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Beth Israel-Lahey merger raises a Medicaid issue

GLOBE STAFF
If the merger is approved, Massachusetts’ two largest health systems would be the new Beth Israel Lahey Health and Partners HealthCare. Both would treat a lower share of Medicaid patients than the state average. SOURCE: Mass. Center for Health Information and Analysis

The hospitals included in the proposed merger of Beth Israel Deaconess Medical Center and Lahey Health have much in common, including a stated commitment to high-quality care and their desire to grow. Something else they share: a relatively low portion of their patients are poor or low-income.

At the acute-care hospitals that are part of the merger plan, an average of 13.1 percent of patients last year were on Medicaid, the government insurance program for poor and low-income individuals. That was far below the state average of 21.1 percent.

It was also less than the share of low-income patients at several other Massachusetts hospital systems, where the Medicaid population often accounts for at least 25 percent of total patients.

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The figures, compiled for the Globe by the Center for Health Information and Analysis, a state health care data agency, represent patients who were admitted to and discharged from hospitals in the 2017 fiscal year. They do not include outpatient visits.

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The numbers reflect an aspect of the big hospital merger that is causing consternation as it moves through the regulatory process: If Beth Israel Deaconess and Lahey consolidate, they will form a new health system stretching from New Hampshire to Cape Cod that focuses more on middle-class and wealthy patients than on the poor. That would leave a disproportionate responsibility to treat Medicaid patients to other hospitals.

The worry is that the pending merger could reinforce what some call a two-tier health care system in Massachusetts, where the largest hospital companies concentrate on wealthier patients while the smaller and less powerful ones care for the poor.

“If this transaction goes forward without adequate conditions, it might only worsen the situation,” said Dr. Paul Hattis, a professor at the Tufts University School of Medicine and a former member of the state Health Policy Commission.

The largest hospital system in Massachusetts, Partners HealthCare, also has a relatively low share of Medicaid patients. Partners hospitals discharged more than 23,000 Medicaid patients last year, a greater number than at any other hospital system — but that accounted for just 14.7 percent of Partners’ patients.

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Caring for Medicaid patients can challenge hospitals financially, because the Medicaid program, known in Massachusetts as MassHealth, reimburses less for services than what private insurers pay. Hospital officials often complain that Medicaid payments are so low they don’t even cover the full cost of providing care.

Last week, Attorney General Maura Healey joined the growing list of people who are raising concerns about the Beth Israel Deaconess-Lahey merger, at least partly because of the potential ramifications for Medicaid patients. Healey signaled she may push for changes or limits to the merger.

The Health Policy Commission, a watchdog state commission, is scrutinizing the merger plan and expects to release a report Wednesday that details how the transaction would affect health care costs, quality, and access.

The merger received approval from the state Public Health Council earlier this year but it still needs Healey’s blessing to move forward. It is also under federal review.

Beth Israel Deaconess Medical Center and Lahey Health announced their plan in early 2017. Since then, New England Baptist Hospital, Mount Auburn Hospital, and Anna Jaques Hospital have joined the deal.

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Beth Israel Deaconess is affiliated with several other hospitals that serve high shares of Medicaid patients. They include Brockton Hospital, where 31.1 percent of patients are on Medicaid; Lawrence General Hospital, where 34 percent are on Medicaid; and Cambridge Health Alliance, where 40.9 percent use Medicaid, according to state data.

None of those hospitals are part of the merger.

Sam Richardson, a health economist at Boston College, said executives leading the merger appear to be limiting the deal to hospitals that have relatively higher shares of commercially insured patients, and lower shares of Medicaid patients, which makes them financially more stable.

“They don’t want to be taking on hospitals that are in a precarious financial situation and have a harder time making ends meet,” Richardson said. “It’s a business decision.”

Executives at Beth Israel Deaconess said they did not solicit any particular hospitals to join the merger. The deal essentially includes two organizations: Lahey Health, and CareGroup, a federation of hospitals that includes Beth Israel Deaconess, New England Baptist, and Mount Auburn. Anna Jaques, a community hospital in Newburyport, later asked to join and was allowed into the deal, they said.

“I really don’t think this is an example of cherry-picking,” Dr. Kevin Tabb, chief executive of Beth Israel Deaconess, said earlier this year. Tabb is slated to run the merged company, which would be called Beth Israel Lahey Health.

A spokeswoman for Signature Healthcare, the parent of Brockton Hospital, said the organization values its partnership with Beth Israel Deaconess but wants to remain independent.

Lawrence General Hospital, however, said it is interested in being part of a system that would allow it to offer more specialty services. “We currently have a strong clinical relationship with Beth Israel Deaconess and are watching developments with interest,” spokeswoman Jill McDonald Halsey said in a statement.

Miles Lang-Kennedy, a spokesman for Cambridge Health Alliance, called its affiliation with Beth Israel Deaconess important.

“We look forward to building upon this affiliation going forward,” Lang-Kennedy said by e-mail. Cambridge Health Alliance is a public hospital system.

Officials at Beth Israel Deaconess said the patient numbers reviewed by the Globe don’t tell the full picture of their involvement with low-income patients. At their network of affiliated health centers, for example, over 50 percent of patients are on Medicaid or are uninsured, they said.

At Lahey, 67 percent of patients treated for mental health issues are covered by Medicaid, officials said.

“We recognize that all of us in health care have a continued obligation to support equitable, safe access to all patients, no matter their insurance or lack of insurance,” said Jennifer Kritz, a spokeswoman for Beth Israel Deaconess. “We’ll continue to be creative in expanding our outreach . . . to make sure we are accessible to all patients.”

Normand Deschene, chief executive of Wellforce, a rival health system, is not convinced. Wellforce is the parent of Tufts Medical Center, Lowell General Hospital, and MelroseWakefield Healthcare. At those hospitals, an average of 24.6 percent of patients are on Medicaid.

Deschene said he worries the Beth Israel Deaconess-Lahey system would use its added market clout to demand higher prices from private insurers and to pull patients away from competitor hospitals. That would threaten the sustainability of community hospitals already struggling to get by, he said.

“When BI-Lahey came together, this was a strategic decision on their part to focus on more affluent markets,” Deschene said.

“It creates a duopoly . . . It’ll continue to drive up costs as both Partners and they bulk up.”

Executives at Steward Health Care System, which runs a network of community hospitals in Eastern Massachusetts, also have criticized the merger, arguing it will widen disparities and put community hospitals at risk.

Others objecting to the merger include 1199SEIU, a division of the Service Employees International Union, and the Make Healthcare Affordable Coalition, which is backed by a Boston consulting firm and represents community members. The Greater Boston Interfaith Organization says it opposes any hospital merger that would increase costs.

The attorney general apparently has heard those concerns. In a letter to the Health Policy Commission last week, Healey noted “many hospitals that would remain independent after this proposed transaction receive relatively lower reimbursement rates from commercial insurance carriers and have large percentages of patients with public insurance through Medicare or MassHealth.

“If the proposed transaction goes forward, these institutions risk seeing their commercially-insured patients drawn into the new system, whose providers already see a lower percentage of MassHealth patients than other hospitals.”

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