Partnership Between NJ’s State University System, Large Private Health Network Almost Complete

LILO H. STAINTON | JULY 7, 2020

NJ Spotlight

Spearheading the partnership are Barry Ostrowsky, president and CEO of RWJBarnabas, left, and Brian Strom, chancellor of Rutgers Biomedical and Health Sciences

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In July 2017, leaders from Rutgers University and RWJBarnabas Health hosted a media event in New Brunswick to outline their plans for a potential 30-year partnership designed to beef up New Jersey’s medical education system, expand its biomedical research capacity and create a network of world-class health care practices.

The collaboration between New Jersey’s state university system and one of its largest private health care providers is well underway, although some of the paperwork spelling out details of the deal remains to be signed. That includes an important agreement related to RWJBarnabas’ role overseeing the clinical work and practice operations of more than 1,000 doctors, nurses and other health care providers affiliated with Rutgers. Originally targeted for completion July 1, it should be finalized in the coming weeks, the parties said.

While the coronavirus pandemic pushed back the schedule for completing this and other documents slightly, leaders at both organizations said it also strengthened both sides’ commitment to the initiative.

“The truth is I think we’ve never been more enthusiastic or grateful that we created this partnership,” said Barry Ostrowsky, president and CEO of RWJBarnabas, which operates 11 hospitals, a handful of urgent care centers and dozens of outpatient facilities, primarily in northern and central New Jersey.

“If COVID has proven one thing, it’s that the research aspect and the academic perspective on dealing with pandemics like this is critical and certainly supports our ability to provide the kind of clinical care we want,” he added.

Chancellor Brian Strom, who leads Rutgers Biomedical Health Sciences — an umbrella entity that includes the university’s two medical schools and nursing, dental and other health care colleges, plus several clinical institutes — said clinicians from both organizations worked together “seamlessly” to treat patients during the COVID-19 crisis. “The two teams worked together magnificently. It just really clicked. It showed the benefit of the partnership,” he said.

Similar partnerships have been undertaken elsewhere

The partnership — outlined in a 2017 letter of intent and a “master affiliation agreement” signed the following summer — seeks to create a stronger, integrated academic health system under a concept similar to those used by Yale New Haven Health System or Penn Medicine, where Strom served as a vice dean before joining Rutgers in 2013. It aims to improve the medical education curriculum and training options for students, retain more biomedical graduates in New Jersey and build a more robust workforce of clinicians, researchers and related professionals.

The deal calls for RWJBarnabas to invest $100 million upfront and up to $50 million a year to support Rutgers’ efforts to recruit additional researchers, enhance laboratory facilities, expand academic opportunities and encourage graduates to remain in the Garden State. The master affiliation agreement extends for 20 years with an automatic 10-year renewal, although the so-called mission-support payments will be re-negotiated after the first decade. There is a multiyear process to phase out the partnership when that time comes.

In addition, if RWJBarnabas does well financially — even in areas of business not related to the academic partnership — Rutgers also stands to benefit under the deal. The master agreement establishes a schedule of “variable mission payments” based on a graduated scale tied to the hospital system’s adjusted operating margin (essentially a measure of profit, before taxes and interest are paid) that could trigger payments to Rutgers of between 5% and 50% of that year’s margin.

“We felt the Rutgers University partnership is integral to our long-term success and, as such, we offered to Rutgers University the opportunity to share in that increased success,” Ostrowsky said.

Recruiting high-profile researchers

So far, RWJBarnabas has contributed $150 million toward the joint effort, officials said. According to Rutgers, $100 million has been kept in an interest-bearing escrow account, to fund and provide leverage during ongoing recruitment efforts; $50 million has been spent on securing high-profile faculty clinicians, researchers and their teams.

That list includes a half-dozen standouts, such as Dr. Steven K. Libutti, who came from Montefiore Medical Center in Bronx, New York to lead the Rutgers Cancer Institute and serve as a professor of surgery at Robert Wood Johnson Medical School, in New Brunswick; and Dr. Howard S. Hochster, from Yale Cancer Center, who  serves as associate director of clinical research at the Rutgers cancer program, plays a similar role at  RWJBarnabas and teaches at the New Brunswick medical school. The university did not have a full accounting of the expenses for such recruitments and other partnership-related costs readily available when asked in late June.

The collaboration also established a system in which RWJBarnabas oversees the clinical practice of at least 1,000 Rutgers-affiliated health care providers, with an eye toward improving quality of care and efficiency. The hospital system will eventually take over the financial operations of these practices as well, paying expenses and handling billing and collections. Both sides agree these practices have generally operated at a deficit, but Ostrowsky said he plans to turn them around.

“We’re taking on losses and we expect those losses to be curtailed and we eventually expect the faculty practice plan will at least break even and perhaps even be profitable,” Ostrowsky said. The agreement includes several practice groups run by clinicians who are on the faculty at New Brunswick’s RWJMS, New Jersey Medical School in Newark or Rutgers’ other clinical colleges.

Strom said the pandemic also underscored the need for coordinated, well-run health care systems. “The key underlying the partnership is that the (RWJBarnabas) health system, which is inherently a business delivering clinical care, can probably manage clinical operations (at Rutgers) hopefully better than we can,” Strom said. “So getting more efficient in doing that is wise. Having less duplication in doing that is wise.”

The formal partnership builds on previous joint efforts by the university and the health system. The two joined forces in 2016 to create a sports medicine program and teamed up to enhance the work of the Cancer Institute of New Jersey, in advance of their formal partnership. RWJBarnabas also operates Robert Wood Johnson University Hospital, the main teaching hospital for the New Brunswick medical school, as a result of the 2016 merger between the Robert Wood Johnson Health System — which previously ran the hospital — and Barnabas Health that created the new mega-system.

