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New Jersey hospital merger plans come to an end

Plans for three New Jersey hospital systems to merge with a for-profit health care network out of state have broken down after one of the hospital systems announced it didn’t need the merger to survive on its own. The decision by St. Joseph’s Healthcare System, based in Patterson, also spelled the end of a possible takeover of St. Mary’s Hospital in Passaic. But other parties in the potential merger are hopeful that this isn’t truly the end of the deal.

The original merger plan called for Ascension Health Care Network, the largest Catholic hospital chain in the country, to take over St. Joseph’s and St. Mary’s and operate them under a for-profit model. But after six months of negotiations, St. Joseph’s CEO announced after a closed board of trustees meeting in recent weeks that it was financially viable without Ascension’s help.

What the announcement means for St. Mary’s remains to be seen. The hospital emerged from bankruptcy in 2010 with help from $7 million from the state and reportedly has less than a week’s cash on hand. Ascension, based in St. Louis, Missouri, had hoped to acquire both St. Mary’s and the two-hospital St. Joseph’s system and operate them as a for-profit Catholic chain in New Jersey. Now that St. Joseph’s has pulled out, Ascension is no longer interested in St. Mary’s.

Hospital industry experts say that merger talks are on the rise in New Jersey and elsewhere as a result of the Affordable Care Act, which administrators anticipate will raise the cost of health care. At the same time, insurance reimbursements could be smaller as they’re divided among more parties, including hospitals, physicians, nursing homes and home health aides. The potentially higher costs and smaller reimbursements are causing many hospitals to re-evaluate their business models.

Ascension has expressed disappointment in the failed negotiations, saying it had hoped to help the hospitals succeed, and said it was open to negotiating again in the future if St. Joseph’s plans changed. Meanwhile, it’s difficult to say what the future holds for St. Mary’s and other struggling hospitals in the coming years, whether the predictions about federal legislation’s effect on health care hold true or not. Hospitals will undoubtedly continue to adjust their business models to accommodate the sweeping changes coming in health care.

Source: NJ.com, “Merger called off between Catholic hospital giant and two Passaic County hospitals,” Susan K. Livio, Aug. 3, 2012

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