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3 big providers exploring health alliance

Health care merger fever spiked Wednesday when the leaders of two major teaching hospitals and the state’s largest physicians organization told employees they are in preliminary talks to form an alliance that could create one of the largest medical systems in Massachusetts.

The discussions involve Beth Israel Deaconess Medical Center in Boston, Lahey Health of Burlington, and Atrius Health, a Newton-based consortium of Harvard Vanguard Medical Associates and five other doctors groups. Also taking part are the in-house physicians groups at Lahey Clinic and Beth Israel Deaconess.

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In memos to employees and associates, obtained by the Globe, presidents of the parties that are negotiating said they are committed to “spend a few months exploring new possibilities to benefit our patients and the communities we serve.” They offered no details of the type of partnership envisioned or the scope of services being considered.

The potential impact on patients is not clear. They could gain access to a broader range of medical expertise from the three providers, but Beth Israel Deaconess, Lahey, and Atrius are expensive health care providers in Massachusetts. Combining them might have the potential to drive up costs, just as state officials focus on health care affordability.

Representatives of Beth Israel Deaconess, Lahey, and Atrius declined to comment.

If they agree on an alliance — especially one that includes an outright merger of Beth Israel Deaconess and Lahey — it would dramatically alter the competitive landscape.

Combining the Beth Israel Deaconess and Lahey Health networks, which include community hospitals from Needham to Beverly, would create a 1,577-bed system, including Jordan Hospital in Plymouth, which agreed in January to be acquired by Beth Israel Deaconess. That would be topped only by Partners HealthCare System, with 2,400 beds, and Steward Health Care System, with 2,096 beds in Eastern Massachusetts.

But with the added muscle of the Atrius doctors groups, which include more than 1,000 physicians who already refer patients to Beth Israel Deaconess and Lahey Clinic, the system could rival Boston-based Partners and Steward in scale and reach.

It might also block efforts by Tufts Medical Center, another prominent Boston teaching hospital, to expand its footprint at a time when health care providers here and nationwide are banding together to coordinate care and gain clout to negotiate better payments from insurers.

“This would create a big pool of clinical capability,” said Steven J. Tringale, president of the Boston consulting firm Tringale Health Strategies. “A collaboration of Beth Israel, Atrius, and Lahey would create enormous opportunities for all three parties in everything from integrated health care service lines to co-branded insurance products in the future.”

Beth Israel Deaconess’s chief executive, Kevin Tabb, in his memo to vice presidents, physicians, and managers, wrote:

“One of our objectives for the future is to expand and strengthen our network of partnerships and relationships. It is part of our strategic imperative to rethink how we deliver care to patients in light of the rapid and fundamental change in health care.”

In a similarly worded memo, Lahey chief executive Howard Grant said, “Our organizations share the same vision of providing outstanding care in the right place at the right time.”

Another memo went out from Atrius’s president, Gene Lindsey, who gave Beth Israel Deaconess a boost several years ago when he made it his organization’s preferred referral hospital. That status had been held by Partners-owned Brigham and Women’s Hospital.

Beth Israel Deaconess and the Lahey Clinic, Lahey Health’s main medical center in Burlington, are both respected teaching hospitals led by relatively new presidents from outside of Massachusetts. Grant, who arrived in late 2010, initiated discussions with Beth Israel Deaconess in 2011 before it hired Tabb to replace departing chief executive Paul Levy. Those talks did not result in a deal to form an alliance.

Since then, Lahey has merged with Northeast Health Systems, the owner of Beverly Hospital and two other North Shore hospitals. It also began talks with Tufts Medical Center about a potential affiliation, but broke off discussions last month before engaging Beth Israel Deaconess, said people familiar with the developments. Tufts declined to comment.

Tabb, who took the helm at Harvard-affiliated Beth Israel Deaconess in late 2011, has been involved in the current talks with Lahey. Also participating are the two hospitals’ physicians groups, Harvard Medical Faculty Physicians at BIDMC and Lahey Clinic Physicians Group, which wield considerable influence.

Tabb has been aggressively building up the Beth Israel Deaconess network. In January, it signed a letter of intent to acquire Jordan Health Systems Inc., the parent of Jordan Hospital. Last month, Beth Israel Deaconess said it was discussing a range of joint clinical and community programs with New England Baptist Hospital in Boston.

Those alliances would further fill out the Beth Israel Deaconess system, which includes its own physicians group, its affiliation with Atrius, and satellite hospitals in Needham and Milton.

It also has a clinical affiliation with Hebrew SeniorLife, the largest elder care provider in the Boston area, and is negotiating relationships with Cambridge Health Alliance, which owns hospitals in Cambridge and Somerville, and Signature Healthcare in Brockton, the owner of Brockton Hospital.

Early this year, Beth Israel Deaconess created a new organizational structure, called Beth Israel Deaconess Care Organization, that is designed to make it easier for the expanding health care system to bring in more wholly owned and affiliated providers.

Robert Weisman can be reached at weisman@globe.com. Follow him on Twitter @GlobeRobW.
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