After long negotiations, Attorney General Martha Coakley and Partners HealthCare System have arrived at a reasonable deal to let the hospital network acquire South Shore Hospital in exchange for significant restrictions on short-term rates and bargaining power.
This agreement should be healthy for Massachusetts and good for Partners itself, which considers the acquisition of the Weymouth hospital vital to its efforts to deliver care in the most cost-effective setting.
The multi-part pact is complicated, but the most significant pieces aren't. The annual increases in Partners' contracts with insurers will be capped at inflation through 2020. Further, Partners won't be able to require insurers to accept its entire network of hospitals as a condition of having highly coveted Mass. General and Brigham and Women's hospitals in their plans. Instead, insurers will be able to contract separately with those two academic medical centers — or with other parts of the Partners system — for the next 10 years.
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In addition to South Shore Hospital, the deal allows Partners to proceed with the process of acquiring two other hospitals: Lawrence Memorial Hospital in Medford and Melrose-Wakefield Hospital. Beyond that, Partners can't acquire any other eastern Massachusetts facilities without the attorney general's approval for seven years, though because of its relationship with Emerson Hospital in Concord, that facility is exempt; under the agreement, Partners could, after a year, initiate the process of acquiring Emerson. The agreement also includes important restrictions on enlarging Partners' physicians network through either direct hiring or affiliation.
Some critics have attacked the arrangement as merely enshrining the status quo, but it actually does a good deal more. Holding Partners' annual rate increase to general inflation amounts to a real-dollar freeze on costs at the state's leading provider over the next six and a half years.
That's significant — and something that would not otherwise occur. Over the last decade, Partners had regularly gotten increases in the 4 to 5 percent range, and sometimes higher. And the inflation of medical costs typically runs about 1.5 percent higher than general inflation, which makes the deal look even better.
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As a further restraint, the deal stipulates that annual cost increase to insurers from Partners' HMO contracts won't exceed 3.6 percent, the state's health care cost-constraint benchmark. (Those costs are driven by a combination of the rates charged for care and the number of times that care is delivered.) If Partners exceeds that cap, it will have to refund the extra to the insurers; other health care providers merely have to develop cost-control strategies.
Partners, then, has made a serious commitment to cost restraint in exchange for Coakley's — and the Department of Justice's — acceding to its short-term acquisition plans. Both Partners and Coakley deserve credit for their efforts to craft a reasonable deal that allows Partners to move forward with its community-care plans while taking important steps to curb its market power and keep health care costs in check.