PROVIDENCE — A new report exploring the economic impact of the proposed hospital merger between Lifespan and Care New England claims merging the state’s two largest health systems would increase the annual economic impact of the state’s academic medicine sector from $8.2 billion in 2020 to $11.5 billion by 2035.
But critics contend that the report, which was commissioned by Brown University and cost $90,000, is deeply flawed and the data it relies on is unclear, at best.
Brown University, which has committed $125 million in capital over the first five years of the merger if it’s approved by regulatory bodies, paid a Kansas City-based consulting firm to write the report.
“We engaged Tripp Umbach because we know that one of the persisting questions about the proposed Care New England and Lifespan merger and affiliation with Brown concerns its potential economic impact,” Brown University president Christina H. Paxson said in a statement. “It was important to have an independent and objective assessment of the financial benefits of combining Rhode Island’s largest health care systems.”
University spokesman Brian Clark said Tripp Umbach has “worked for more than three decades conducting research, feasibility analysis, planning and economic analysis in the academic medicine industry.”
Paul Umbach, the president and founder of the firm, told the Globe in an interview Wednesday that he had never worked with Brown before, and began working on this report in September 2021.
The 21-page report finds that integrating the two health care systems and the university could bring billions of dollars and thousands of jobs to the state by 2035.
“A fully integrated academic medical center in Rhode Island can combine leading-edge research and renowned medical expertise to improve the quality of care; advance biomedical discovery; and educate future leaders in medicine, public health, and biomedical engineering. It would create a vibrant driver to the state’s economy,” the report reads, echoing previous statements offered by executives at Brown, Lifespan, and Care New England.
The report also said Rhode Island lagged neighboring states in the size of its academic medicine industry, which includes the total economic impact of higher education, the biomedical industry, and health care. Only Connecticut, the report said, had a lower percentage of employment in these sectors compared to the other New England states.
But the report also said that Rhode Island has the largest academic medicine industry compared with all US states that have only one medical school, and that Brown provides the largest economic impact among all medical schools that are not part of an integrated academic medical center.
Umbach said he interviewed leadership at Brown and the health systems to “understand the nature of their current academic medicine sector footprint.” He said he also spoke to “economic development” leaders from the Jewelry District in Providence. He acknowledged to the Globe that he did not interview health care providers, union representatives, community representatives, patients, or their advocates; but “reviewed news articles and reports that reflect the opinions of [these] audiences.”
Some health policy experts questioned the independence of the report, and its findings.
“The ‘independent report’ was commissioned by Brown, so I’m not sure I’d really call it independent,” said Elsa Pearson, a senior policy analyst of health law at Boston University’s School of Public Health. “I’m sure they had autonomy while conducting their research but it’s hard to overlook that minor detail.”
Pearson, who is originally from Rhode Island, said she would not be surprised if there was a financial net positive in the “academic medicine sector” given the likely influx of new physicians, researchers, students, and innovation. But, she said, she would be surprised if those economic gains “made it down to the patients in any beneficial way.”
Lifespan owns the Miriam, Hasbro Children’s, Newport, Bradley, and Rhode Island hospitals. Care New England owns Women & Infants, Kent, and Butler hospitals. In June 2020, the systems’ leaders agreed to return to merger talks, attempting to join forces after the COVID-19 pandemic exacerbated their financial pressures. Their boards and CEOs signed a letter of intent to merge in September 2020 and then signed a definitive agreement in February of this year. While their application was recently deemed complete, it has not yet been approved.
It’s not the first time the systems have attempted to merge, and critics have long said that a merger could cause a monopoly for health care in Rhode Island, an increase in prices, and a loss of jobs. Proponents say it would prevent an outside organization from attempting to take control over one of the systems.
The report states having an integrated academic medical center will create approximately 10,000 new high-paying jobs by 2035 since it will “significantly increase biomedical economic development” in the state — a point Paxton underscored.
“The report’s finding that we have an opportunity to add billions of dollars to strengthen the biomedical economy in Rhode Island clearly strengthens the argument for the creation of an integrated system that brings together research, medical education and teaching hospitals,” Paxson said.
