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    AG, public health agency weigh conditions for Beth Israel-Lahey merger

    Beth Israel Deaconess Medical Center and Lahey Health have criticizing the formula used to calculate the projected cost increases, calling the numbers misleading.
    DAVID L. RYAN/Globe Staff/File
    Beth Israel Deaconess Medical Center and Lahey Health have criticizing the formula used to calculate the projected cost increases , calling the numbers misleading.

    The state attorney general’s office and the Department of Public Health on Thursday signaled that they are drafting conditions for the biggest health care merger proposed in Massachusetts in decades, after a state watchdog agency stood firm behind projections that the deal could sharply raise costs for consumers.

    The comments from the three public agencies indicated that nearly two years after it was first proposed, a merger between Beth Israel Deaconess Medical Center and Lahey Health may be nearing final approval — but with guardrails.

    The Health Policy Commission, which serves the watchdog role, said Thursday that the deal would give the hospitals the market power to demand higher prices for their services — increasing health spending by at least $128.4 million to $170.8 million per year for inpatient, outpatient, and adult primary care services. Spending on other medical services could increase by an additional $29.8 million to $59.7 million per year, the commission projected in a new report.

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    Commissioners referred their findings to Attorney General Maura Healey’s office and asked Healey to develop “strong and enforceable steps” the hospitals can take to mitigate concerns about higher costs. The hospitals need Healey’s approval before they can merge.

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    In a statement Thursday, a spokeswoman for Healey said: “We share [the commission’s] concerns and are currently engaged in ongoing discussions with BI-Lahey representatives on enforceable conditions to address cost and access concerns, particularly for low-income communities and communities of color.”

    The Health Policy Commission also asked the Department of Public Health to reconsider its approval of the merger, which was granted in April before any cost estimates were released. DPH officials said Thursday that they would reconsider the matter on Oct. 10.

    “This examination will include assessing the project’s impact on public health value, access to care, and quality of care,” DPH spokeswoman Ann Scales said in a statement.

    The Health Policy Commission is charged with studying hospital mergers but cannot block them. It can refer its findings to other officials with greater regulatory authority.

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    “The question is: Does the merger serve the Commonwealth? The answer is no — not yet,” said Dr. Donald Berwick, a member of the commission, said at a public meeting Thursday.

    “Costs are going to go up. They’re going to go up substantially,” he said. “We need a form of restraint.”

    Looming over the discussion was Partners HealthCare, the state’s largest and priciest health care network, which includes Massachusetts General and Brigham and Women’s hospitals.

    Beth Israel Deaconess and Lahey argue that their merger would create a high-quality and lower-cost alternative to Partners. The 13-hospital deal also includes Mount Auburn, New England Baptist, and Anna Jaques hospitals.

    Commissioner David Cutler said the proposed merger could result in a range of outcomes.

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    “It could be a transaction that is absolutely wonderful for the Commonwealth by stirring competition and lowering costs,” he said. “It could be a transaction that is terrible for the Commonwealth . . . by resulting in two systems with high prices and everyone else struggling even more.”

    The cost estimates released Thursday are similar to the numbers in a preliminary report the commission issued in July. Beth Israel Deaconess and Lahey officials rejected those initial cost estimates, criticizing the formula used to calculate the projections and calling the numbers “misleading and inflammatory.”

    Hospital officials submitted a lengthy rebuttal, but the commission remained unconvinced.

    “The parties have declined to offer any commitments to limit future price increases,” the commission’s new report said.

    The report said the hospitals overstated the savings that would come from their merger and failed to provide new information to change the commission’s projection that the deal would substantially raise costs.

    If the merger is completed, the new Beth Israel-Lahey system would have market share similar to Partners.

    Critics, including rival hospital systems, have argued that a big new Beth Israel-Lahey system would draw patients away from community hospitals that are already struggling. They have also raised concerns about the relatively low share of poor patients that Beth Israel Deaconess and Lahey serve.

    “The HPC’s final report confirms our worst fears that this mega merger will hurt communities of color and raise prices for patients across Massachusetts,” Hanoi Reyes, spokeswoman for the Make Healthcare Affordable Coalition, said in a statement. The coalition opposes the merger.

    The chief executive of Beth Israel Deaconess, Dr. Kevin Tabb, told the Globe on Thursday that hospital officials will continue working with regulators to alleviate concerns about the deal.

    “We believe that ultimately those concerns, while rational and legitimate, can be addressed . . . prior to our ultimately coming together and doing something that we think will be better for everybody in the Commonwealth,” he said.

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