St. Peter’s Healthcare System and RWJBarnabas Health announced Thursday they have taken the next step in their effort to join forces, bringing New Jersey’s Middlesex County closer to having no independently owned hospitals.
The New Jersey systems said they have signed a definitive agreement to integrate and create what they say will be the state’s “premier multi-campus academic medical center.” The development follows the letter of intent New Brunswick-based St. Peter’s and West Orange-based RWJBH signed in December.
St. Peter’s CEO Leslie Hirsch said in a statement that the latest agreement assures his organization—including its flagship 478-bed acute-care teaching hospital—will keep its Catholic identity. That means continuing to adhere to the Catholic Church’s rules governing healthcare, which forbid providing services like birth control, abortion, sterilization and physician-assisted dying, which is legal in New Jersey.
“We look forward to collaborating with RWJBarnabas Health and immediately undertaking the planning needed to make this vision a reality while also continuing our ongoing commitment to working collaboratively with community physicians,” Hirsch said in a statement. He and RWJBH CEO Barry Ostrowsky declined to comment beyond the news release.
Thursday’s release did not disclose how the proposed transaction would be structured, including whether it would be a full asset merger or merely an affiliation. A spokeswoman declined to provide more detail.
The proposed transaction is the result of a request for proposals St. Peter’s issued in 2018. St. Peter’s is the last independently owned health system in Middlesex County, but Hirsch has lamented in interviews that it has become increasingly difficult to go it alone. St. Peter’s posted $14 million in operating income on $502 million in revenue in 2019, a 2.8% margin.
The much larger RWJBH produced $161.5 million in operating income on $5.6 billion in revenue in 2019, a 2.9% operating margin.
RWJBH said in the release it has committed to making “significant capital investments” in St. Peter’s facilities, technology and innovation. It did not specify a dollar amount.
The definitive agreement sets off a period of review by multiple state and federal regulatory agencies. The Catholic Church also needs to sign off.
The news release says church sponsorship of Saint Peter’s will be provided by the local bishop, Rev. James Checchio, bishop of the Roman Catholic Diocese of Metuchen. Checchio said in a statement that the deal will bring renewed strength and resources to Saint Peter’s. “Our connection with the RWJBarnabas Health System is intended to bolster our ability to provide this Christ-inspired, human person-centered health care to the individuals and communities that we are so honored to serve, protecting and promoting the lives of all,” Checchio said.
Bishops like Checchio are responsible for reviewing deals and determining whether the potential partner’s values are compatible with the church’s values, among other criteria. In some cases, bishops apply certain conditions to their approval when the partner is a non-Catholic or for-profit provider.
The deal adds to the already frenzied pace of hospital consolidation in New Jersey, especially in recent years. Today, just 20% of the state’s acute-care hospitals are independent of a multi-hospital health system, Kerry McKean Kelly, a spokeswoman for the New Jersey Hospital Association, wrote in an email. In October 2019, Englewood Health signed a definitive agreement to merge with Hackensack Meridian Health and Trinitas Regional Medical Center, another Catholic hospital, signed a letter of intent to merge with RWJBarnabas Health.