Beth Israel-Lahey merger could create strong rival for Partners
Is this the health care breakthrough Massachusetts has been waiting for? Or is it just another burden on consumers in the making?
In essence, those are the questions facing state regulators as they try to decide whether to bless a proposed merger of Beth Israel Deaconess Medical Center and Lahey Health, two prestigious institutions that want to combine into a new 13-hospital powerhouse. The state’s Health Policy Commission expects to decide on Sept. 27 whether to refer the merger to Attorney General Maura Healey, who has the power to challenge the deal.
For glass-half-empty skeptics, the possible downside to the union is the same as the downside to every other hospital merger: cost. It’s practically an iron law of health economics, and the commission predicted in July that the proposed merger would raise spending in Massachusetts by $251 million. Any other deal, and such alarming projections might have halted the merger in its tracks.
And yet. . .
The main reason the merger could still win approval is that this alliance comes with potential benefits that are impossible to ignore. There’s a chance that the system could radically reshape Massachusetts health care, revving up competition and ultimately pushing spending down.
It’s a gamble, and if costs balloon, regulators of the future will wonder what on earth the state was thinking in 2018. But if the state — meaning the commission, the Department of Public Health, and the attorney general — can craft clear, enforceable conditions and receive an ironclad vow from the new system to limit costs, the deal deserves to go ahead.
THE DISCUSSION plays out in the shadow of a dominant player whose name hospital chiefs Dr. Kevin Tabb of Beth Israel and Dr. Howard Grant of Lahey seemed reluctant even to utter during a recent visit to the Globe.
The “other system,” as Grant prefers to call it, is Partners HealthCare, the $13.4 billion colossus made up of Brigham and Women’s, Massachusetts General Hospital, Mass. Eye and Ear, and other Eastern Massachusetts hospitals.
With its market clout and name-brand cachet, Partners commands unjustifiably high prices that insurers have little choice but to pay. It’s blamed for destabilizing community hospitals in poorer areas, which lose prized commercial patients and doctors to the downtown giant, and the state’s decision to allow its creation in 1994 is widely viewed as a mistake.
To critics of the proposed Beth Israel-Lahey deal, including rival systems Wellforce and Steward, approving the merger would mean the state has learned nothing. By joining forces, the hospitals would just become another system able to extract higher prices — the second arm of a duopoly.
BUT WHAT if having a competitor closer to its own size (the combined Beth Israel-Lahey system would be the state’s second largest, at about $5 billion in annual revenue) is what’s needed to finally curb
The theory embraced by merger proponents is that because the new company will have lower prices, but also a brand name and market heft, it’ll put more pressure on Partners.
The commission’s study does foresee the new company stealing some business from Partners but predicts the savings would be largely canceled out by higher prices in the new system. Supporters of the merger brush off those cautions: There’s never been a deal like this, they say, and projections built on other states don’t help chart what will happen here.
Still, for this experiment to be worth trying, the risks need to be minimized. Conversations are said to be ongoing between the hospitals and regulators about possible conditions if a merger were to take place. A limit on price increases, and restrictions on doctor-poaching from community hospitals, would be good conditions to attach to the deal.
Some regulators frown on merger conditions that require continuing enforcement, since their effectiveness tends to fade over time. One way to build up the credibility of the conditions for a Beth Israel-Lahey deal would be to spread out enforcement between both the Department of Public Health and the attorney general. Another would be to hire a third-party monitor, a step that hasn’t been part of other mergers.
Yes, there are risks. But the status quo is crushingly expensive. With appropriate safeguards, the state should welcome a rival capable of giving Partners a run for our money.