Moving into uncharted territory Wednesday, the state’s new Health Policy Commission voted 10 to 0 to press forward with a full “cost and market impact” review of Partners HealthCare System’s agreement to acquire the 378-bed South Shore Hospital in Weymouth.
The review could create a stumbling block for the first major hospital expansion bid in seven years by Boston-based Partners, the largest hospital and physicians group in Massachusetts, which seeks to take over one of the state’s last remaining independent hospitals.
A preliminary inquiry by the commission’s staff last month found that “given Partners’ size and high costs, an expansion of the system to include South Shore Hospital, a large, high-cost community hospital, is likely to have a significant impact on the Commonwealth’s ability to meet its health care cost growth goals, and on the competitive market.”
But as the first comprehensive review launched by the commission, created as part of last year’s health cost containment law, it could also be a test of whether a new regulatory body that considers itself a watchdog has the teeth to affect the course of hospital consolidation in Massachusetts.
Under the new law, the commission lacks the power to reject a proposed merger that it determines would drive up costs or limit competition, though it can issue a report outlining its objections and recommend that the state attorney general’s office take action.
“This is the first time a review like this has been ordered in the United States,” said commission chairman Stuart Altman. “We are building this airplane while we’re flying it.”
Partners and South Shore, which has a longstanding clinical affiliation with Partners-owned Brigham and Women’s Hospital, argue their alliance will help them better coordinate health care delivery and improve community health services in a part of the state where many patients travel to costly Boston teaching hospitals for routine care.
But the deal is also being investigated by the US Justice Department’s Antitrust Division in partnership with the Massachusetts attorney general’s office, which are seeking to gauge whether it would be anticompetitive.
The state health policy panel’s review would have a broader scope, examining the impact of Partners’ proposed takeover of the Weymouth hospital on costs and patient access to medical care as well as competition in the overall health care market. The review could take up to five months, and Partners’ acquisition could not be completed until 30 days after the review ends.
“All along, we’ve expected that this would be reviewed by the Health Policy Commission,” said Partners vice president Rich Copp. “The review process will allow us to demonstrate that our vision for coordinated patient-centered care delivered closer to patients’ homes can reduce cost growth.”
Copp said the goal of Partners and South Shore Hospital is to “increase the availability of primary care in the local community” for patients in Southeastern Massachusetts.
The proposed transaction would involve the transfer of South Shore ownership to Partners, tighter integration of their affiliated doctors, and joint contracting with health insurers.
Underscoring the regulatory complexities facing the commission’s review, another state panel, the Public Health Council, voted 9 to 1 in April to grant a “determination of need” license to the Weymouth hospital. That license would allow Partners to become the sole corporate owner of South Shore Hospital.
Last week, the commission said it would not review a separate acquisition of the smaller Cooley Dickinson Hospital in Northampton by Partners-owned Massachusetts General Hospital, noting that the attorney general’s office had required the parties to agree to negotiate separate insurance contracts for five years. The commission also passed on reviewing a clinical affiliation between Beth Israel Deaconess Medical Center in Boston and Cambridge Health Alliance.
Wednesday’s vote to examine the Partners-South Shore alliance came against a backdrop of rising concern over the accelerating pace of hospital mergers, which critics say is contributing to rising health costs in Massachusetts and the nation.
“From where I sit, the laissez-faire era, without any appropriate review [of hospital mergers] . . . that era is clearly over, ” said health commission member Paul Hattis.
Another commission member, Jean Yang, lamented that the number of financially viable independent hospitals in Massachusetts has been dwindling steadily. “For [any of] them to be consolidated into a large system, for me, it needs a lot of justification,” Yang said.
Altman warned that Massachusetts remains “on the top of the heap” in health costs, spending almost 17 percent of the gross state product on medical care, compared with about 15 percent nationally.
“We have developed a very expensive health care delivery system,” he said. “Our patients disproportionately use inner-city teaching hospitals for services that are provided in the community elsewhere.”
Commission members also voted unanimously Wednesday to approve guidelines for mandatory nurses’ overtime at Massachusetts hospitals.
Overtime can only be ordered for “an unforeseen event that could not be prudently planned for or anticipated by a hospital that affects patient safety in the hospital,” according to the guidelines. Such an event would occur when there is a government declaration of emergency, a catastrophic event, or a hospital emergency.
The aim is to “assure mandatory overtime is not a hospital staffing strategy,” the Health Policy Commission’s executive director, David Seltz, told commission members.