in a non-ownership fashion. Two years ago, Meridian and Geisinger Health Plan, the insurance arm of Geisinger Health System in Danville, Pa., created a joint venture Medicare Advantage plan. Hackensack more recently co-branded a narrow-network Medicare Advantage plan with national carrier Aetna.
Both systems are also heavily involved in the Medicare Shared Savings Program, one of the government's largest experiments with accountable care organizations. Meridian and Hackensack have earned $7.3 million and $5.3 million, respectively, in shared savings under the program. The positive initial results with different Medicare initiatives bodes well for experimenting with small and large employer plans, Garrett said.
“The experience of Medicare Advantage and the positive experience of ACOs can certainly be a nice launching pad to get into the commercial space,” he said. He didn't explain further what type of insurance venture the system would pursue or when, but he said it would likely involve a national or regional insurer.
Hackensack Meridian Health is yet another example of large local hospital systems combining to create regional behemoths. The concern among many industry stakeholders—including New Jersey health plans—is that these large mergers give hospitals unfair negotiating power to extract higher payments from private health insurers.
“Provider and hospital consolidation are often sold as measures to increase 'efficiency,' but ironically they often result in higher prices for employers and individuals as efficiencies can be overshadowed by higher charges that larger healthcare systems often leverage in negotiations,” Wardell Sanders, president of the New Jersey Association of Health Plans, wrote in an e-mail.
However, Garrett said Hackensack and Meridian spoke with several insurance company executives once an agreement was reached, and they received positive feedback. Judith Roman, CEO of insurer AmeriHealth New Jersey, was supportive in a statement. “The merger of Hackensack and Meridian is an example of how the delivery of healthcare in New Jersey continues to transform,” Roman said. “We support collaboration that further promotes our mission of providing affordable, quality care to individuals and businesses in the state.”
Garrett and Meridian CEO John Lloyd began talks about five months ago. Garrett said a full-asset merger gave the systems “the best opportunity to integrate,” and changes in the healthcare market prompted the organizations to make a move. “This timing seemed very opportune,” Garrett said.
For the first 2½ years, once the merger is approved, Garrett and Lloyd will serve as co-CEOs. Garrett will then become the sole president and CEO. State and federal clearance is required, and the deal is expected to close early next year.
Follow Bob Herman on Twitter: @MHbherman