FTC wants to block the RWJBarnabas, Saint Peter's Healthcare merger. Here's why

NEW BRUNSWICK – The federal government is looking to block the acquisition of Saint Peter’s Healthcare System by RWJBarnabas Health because it says it would harm competition for hospital services.

The Federal Trade Commission voted unanimously to take action to block the merger because, according to FTC Bureau of Competition Director Holly Vedova, “there is overwhelming evidence that this acquisition would be bad for patients, because the parties would no longer have to compete to provide the lowest prices and the best quality and service.”

"Saint Peter's University Hospital is less than one mile away from RWJ in New Brunswick, and they are the only two hospitals in that city," Vedova said.

In a statement on Friday, RWJBarnabas Health CEO Barry H. Ostrowsky and Saint Peter’s Healthcare System President and CEO Leslie D. Hirsch said they will be reviewing the FTC’s complaint over the coming days and determine how to best move forward.

"Today, we were notified that the Federal Trade Commission (“FTC”) is going to file an administrative complaint and has authorized a suit in federal court to block our proposed transaction that would have enabled us to build the first premier academic medical center in New Jersey to increase services and provide better access to such care for New Jersey residents," the statement said. "We are incredibly disappointed by these FTC actions against our proposed transaction, which has received full approval from New Jersey’s Attorney General and is supported by grassroots community groups, employer groups, unions, managed care organizations and elected officials at all levels within the State of New Jersey.

"We are most disappointed, however, for the people of New Jersey – especially those who reside in our most vulnerable, chronically underserved communities – who will be denied access to the complex care only provided by premier academic medical centers."

Merger plans abandoned: Hackensack Meridian, Englewood Health terminate agreement

Saint Peter’s Healthcare System and RWJBarnabas Health signed an agreement in 2020 to merge the two health care systems. That announcement came less than a year after Saint Peter’s and RWJBarnabas signed a letter of intent to explore a strategic partnership.

The acquisition would give the combined health care system a market share of approximately 50 percent for general acute care services in Middlesex County as a whole, easily resulting in a presumption of harm under the antitrust laws, according to an FTC statement.

Saint Peter’s and RWJBarnabas are direct competitors and both systems routinely identify the other as the most significant competitor when assessing competition and strategizing on providing general acute care services in Middlesex County, the FTC said.

Earlier: Saint Peter's, RWJBarnabas to integrate health care systems

This competition incentivizes Saint Peter’s and RWJBarnabas to improve quality, technology, amenities, equipment, access to care and service offerings, according to the FTC.

The FTC also said the entry of other health providers into the general acute care services market in Middlesex County will not be timely, likely, or sufficient to counteract the anticompetitive effects of the acquisition.

The FTC's  complaint also says that the acquisition would:

• Eliminate important head-to-head competition between the parties. Today, the competition between the parties benefits both commercial insurers and all RWJBarnabas and Saint Peter’s patients, regardless of the insurer;

• Increase concentration. The acquisition would likely increase concentration and substantially lessen competition in the market for general acute care services in Middlesex County; and

• Leave insurers with fewer, less attractive alternatives. The only other general acute care hospitals in Middlesex County are located outside New Brunswick. A combined health system would likely be able to demand higher reimbursement rates and/or more onerous contractual terms than it does today, which will harm consumers

Besides the administrative complaint, the FTC voted to authorize its staff to seek a temporary restraining order and a preliminary injunction.

The federal court complaint and request for preliminary relief will be filed in the U.S. District Court for the District of New Jersey to halt the transaction pending an administrative proceeding scheduled to begin on Nov. 29.

Headquartered in West Orange, RWJBarnabas is a nonprofit corporation that operates 12 general acute care hospitals, several ambulatory surgical centers, a pediatric rehabilitation hospital and a freestanding behavioral health center in New Jersey.

Saint Peter’s Healthcare is a nonprofit corporation headquartered in New Brunswick that operates an independent hospital, which includes a state-designated children’s hospital.

Earlier this spring, Hackensack Meridian Health and Englewood Health officially dropped their plans for a merger.

The two institutions dropped their fight against the FTC’s objections to their plan for one of the state's largest health systems to acquire the Englewood hospital, a proposal that was announced with great fanfare — and promises of a $440 million investment by Hackensack Meridian — in October 2019.

Email: sloyer@gannettnj.com

Susan Loyer covers Middlesex County and more for MyCentralJersey.com. To get unlimited access to her work, please subscribe or activate your digital account today. 

This article originally appeared on MyCentralJersey.com: RWJBarnabas and Saint Peter’s Healthcare merger challenged by FTC