Updated at 3 p.m. ET
Hackensack Meridian Health and JFK Health signed a definitive agreement to merge Tuesday, creating a combined entity with 15 hospitals throughout New Jersey.
The deal, pending government and regulatory review, would combine the Hackensack Meridian system and JFK Health's single hospital in an effort to expand patient access and deliver better outcomes by focusing on population health, the companies said. Financial terms of the deal were not disclosed. Both organizations are based in Edison, N.J.
"We are in a major pivot to population health and knew we needed scale to meet the needs of the community, and Hackensack fit that order," said Raymond Fredericks, CEO of JFK Health. "This will help us continue to keep a strong, robust hospital in Edison and offer a great compendium of services close to our residents' homes."
The past 15 years have seen significant consolidation in the number of providers, and that trend is expected to continue. Providers say they must merge to remain competitive, scale costs and streamline operations. Others worry that a more consolidated market translates to higher healthcare costs.
The merger will help Hackensack bolster its ambulatory network that already spans a variety of specialties across 120 centers, which is the "future of healthcare," said John Lloyd, co-CEO of Hackensack Meridian Health. Fewer patients are going to hospitals and instead choosing ambulatory facilities where they can get more affordable and efficient treatment, he said.
"Today, people in the community want services convenient to them," Lloyd said. "The goal is to provide clinically integrated care that connects all the various pieces."
The cost of care in areas with consolidated markets increases an estimated 15.3% compared with regions that have four or more hospitals, according to a 2015 study from the Health Care Pricing Project. That research was supported by a 2017 paper from the Center for Health Policy at the Brookings Institution and Carnegie Mellon University's Heinz College. Without effective competition, hospitals can secure higher price concessions in their negotiations with insurers, the paper found, leading to 16% higher costs in consolidated markets.
Yet, Hackensack and JFK executives argue that the combined share of the companies' ambulatory and home healthcare networks will allow them to reduce costs and improve quality by bundling care.
"With control over the full continuum of care, patients will spend less time in sub-acute care and transition to home quicker," said Robert Garrett, co-CEO of Hackensack Meridian Health.
Hackensack Meridian Health was formed after a recent merger of Hackensack University Health Network and Meridian Health, including its 28,000 employees. The health system, which is a partner with the Memorial Sloan Kettering Cancer Center, plans to launch a Seton Hall University-affiliated medical school in 2018.
The combined entity would employ more than 33,000 team members and more than 7,000 physicians on staff.
"By creating scale, we can provide better quality care that is more affordable, which is a huge advantage in population health," Fredericks said.