St. Peter’s Healthcare System and RWJBarnabas Health Merger

CHAPA PROCESS & FTC INVESTIGATION

When two non-profit health systems announce an intention to merge, they must contact the New Jersey Attorney General’s office and begin the Community Health Assets Protection Act (CHAPA) process. This begins with submission of a Letter of Intent, followed with the AG’s office requesting information and documentation including financial statements, fair value appraisals, board meeting minutes, conflict of interest statements from board members and key employees, any consultant reports, and hierarchy charts. Once the AG’s office is satisfied with the information submitted, it will post an announcement for a public hearing, at which members from the community may speak in favor of or against the proposed merger. The AG’s office writes a recommendation, sending it to the Superior Court, which gives the final approval (or denial) based on the AG’s report.

Superior Court gave its approval on April 26, 2022 and both parties said they intended to complete the merger on June 10, 2022, despite an ongoing FTC investigation. The FTC had concerns because all the hospitals in New Brunswick would be under the operation of RWJB, effectively eliminating competition within the community. If the merger went into effect before the FTC made a decision, and then the FTC determined the merger was anti-competitive, the FTC had the ability to force RWJB and St. Peter’s to unwind the merger.

On June 2, 2022, the FTC sued to block the merger between the two health systems, citing that the two hospitals in New Brunswick were less than a mile apart and the only two hospitals in the city. A merger between the two would effectively eliminate any competition within the city and also give RWJBarnabas a 50 percent market share of acute care services in Middlesex County. The Commission voted 5-0 to employ a temporary restraining order and preliminary injunction. St. Peter’s and RWJBarnabas announced on June 14, 2022 that they would not pursue the merger further, cancelling the definitive agreement between the two health systems.

HIGHLIGHTS: LETTER OF INTENT

In a four-page Letter of Intent, it was clearly stated that whether St. Peter’s was completely subsumed by RWJB or RWJB became a minority investor, St. Peter’s would remain sponsored by the Roman Catholic Diocese of Metuchen. The letter outlined an exclusivity clause, negotiating the definitive agreement, a confidentiality clause, and due diligence.

The cover letter accompanying the LOI was sent to the AG’s office on October 16, 2020; the Merger Substitution and Merger Agreement were also included. In response, the AG’s office sent the first set of CHAPA questions to St. Peter’s on October 29, 2020, with 57 initial questions.