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Analysis

'Touching More Lives in New Jersey': Atlantic Health System, CentraState Health Sign Letter of Intent for Co-Ownership

By Melanie Blackman  
   September 17, 2020

The two New Jersey–based health systems started working together in 2018 and have had a clinical affiliation for oncology and neuroscience care services since February.

Atlantic Health System and CentraState Healthcare System signed a letter of intent on Monday to expand their collaboration to co-ownership.

According to a press release, "Atlantic Health will become the majority corporate member in CentraState and CentraState will join the Atlantic Health System network of care."

Each organization will hold seats on a governing board under CentraState and will have their own responsibilities and rights.

Atlantic Health System President and CEO Brian Gragnolati spoke to HealthLeaders about the strategy behind the unique partnership and how the two organizations will operate in the co-ownership.

"People are used to seeing just pure mergers where a large system acquires a smaller system. And that's not what this is. This is a new way of figuring out how to work with great healthcare organizations in a way that allows them to continue to stay laser-focused on the communities that they're serving, but get the necessary support through this relationship, so that they can do an even better job than they're already doing," Gragnolati tells HealthLeaders. "And from our side of the equation, this is a way that we can really extend our strategy. … [The partnership] extends our opportunities to touch more lives in New Jersey. … It's a way to continue to develop our network, [and] to truly partner with another great organization that shares a similar view of the future."

"The co-membership model is one where we make investments into CentraState in exchange for an ownership interest in the company," Gragnolati says. "It provides that platform where we can begin to make those investments that will help CentraState to better serve its community, and at the same time, it allows us to use a lot of the capabilities that we've developed in our population health efforts to help them and not be redundant."

The two New Jersey–based health systems have a history of collaboration and started working together in 2018 when six New Jersey healthcare systems came together to form the Healthcare Transformation Consortium.

"We pooled our insurance spend for our employees and dependents, and then faced the market together," Gragnolati says. "The goal there was, how could we take on some of the philosophies that we all had about improving access and improving the quality of care, but also trying to drive down per capita spending on our own employees' dependent population."

A few years later, CentraState CEO John T. Gribbin "and his board went through a process of trying to imagine what a future needed to look like in this market here in New Jersey, and the conclusion was CentraState approaching us and asking if we'd be interested in having a conversation about a more involved relationship beyond the Health Transformation Consortium," Gragnolati says.

This led to the development of a clinical affiliation, which was finalized in February 2020. The "focus was on improvements and help in the areas of oncology and neurosciences and that market. But also help in accessing some health plans," Gragnolati says.

Talks about co-ownership started at the end of last year and went on pause during the COVID-19 pandemic surge. "Through the COVID process, we were staying in contact with each other all the time and helping each other wherever we could. To me, it just reinforced the cultures being compatible, because we are both absolutely focused about how we can help our communities."

Now, both organizations will work toward a definitive agreement, pending approval from state and federal officials.

"You're going to start to see new ways of these types of deals coming together, and I think that this is an example of one of them," Gragnolati says.

Melanie Blackman is the strategy editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: Morristown Medical Center entrance; Morristown, NJ. Photo courtesy of Atlantic Health System


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