Critics note that the report does not provide clear data to support that claim. Umbach told the Globe that the report uses data he and his firm have been collecting on “the economic impact of teaching hospitals in the US since 1995,” that was initially prepared for the Association of American Medical Colleges.
James Bailey, a Providence College economics professor who specializes in health economics, said the core problem with the report is that it is “opaque” and does not cite sources for most of its numbers.
“And the entire ‘methodology’ section is one paragraph long,” said Bailey. “It also never really explains how exactly the merger would lead to more economic impact. It says it would create jobs, but doesn’t say how.”
The lack of transparency makes it unconvincing, he told the Globe, but also difficult to immediately identify data that was “definitely wrong.”
“I’d need to put in as much time as they did to write my own competing report,” he quipped. “Its possible their 2035 numbers could be right regardless of whether the merger goes through simply because health care, higher education, and biomedicine generally grow over time.”
But the report is more specific, Bailey said, about the jobs that this merger could destroy.
“The significant duplication in administrative and back-office support across the two systems leads to higher healthcare operating costs,” read the report. “Tripp Umbach believes that the lack of a consolidated faculty practice plan leads to inefficiency and to uncoordinated care and recommends merging the systems to enhance high-quality and lower cost coordinated care across primary care providers, specialists, and hospitals to the benefit of consumers.”
The report also said that a Lifespan-Care New England merger could result in “better care and reduced cost” and cited the American Hospital Association (AHA) and a separate, unrelated report by Charles River Associates that looked at benefits of merging hospitals in other states.
But Pearson said that decades of studies show mergers typically do not lead to better care or reduced cost at the patient level.
“The hospital systems might save money due to administrative efficiencies. But I don’t buy the idea that those savings would trickle down to the patients,” she said. “What’s more, quoting the AHA doesn’t give credence to their argument — the AHA is looking out for hospitals.”
Umbach said that hospital mergers that “took place in the 1990s” did increase costs of care because systems merged to increase scale and lower competition.
“But they can’t do that now because the payment side won’t be so generous,” he said. “Most health policy experts would agree on one thing: Health care costs cannot continue to rise at the rate that they are. There’s a need, at some point, for health care costs to eventually come under control as the payment shifts from fee-for-service to value-based.”
While the U.S. Centers for Medicare & Medicaid Services have been reforming the way they reimburse hospitals, he said, modern mergers, such as the proposed deal between Lifespan and Care New England, will have to “right the ship.”
“The economics of healthy people is the way to go in the future,” said Umbach. “If we can have healthy people and lower the costs of care, it doesn’t mean that we won’t have industry growth. But we are the least-healthy country in the world. We spend the most on health care. And new systems will have to figure that out.”
Though the prices consumers pay and Medicare & Medicaid reimbursement are separate issues, Umbach insisted that the merger in Rhode Island would reduce the cost to consumers.
“Sadly, the general public continues to have a misperception that all hospital mergers, especially in the post-COVID era, are rooted in the same outdated economic design model,” he said. “Clearly, it is the intention of Brown University, Lifespan, and Care New England to reduce costs as it is critical to their survival in a payment environment tied to quality outcomes.”
The report compares Providence’s health care market to that of Pittsburgh, which it said has the highest percentage of employment engaged in academic medicine among all markets nationally. But, Pearson pointed out, the two cities have significant differences. Providence has a population of 179,494 people, according to the US Census Bureau, while Pittsburgh has more than 302,000. And Providence is much closer to both Boston and New York City than Pittsburgh is to the medical services in Philadelphia.
“Rhode Island is a very unique, very small market that will always exist in the shadows (and) context of New York City’s and Boston’s markets,” said Pearson “Even if Rhode Island does create an academic medicine sector... There will be considerable competition. It’s a bit naïve to believe that new system will exist in a vacuum, independent of existing systems.”
“Just because ‘XYZ’ happened in Pittsburgh, doesn’t mean it’ll happen in Providence,” she said. “We have to be careful when we look at data and make assumptions about how trends will transfer over to new markets.”
Alexa Gagosz can be reached at firstname.lastname@example.org. Follow her on Twitter @alexagagosz and on Instagram @AlexaGagosz.