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The Boston Globe


Partners-South Shore deal may hurt insurers

Panel forecasts they’ll spend up to $26m more after merger

Plans to meld South Shore Hospital and Harbor Medical Associates into Partners HealthCare System would boost the state’s three largest health insurers’ spending by a projected $23 million to $26 million annually, overwhelming potential savings from more efficient operations, according to a summary of a report scheduled to be released Wednesday by the Massachusetts Health Policy Commission.

The watchdog agency, created last year to help bring health cost increases in line with the state’s economic growth, will refer its report on Partners’ proposed South Shore expansion to Attorney General Martha Coakley’s office for further review, the summary said.

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“We find the proposed transactions between Partners, South Shore Hospital [in Weymouth], and Harbor will increase health care spending, likely reduce market competition, and result in increased premiums for employers and consumers,” the summary concluded.

“We find the projected benefits from care delivery efficiencies and quality improvement to be limited in comparison to known spending increases.”

But the commission’s findings on Partners’ expansion push on the South Shore are being called preliminary. That means Partners will be given 30 days to respond before a final report is published. The commission is also pressing forward with a review of Partners’ plans to take over a pair of community hospitals north of Boston.

A Partners vice president, Rich Copp, said executives had not seen the report Tuesday, but hoped it would be the springboard to a “meaningful dialogue” on the system’s efforts to strengthen health care delivery and rein in costs.

“Our proposed acquisition will improve the care that patients in Southeastern Massachusetts receive as we invest in primary care and health information technology, resulting in more coordinated and cost-efficient care,” he said.

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A commission spokeswoman said officials there would not discuss the report before its formal release Wednesday. But in a statement, commission chairman Stuart Altman said, “I look forward to an open discussion of our findings.”

Separately, the Health Policy Commission will issue a cost trends report Wednesday that shows Massachusetts continued to have the highest per-capital medical care spending in the nation as of 2009, when the state spent $9,278 per resident, compared with $6,815 for the nation as a whole. Among the drivers of high prices, that report said, was the greater use of hospitals in Massachusetts than nationally, especially for outpatient services that are more often performed in doctors’ offices elsewhere.

The cost trends report doesn’t measure the growth in medical spending against the commission’s target of limiting health cost increases to the state’s economic growth, projected to be 3.6 percent in 2013. Starting next year, when the commission staff is able to compile full-year data, it will use that benchmark.

Partners, the state’s largest hospital and physicians network, has come under scrutiny partly because of fears its plans to expand on both the South Shore and the North Shore could hinder efforts to hold down costs. Coakley’s office and the US Department of Justice has also been examining Partners’ planned acquisition of 378-bed South Shore Hospital as part of a broader investigation into allegedly anticompetitive practices by the Boston-based health care system.

The Health Policy Commission does not have authority to block any of the deals, but state and federal antitrust regulators could sue to prevent the acquisitions.

Executives at Partners, which operates Massachusetts General and Brigham and Women’s hospitals, say they are working to more efficiently provide medical care through better coordination with affiliates and improved technology.

But the commission’s summary said such efforts, demonstrated by Partners’ performance in a US government pioneer program with Medicare patients, are projected to save no more than $6.6 million annually on the South Shore and could wind up raising costs by $1.4 million a year, based on historic trends.

The summary said Partners and South Shore Hospital have the largest market shares of medical care providers on the South Shore, accounting for 50 percent of the inpatient market. Both are financially strong and have high total medical expenses, strong quality performances, and a higher proportion of commercially insured patients than the state average, according to the summary.

With the addition of Harbor Medical, a Weymouth-based group of 65 doctors, “the resulting system is anticipated to have increased ability to leverage higher prices and other favorable contract terms in negotiations with commercial payers,” the commission warned.

The cost trends report shows health care spending as a share of the Massachusetts economy climbed from 12.9 percent in 1990 to 16.8 percent in 2009, but has since edged down to 16.6 percent. By contrast, health care spending rose from 11.5 percent to 15 percent of the US economy between 1990 and 2009 and has subsequently declined to 14.9 percent.

Prices charged by hospitals to commercial insurers were the primary cause of increased per-capita spending in Massachusetts, growing 10 percent faster than the national average, the cost report said.

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

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