A state health care watchdog agency Wednesday asked Attorney General Maura Healey to review Partners HealthCare’s plan to acquire a specialty eye and ear hospital, saying the deal would raise medical costs substantially.
The Health Policy Commission said Partners’ takeover of Massachusetts Eye and Ear would boost health spending by as much as $61 million a year — expenses that ultimately would be borne by consumers and businesses.
The commission, whose board includes state officials and health policy experts, first issued its cost estimate in November. Partners and Mass. Eye and Ear then submitted a response, arguing that the agency overstated potential cost increases while underestimating Mass. Eye and Ear’s financial challenges. The commission was unswayed and stuck to its initial analysis
The Health Policy Commission studies hospital mergers but cannot block them. Commissioners on Wednesday voted to send their analysis to Healey as well as to officials at the state Department of Public Health, which is separately reviewing the transaction and has greater regulatory powers than the Health Policy Commission.
Commission staff said that by law their report must be referred to Healey because it raises concerns about a deal involving a particularly large and high-priced health care provider.
Mass. Eye and Ear is a Boston-based teaching hospital that focuses on ailments of the eyes, ears, nose, and throat. It has struggled financially in recent years, and executives have argued that they need to join a larger health system in order to thrive.
But the Health Policy Commission’s report said Partners and Mass. Eye and Ear failed to promise to limit the price increases that would result from their merger, and they “have not provided evidence that a corporate merger is either necessary or sufficient to achieve quality or access improvements.”
Partners, the nonprofit parent company of hospitals including Massachusetts General and Brigham and Women’s, has some of the highest prices for health services in the state. If it acquires Mass. Eye and Ear, Partners would seek to raise prices for the specialty hospital’s services, the commission argued.
“By the very nature of Mass. Eye and Ear becoming a unit of Partners. . . it would invariably lead to a price increase,” said Stuart Altman, an economist who chairs the commission. “Exactly how much, we don’t know.”
The commission’s report estimated that the transaction would increase health spending in the range of $20.8 million to $61.2 million a year.
Representatives of Mass. Eye and Ear and Partners, who unveiled their merger plans almost a year ago, said they will work with the Department of Public Health and attorney general’s office to try to win approval of the deal.
“Becoming a member of Partners HealthCare will allow Mass. Eye and Ear to remain a sustainable provider of highest quality, affordable care for all patients and to conduct research to cure blindness and deafness,” said Jennifer Street, a spokeswoman for Mass. Eye and Ear.
Partners spokesman Rich Copp said: “This partnership will strengthen the clinical and scientific relationships between our organizations and will make Mass. Eye and Ear services and research accessible to a broader population of patients.”
Following the review, the attorney general’s office could pursue one of several options. Those include taking no action on the merger; challenging the deal with a lawsuit based on antitrust or consumer protection grounds; or seeking a settlement with Partners and Mass. Eye and Ear to allow the transaction with certain conditions.
Healey’s office didn’t comment Wednesday other than to confirm that it will review the report.
Meanwhile, the deal also has to clear the Department of Public Health. The department could choose to approve the merger with certain conditions — or reject it.
“The Department of Public Health will take the Health Policy Commission’s report into consideration as part of its overall analysis of the merger and its impact on public health, quality and access to care,” department spokeswoman Ann Scales said.
Staff at the Health Policy Commission noted Mass. Eye and Ear’s financial challenges Wednesday but said “there is no indication that it is in imminent danger of closure.”
Partners has faced scrutiny from the commission before. Since the commission was founded in 2012, it has referred only a few hospital deals to the attorney general — all of them involving Partners.
When Partners proposed acquiring South Shore Hospital of Weymouth and Hallmark Health System of Medford a few years ago, the commission said those deals would add to Partners’ market clout and raise health spending by millions of dollars a year. Partners eventually dropped both deals.
Altman said in an interview that the commission holds all organizations to the same standards, but Partners’ deals tend to trigger more concerns because “Partners itself is so big and is so much more expensive” than other Massachusetts hospital systems.Priyanka Dayal McCluskey can be reached at email@example.com. Follow her on Twitter @priyanka_dayal.