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Hospital merger should await more proof of cost controls

The famed Massachusetts General Hospital and Brigham and Women’s Hospital are boons to the state’s economy but, at times, a bane to insurers and premium payers. The two hospitals, owned by Partners HealthCare, offer top-quality treatment, but at higher than ordinary prices, even for routine procedures. Nonetheless, local patients vote with their feet — and demand that insurers give them access to the most prestigious hospitals.

This complicated dynamic is at the heart of the state’s efforts to control health care costs. And it presents itself, yet again, in the attempt by Partners to acquire South Shore Hospital. In 2012, the Legislature established a new Health Policy Commission to assess the cost implications of hospital mergers, which are also reviewed by state Attorney General Martha Coakley or the US Justice Department for potential antitrust concerns. The panel’s verdict: Partners’ purchase of South Shore Hospital would drive up costs for the state’s three largest insurers between 1.3 percent and 1.5 percent over what they would otherwise be.

Partners insists the estimate is based on faulty assumptions about the changes the merger would bring. The Partners system is transitioning to an accountable-care model, in which networks are paid a flat rate for the care of a patient, rather than a separate amount for each service. Buying the Weymouth-based South Shore Hospital, it insists, would enhance its ability to implement new cost-saving models.

Nonetheless, the Health Policy Commission studied Partners’ past behavior, including its takeover of Newton-Wellesley Hospital, and raised further concerns about giving such a giant player on the health-care landscape even greater market clout.


Although it could now proceed with the takeover, Partners, in a joint statement with Coakley’s office, said Wednesday that it would delay doing so because the two are engaged in discussions. Those discussions are about conditions and safeguards under which Coakley and the federal Department of Justice might agree not to oppose the merger in court.

Perhaps such a constructive agreement could be fashioned. The better solution, however, would be for Partners to keep working on its accountable-care model, continue to coordinate closely with the supportive management team at South Shore Hospital, and reapply for its purchase in two years. Then, regulators will have a better idea of whether Partners’ new approaches are truly yielding savings.


The issue comes down to a clash between past patterns and future promises. In the past, studies by Coakley’s office have shown that Partners has used its considerable clout to leverage higher reimbursements from insurers for procedures that could have been performed more cheaply at other facilities. This point — that Partners not only extracts top dollar from insurers for complex cases, but for ordinary procedures — was a focus of the Health Policy Commission’s evaluation. The commission concluded that the merger will likely result in less competition, higher health care spending, and “increased premiums for employers and consumers.”

If the commission is right, this deal shouldn’t go forward. But if Partners is correct, past trends won’t dictate future costs, as it moves to an entirely new model of care.

Partners executives say they envision a system in which basic patient care takes place at community hospitals while Mass. General and Brigham and Women’s handle only the more complicated cases and complex procedures. They cite their experience restraining costs for several populations of Medicare patients who are big consumers of health care, as well as the fact that 30 percent of their patients are now treated for a fixed annual sum rather than on a fee-for-service basis. Further, the hospital network says it will employ innovative health-management techniques such as patient Web portals, virtual visits, and enhanced case oversight and monitoring to keep a check of costs.


But Partners hasn’t yet made a thorough-going transition to accountable care. By its own projections, a majority of Partners patients won’t be cared for under fixed-sum arrangements for at least another three years.

And that underscores the best course forward here. Partners should put its plans on hold until it has more compelling evidence of its ability to restrain costs. After two years, everyone should have a much better sense of the success of those efforts. To approve the deal now, even with conditions attached, would require the state to provide constant oversight to nudge the merged entity toward any cost-containment goals. Far better to give Partners the time, and the obligation, to prove itself.

While it works toward its stated goals, Partners can continue its increasingly close cooperation with South Shore Hospital. If, in two years, Partners has truly become part of the cost-curbing solution, then its proposed acquisition of South Shore Hospital will be a deal that sells itself.