BI-Lahey merger gets a break on cost growth

State officials remove benchmark mandate they enforced with Partners

by Jack Sullivan for CommonWealth Magazine

April 6, 2018

State health officials stripped language from a document that would have required the merger of Beth Israel Deaconess Medical Center and Lahey Health to prove they’ll meet legislatively mandated cost growth benchmarks, a requirement officials made sure was adopted as part of the recent merger between Partners HealthCare and Massachusetts Eye and Ear Infirmary.

The change in language during the Department of Public Health’s Determination of Need process has some industry officials and patient advocates up in arms because the change was made after the public comment period was closed.

“From our perspective, [the requirement] is the first step in requiring the merger parties to be held accountable for the cost impact for the consumer of these mergers,” said Bonny Gilbert, chairwoman of the Greater Boston Interfaith Organization health care team who testified against the change in conditions. “There has never been a merger that has not increased costs. Our costs just go up and up.”

Gilbert and other advocates say they are holding out hope that the Health Policy Commission or Attorney General Maura Healey can insert the language back into the official documents to protect patients from cost increases that often come with mega-mergers such as this. The Health Policy Commission does not have regulatory powers, but is charged with monitoring provider and payer performance in meeting the state’s health cost growth benchmark.

A spokeswoman for Beth Israel referred questions about the shift in language to DPH. Ann Scales, a DPH spokeswoman, insisted the amended language is a more effective way to gauge the merger’s impact on costs. She said because the Beth Israel-Lahey transaction is actually creating  new system, it has different needs than the merger of Partners and Mass Eye and Ear, which involved a much larger provider absorbing a smaller and cheaper hospital.

“Each Determination of Need (DoN) application is analyzed, and conditions are developed, based upon the transaction and the way the transaction and the commitments made in that transaction can be most objectively and effectively measured,” Scales said in an email. “What was appropriate in the situation where two service lines were being merged from a lower-cost provider (Mass Eye & Ear) and into a higher-cost system (Partners) is different from a situation in which a brand new system with the potential for significant market power should be reviewed.”

For years, Partners has been the focus of concern from regulators and advocates, who have raised questions about its outsized clout in the state’s health care market and its effect on health care costs. The proposed Beth Israel-Lahey merger has thus far escaped that level of scrutiny, though it would, if completed, create a provider network second only to Partners to size. The Beth Israel-Lahey merger would create a 13-hospital network that includes 4,200 physicians.

The Boston City Council is planning on holding a hearing on the Beth Israel-Lahey merger Tuesday and one advocacy group said the hospitals will be put under the spotlight.

“At a time when health costs are rising across the board, allowing a second market giant like Partners is the exact opposite direction we should be going,” said Hanoi Reyes, spokeswoman for the Make Healthcare Affordable Coalition. “Now is the time to ask questions and scrutinize this deal, or we will have lost the chance.”

In early March, DPH issued a report on the merger and opened it up to public comment. Included in the report was a section under “Other conditions” that would have required Beth Israel and Lahey, under their new corporate structure called NewCo, to annually certify that they are meeting the cost growth benchmarks the Legislature passed several years ago to contain health care costs.

“The Holder will ensure that the health status adjusted total medical expense of the NewCo system does not exceed in any calendar year the health care cost growth benchmark established under (Massachusetts law) for such year,” the Determination of Need report originally stated. “The parties shall annually certify compliance with this section to the Department and provide any requested documentation necessary to assess compliance.”

But in its recommendation earlier this week to approve the $5.3 billion merger, staff from the Public Health Council, which oversees the Determination of Need process, struck that language and inserted wording saying only that if the new health system is required by the Health Policy Commission to develop a Performance Improvement Plan, the hospital group will “timely provide all information necessary” for officials to conduct an analysis.

Gilbert testified at the hearing that it’s not enough to trust claims that a merged BI-Lahey system would be able to contain costs.

“We cannot afford to allow any more mergers solely on the basis of well-intended, yet unaccountable goal statements,” she testified. “You, the Public Health Council, have a responsibility to the Massachusetts citizens to require that this merger live up to its goals by requiring it to maintain per capita health care spending growth  at or below the benchmark, and to document this compliance, with consequences for any failure.”

The language for the NewCo merger differs significantly from what state officials demanded from Partners in its merger with Mass Eye and Ear. Under the report approving that venture, Partners has an “obligation to ensure that its health status adjusted total medical expense does not exceed the health care cost benchmark” in any given year.

“The parties shall annually certify compliance with this section to the Department and provide any requested documentation necessary to assess compliance,” the recommendation stated.

The benchmark set for 2018 by the Health Policy Commission calls for health care costs to grow by no more than 3.1 percent.

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