What health care workers fear

While well underway, the partnership process has raised concerns for several labor organizations representing Rutgers facility and health care workers. Union representatives said they don’t oppose the partnership itself or the stated goals, but they worry it will result in less transparency around public resources. They also fear the deal could reduce access to essential health services — like mental health treatment, which does not tend to generate profit — particularly within low-income communities, where fewer patients have the private insurance hospital systems count on for higher reimbursements. In some cases, labor leaders are also fearful the deal will erode union power and the protections they’ve negotiated for workers.

“The public has invested public dollars in Rutgers Health as it is a public institution. Now  a significant portion of its operation is going to be managed by a private entity,” said Debbie White, a nurse who is president of Health Professionals and Allied Employees, which represents caregivers associated with Rutgers. “When operations are transferred to a private entity, public dollars will be transferred to a private entity and we lose transparency and oversight of how those dollars are invested in health care.”

“With a public institution the decision makers are accountable to us, the public. We now have a private entity making decisions about public health care,” White added.

HPAE and a chapter of the American Association of University Professors-Biomedical and Health Sciences of New Jersey, which represents 1,500 faculty in Rutgers’ biomedical programs, said Rutgers officials have provided little information in response to their repeated requests for more details on the partnership and what it would mean for their members and the patients they serve.

“Their refusal to be open and transparent only leads to distrust that this affiliation is in the best interest of our community,” White said. “During a time when health care workers have put their lives on the line, we all must be assured that there is greater investment in public health care services that addresses the health care needs of our community, not the financial interests of a private health care corporation.”

Diomedes Tsitouras, executive director of the Rutgers Biomedical AAUP chapter, noted not all faculty practices operate at a loss. University Physicians Associates of New Jersey, a decades-old practice in Newark, has cash earnings close to $120 million a year, he said. From this, Rutgers deans and various departments collect “taxes” that contribute to the university’s budget, Tsitouras added, and the practice also generates millions annually for New Jersey Medical School.

Complaint about employment status

On June 30, the AAUP filed a complaint with the state’s Public Employment Relations Commission alleging that Rutgers essentially shifted the employment of at least seven unionized staff members from Rutgers to RWJBarnabas by reappointing them at a split status, with 10% of their responsibilities presumably assigned to the university and 90% to the health system. “It’s not a wholesale thing. But say it becomes 10 (employees shifted) by the end of the year, and 30 next year. Eventually that’s hundreds of people,” Tsitouras said.

Strom said he hadn’t seen the complaint, but he insisted that while shifting operations to RWJBarnabas could take time, employment status and reporting structures would remain unchanged. “If people are employed by Rutgers University, they will remain employed by Rutgers University. There’s been a lot of misinformation about that,” he said. “In fact, the number of Rutgers University employees will increase because we are hiring more researchers.”

RWJBarnabas “is overseeing the practice, but the people are still our employees. They’re subject to our rules, our employment, our union contracts,” Strom added. “And it remains that the faculty’s bosses are the (department) chairs and the chairs’ bosses are the deans and the deans’ boss is me. None of that changes.”

In addition, Strom stressed the university would remain committed to the communities it cares for now, including Newark. That includes working with University Hospital, the region’s only Level 1 Trauma Center, and a critical resource for Newark residents. While University Hospital is a principal teaching hospital for the Newark medical school, it is not part of the RWJBarnabas system and isn’t a direct party to the agreement.

“And to be clear, our commitment to University Hospital remains,” Strom said, “but the money from Barnabas isn’t going to be usable to subsidize what amounts to a competitor.” RWJBarnabas operates Newark Beth Israel Medical Center, the city’s other major acute care facility, just three miles from University Hospital.

“Hopefully over time, because they’re both our facilities, we will help grow the partnership together between University Hospital and Barnabas,” Strom added. (The chancellor is also the driving force behind an unrelated effort to combine Rutgers’ two medical schools, with a shared presence in both Newark and New Brunswick, to further strengthen the system.)

Keen to emphasize the benefits

Both Rutgers and RWJBarnabas are eager to point out the benefits of the deal, which seeks to recruit approximately 100 new “high-caliber” researchers to Rutgers, who would in turn attract additional federal and private funding for their work. Strom said research dollars are on the upswing already and several quality investigators have joined the university in recent years.

Money from RWJBarnabas has also enabled Rutgers to launch its “Rising Stars” program, which seeks to keep dozens of the top medical school graduates in state by paying off up to $200,000 in medical school debt per person, over 10 years. In return, these young clinicians must agree to work at Rutgers or RWJBarabas for at least a decade. “We turn out great kids from our medical schools and the best of them don’t stay in New Jersey,” Strom said. “Our goal is to keep them in New Jersey.”

In addition, Strom suggested the partnership will be particularly valuable to Rutgers in the immediate future, as the university faces economic losses related to the pandemic, with less student revenue, reduced income from patients and massive cuts in state funding. He also noted that hospitals have racked up losses from not being able to perform elective procedures for several months — something that also impacted Rutgers clinicians — but acute care facilities are due to receive economic relief from the federal government, while universities at this point are not.

Ostrowsky agreed both entities face financial challenges related to the pandemic, but the crunch for Rutgers is particularly significant. But he and Strom agreed the economic downturn doesn’t change their joint plans, although some steps might take longer to implement.

These challenges “present an issue where both of us as partners have to in fact look at what each can do, even if the strict provision of our partnership (indicates) it is not our responsibility,” Ostrowsky said. “That’s not how you build durable and meaningful partnerships.”

“The important tone is that we’re partners,” he continued. “When one partner is in need of some kind of help, the other partner steps in and tries to offer that help; it doesn’t simply pull out an agreement and say, under paragraph six that’s not my responsibility.”

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