Business & Tech

State formally signs off on merger between Mass. Eye and Ear, Partners HealthCare

Massachusetts Eye and Ear.
David L. Ryan/Globe Staff/File 2017
Massachusetts Eye and Ear.

State public health officials Wednesday formally approved Partners HealthCare’s acquisition of Massachusetts Eye and Ear, capping a monthslong public debate about whether the deal would significantly raise costs for consumers.

The unanimous vote from the Public Health Council, which is chaired by the Baker administration’s public health commissioner, Dr. Monica Bharel, means Partners and Mass. Eye and Ear now can finalize the deal they proposed more than a year ago.

The transaction — which executives described as critical to the financial sustainability of Mass. Eye and Ear — is slated to close by April 1.

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Patients are not likely to see much of a difference initially. Mass. Eye and Ear will retain its name, its medical staff, and its leadership team even as it becomes part of the much larger Partners organization.

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The Public Health Council’s vote of support for the acquisition was expected, as staff at the Department of Public Health had recommended conditional approval, and the council generally follows such recommendations.

In January, Attorney General Maura Healey said she would not sue to block the deal because there was no basis for an antitrust lawsuit.

But regulators acknowledged that they still have some concerns about the transaction.

A 2017 estimate from the state Health Policy Commission, a watchdog agency that tracks hospital mergers, said Partners’ acquisition of Mass. Eye and Ear could increase health costs for consumers and employers by as much as $61.2 million a year, if Partners used the acquisition to significantly raise prices.

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Dr. Edward Bernstein, a member of the Public Health Council, said Wednesday he was worried that some patients could have a harder time getting specialty care at Mass. Eye and Ear if costs rise as a result of the merger. “The concern I think we all have is access,” he said.

With those cost concerns in mind, public health officials mandated that Partners not raise prices for Mass. Eye and Ear’s medical services any more than the state’s annual target for containing health spending. That target is currently 3.1 percent a year.

If Partners doesn’t comply, it could be required to pay millions of dollars toward a fund for community health initiatives, and it would not be able to complete future mergers and other major projects that require state approval.

The top executives of Partners and Mass. Eye and Ear, who answered questions for council members Wednesday, acknowledged that they plan to seek some rate increases for Mass. Eye and Ear. But they said they are not planning any significant cost hikes.

“We are not eager and have not pursued nor have been granted price increases that are significantly anything more than [medical] inflation,” said Dr. David Torchiana, chief executive of Partners.

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Partners is the largest and among the priciest health systems in Massachusetts. Its network includes Massachusetts General Hospital, which sits next door to Mass. Eye and Ear and already shares a close affiliation with the specialty hospital.

Torchiana and John Fernandez, the chief executive of Mass. Eye and Ear, have described their deal as a logical next step for two organizations that already share ties.

The merger approval comes as a victory particularly for Partners, which in 2015 abandoned plans to acquire three other Massachusetts hospitals because of fierce opposition based on cost and antitrust issues.

Torchiana, in an interview, said he was “very relieved” that the deal was approved after “a relatively benign” review.

Fernandez said that the takeover by Partners will help stabilize Mass. Eye and Ear so its staff can continue doing medical research and providing complex patient care for many years.

The transaction also will give more patients access to the eye, ear, nose, and throat care that the specialty hospital provides, he said: “How do we continue to grow clinically in the different locations where Partners already is? We’ll know more in the weeks and months to come.”

Layoffs are common in corporate mergers, but Fernandez did not detail any planned job cuts on Wednesday. Mass. Eye and Ear employs about 2,200 people.

“We’ll have to evaluate that as we go,” he said, adding that employees also would have new job opportunities through Partners.

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.