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From nj.com: Bigger isn’t always better in the hospital game. At least that’s their bet.

  • Category: News
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  • Written By: By George E. Jordan | For NJ Advance Media
From nj.com: Bigger isn’t always better in the hospital game. At least that’s their bet.

Read this article as it originally appeared June 13, 2021 on nj.com. (Subscription may be required.)

Prime Healthcare, the owner of three New Jersey hospitals, waited out the COVID lockdowns as the state’s larger health care networks intensified their hunt for new patients to carry them forward once the pandemic ends.

So while the Big Three — RWJBarnabas Health, Atlantic Health System and Hackensack Meridian Health — were gobbling up the state’s few remaining independent hospitals, Prime waited. And waited. And waited.

Now, we are starting to see the plan.

The California-based company recently announced it will start aggressively marketing its New Jersey hospitals — Saint Michael’s Medical Center in Newark, St. Mary’s General Hospital in Passaic, and Saint Clare’s Denville/Dover locations — as a regional network under the Prime Healthcare brand.

“The goal is to integrate all three hospitals and regionalize our programs,” said Dr. Sonia Mehta, chief medical officer and a regional CEO of Prime Healthcare, which owns 46 hospitals in 14 states. “We want to keep patients within our network.”

Mehta said the company doesn’t plan to buy another hospital, but instead is signing contracts with medical clinics, cross-credentialing physicians to practice in all its hospitals and launching a major consumer marketing campaign.

“The goal is any patient who comes through our emergency room or into our network through one of our doctors, we want to make sure we’re able to provide the full complement of services to them,” she said.

Affiliations with privately owned medical practices help generate patient referrals for a network’s specialty services. Doctor’s offices may be receptive as they look to make up revenue lost during the height of COVID, when lockdowns dramatically reduced routine checkups, lucrative diagnostic tests and elective surgeries.

New Jersey has 72 acute care hospitals, and only a handful remain independent, according to CauseIQ, which estimates the hospitals and networks generate $5 billion in annual revenue.

Recently, Trinitas Regional Medical Center, St. Peter’s University Healthcare System, CentraState Healthcare System in Freehold, and Englewood Hospital and Medical Center all have been swallowed up by the Big Three. (The Federal Trade Commission sued to block the Englewood deal, claiming it would give Hackensack Meridian a monopoly in Bergen County that drives up consumer prices.)

These acquisitions, according to experts, are driven by the Affordable Care Act (ACA), which has shifted the focus in health care to preventive medicine and outpatient care from inpatient hospital stays. The change has intensified health network branding, marketing and opposing claims of who has the most skilled practitioners, the most robust community-based service, the finest facilities and the best health outcomes.

Health networks buy competitors to share costs, reduce expenses and become big enough to demand higher reimbursement rates from insurers. Critics say consolidations lead to higher premiums, co-pays, deductibles and other costs for patients.

Prime Healthcare, which has 4,500 New Jersey employees, is following the new playbook for growth — without scooping up more hospitals.

The company aims to carve out its niche in highly profitable specialty services, designating its hospitals “centers of excellence” for cardiovascular surgery, mental health services and neurosurgery.

The idea is for Prime Healthcare’s well-known community hospitals to compete with bigger network facilities nearby, including University Hospital in Newark and Atlantic Health System in Morristown.

“There is a lot of population near our hospitals. We believe people want to seek care close to home, and we are a community-based hospital network,” Mehta said. “We’re trying to bring new services and increase the services we have.”

New Jersey is home to some of the best hospitals in the country. According to U.S. News & World Report’s 2020-2021 Best Hospitals rankings, five New Jersey institutions are nationally ranked and 14 meet national high-performance standards.

In addition to health networks, New Jersey’s competitive health care marketplace includes retailers like Walmart and CVS Health, which pushed further into health care delivery with in-store pharmacy clinics and insurance plans.

Larry Downs, the Medical Society of New Jersey’s CEO and general counsel, said financial pressure is likely to feed more mergers and acquisitions, while also potentially altering the role of a hospital’s medical staff.

For instance, the hospital medical staff shapes decisions about diagnostic equipment purchases, staffing levels and other clinical decisions, a calculus that Downs said shifts when an independent hospital becomes part of a network.

“We want the medical staff to maintain autonomy over clinical decisions. We’re not always 100% on the same side as the hospital industry,” Downs said. “Sometimes, doctors may differ in what they think the right direction of the hospital should be. … You can have a situation where a large hospital system is trying to control the medical staff.”

Prime Healthcare was founded by Dr. Prem N. Reddy, a cardiologist. Most of the company’s executives are practicing physicians, said Mehta, who is a board-certified general practitioner.

“We have physician leadership at all levels,” she said. “We all play a role in the clinical operation of the hospital. A lot of the decisions we make balance patients’ needs and quality. We are a physician-run organization.”

Prime Healthcare won praise in 2016, when it purchased Saint Michael’s. At the time, the 357-bed acute care hospital in Newark was bankrupt and on the verge of closing.

The company since has upgraded Saint Michael’s heart bypass surgery clinic to compete with Newark Beth Israel Medical Center, which has a heart transplant program.


George E. Jordan writes a weekly column on business and development in New Jersey. He may be reached at george@griotmediaworks.com.