Business & Tech

Merging Partners, Mass. Eye and Ear would raise costs, watchdog says

Partners HealthCare has corporate offices in Somerville’s Assembly Row.
LANE TURNER/GLOBE STAFF/FILE 2016
Partners HealthCare has corporate offices in Somerville’s Assembly Row.

Partners HealthCare’s expansion plans suffered a setback Wednesday after a state watchdog agency warned that health care costs for consumers would rise significantly if Partners is allowed to acquire the specialty hospital Massachusetts Eye and Ear.

The Health Policy Commission said Partners, the state’s largest health care network, is likely to seek higher reimbursements for care by Mass. Eye and Ear and its doctors if the deal goes through. Because Partners is already a high-priced network, the deal would increase health care spending statewide by $20.8 million to $61.2 million a year, according to the commission.

“These spending increases would ultimately be borne by consumers and businesses through higher commercial premiums,” the commission said in a lengthy report.

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The findings are the latest signal that the state’s most powerful health care system will face questions about its expansion plans in Massachusetts as policy makers remain focused on controlling costs.

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The commission cannot block mergers, but it can refer them to the attorney general’s office, which has the authority to take legal action, and to the Department of Public Health, which separately reviews hospital deals. It has not taken either of those steps, because the report is preliminary.

The commission’s critical findings do not come as a shock, given the scrutiny the organization has faced over previous expansion plans. The health system abandoned two planned acquisitions in 2015 after the Health Policy Commission and others raised concerns about costs and market dominance.

Partners is the parent company of several hospitals, including Massachusetts General and Brigham and Women’s, two of the largest and most expensive in the state. The hospitals are renowned for teaching, research, and providing complex medical care, but Partners has long been criticized for using its power in the health care market to extract higher payments from insurers and driving up health care costs.

Representatives of Partners and Mass. Eye and Ear maintained that their combination would benefit patients. When they announced the deal in January, they said it would not drive up medical costs.

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Partners spokesman Rich Copp said the health system would review the details of the commission’s report and work to address the concerns.

“This partnership will greatly strengthen the clinical and scientific relationships between our organizations and will help make Mass. Eye and Ear services and research accessible to a broader population of patients,” Copp said.

Jennifer Street, a spokeswoman for Mass. Eye and Ear, said officials at the specialty hospital will try to better understand how the commission reached its conclusions.

“We remain steadfast in our belief that for Mass. Eye and Ear to join a system is what’s best for all patients who suffer with vision and hearing loss and diseases of the eyes, ears, nose, and throat,” Street said in an e-mail.

“Given Mass. Eye and Ear’s long history of clinical and research collaboration with Partners’ hospitals, joining the Partners system is the best path forward for Mass. Eye and Ear to continue to offer the highest quality care — and find cures.”

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David Seltz, executive director of the Health Policy Commission, said the report “raises important questions for public consideration and discussion, especially with regard to the future affordability and accessibility of the specialty care provided by Massachusetts Eye and Ear.”

The two organizations already share close ties: Mass. Eye and Ear is next door to Partners’ biggest hospital, Mass. General, and it provides the ophthalmology and otolaryngology services for Mass. General patients.

Mass. Eye and Ear doctors are also part of the Mass. General physicians group, which negotiates contracts with insurance companies.

But doctors from Mass. Eye and Ear and Mass. General are not always paid at the same rates, the commission said: For the three largest insurers, Mass. General’s prices for outpatient services are 58 percent to 105 percent higher than Mass. Eye and Ear’s prices.

The report noted that while Partners and Mass. Eye and Ear expect to cut their own costs through the transaction, they have not committed to passing any of the savings on to insurers or consumers.

In addition, the commission said, it’s unclear that the deal would help improve care for patients, because both organizations already have high quality scores, and they already work closely together.

Members of the Health Policy Commission’s board had mixed responses to the findings, which were submitted by the agency staff.

Dr. Donald M. Berwick, one board member, wondered whether the merger was even necessary. Marylou Sudders, a board member who is also the state’s secretary of health and human services, stressed that the commission’s findings were preliminary and could change as its staff compiles more information.

The agency was created in 2012 to monitor health care spending, including by studying big hospital mergers. About three years ago, when Partners was planning to acquire South Shore Hospital in Weymouth and Hallmark Health System in Medford, the commission warned that those deals would boost health care spending by $38.5 million to $49 million a year.

Partners eventually abandoned those plans, after Attorney General Maura Healey threatened a legal challenge.

Partners and Mass. Eye and Ear have 30 days to respond to the commission’s findings. Then the commission will issue a final report and decide whether to refer the matter to Healey and the Department of Public Health.

“If the estimates hold up for the final report, given the potential for as much as $60 million annual increases in health care spending, it is hard to imagine either the attorney general or the [Department of Public Health] allowing this merger to go forward in the absence of any significant gains for businesses, patients, or the public — really only higher premiums to pay,” said Dr. Paul Hattis, a professor at Tufts University School of Medicine and former board member of the Health Policy Commission.

Department of Public Health spokesman Tom Lyons said DPH’s review is continuing. “We will certainly review any comments received by the HPC once they complete their report,” he said by e-mail. “Our analysis includes an examination of the project’s impact on public health, access to care, as well as the quality and cost of care relative to total medical expenditure.”

Massachusetts Eye and Ear.
David L Ryan/Globe Staff/file
Massachusetts Eye and Ear

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey
@globe.com
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