Beth Israel-Lahey merger scores Massachusetts approval

The planned merger between Beth Israel Deaconess Medical Center and Lahey Health won approval by a key Massachusetts board.

Massachusetts' Public Health Council on Wednesday endorsed the merger. The new health system, which would be well-positioned to compete with Partners Healthcare, would have 10 hospitals in its network, plus three affiliate hospitals—Cambridge Health Alliance, Lawrence General Hospital and Metrowest Medical Center and more than 4,000 physicians.

The combined entity would have the second-largest inpatient, outpatient and primary-care market shares in the state—nearly equal to Partners—which would likely affect its leverage to negotiate hospital and physician prices, according to the commission's preliminary report. A Beth Israel-Lahey system and Partners would control about half of the state's inpatient market.

The deal still requires approval from Massachusetts' Healty Policy Commission and the state attorney general's office.

The proposed merger is one of a series of recent health system consolidations in recent months as providers look to lower costs and better coordinate care. Consolidation can give health systems more leverage in negotiating more favorable rates with insurers, which often means that employers and consumers pay higher premiums.

Massachusetts ranks as having among the best healthcare delivery systems in the country. Its growth in overall health spending of 2.8% in 2016 was below the U.S. average of 4.3%, but there is still wide variation in cost. Spending at the highest-cost facility was 36% higher than the lowest-cost organization. Massachusetts still directs a lot of care through academic medical centers, including Beth Israel's affiliation with Harvard Medical School, which often have higher costs.

Beth Israel and Lahey first proposed a merger in 2011, but plans fell through. The systems initiated another round of merger talks in January.