Proposed Beth Israel-Lahey merger may boost costs, Mass. attorney general warns

Massachusetts' attorney general warned a commission reviewing the proposed merger between Beth Israel Deaconess Medical Center, Lahey Health and other hospital systems that the deal could raise healthcare costs and impede access in the state.

Maura Healey described her concerns in a July 9 letter to leaders of the Massachusetts Health Policy Commission, an 11-member board that since December has been hashing out its own comprehensive investigation into the deal's cost and market impact. The commission will release its preliminary findings July 18. In an initial review, commission staff determined the transaction could have meaningful impacts on healthcare costs and market competition.

In her letter, Healey wrote the deal could prompt lower rates from health insurers for hospitals that aren't part of the resulting health system, and that it may also cause higher proportions of patients who rely on Medicare and MassHealth, the state's version of Medicaid and the Children's Health Insurance Program, to visit those hospitals.

"If the proposed transaction goes forward, these institutions risk seeing their commercially insured patients drawn into the new system, whose providers already see a lower percentage of MassHealth patients than other hospitals," she wrote. She added that because Boston's Beth Israel and Lahey Health, based in Burlington, Mass., already are more expensive than their peers, such a shift would raise healthcare costs broadly, and would disproportionately reduce revenue to competitor hospitals, potentially undermining their financial stability.

"There could be cascading effects on patients, workers and communities, as the independent community hospitals might have to consider cuts to services, jobs and spending to remain viable," Healey wrote.

That, in turn, could reduce access to care, especially for people in low-income communities, she wrote.

The letter was directed to Dr. Stuart Altman, the commission's chairman, and David Seltz, its executive director. Beth Israel CEO Dr. Kevin Tabb and Dr. Howard Grant, CEO of Lahey Clinic, also received copies.

David Passafaro, a spokesman for the proposed Beth Israel Lahey Health, wrote in a statement that the providers are committed to enhancing their ability to provide high quality, lower cost care throughout eastern Massachusetts.

"We have been engaged in an ongoing discussion with the attorney general's office as part of a robust regulatory review process," he said. "Over the next few months, we will continue to work collaboratively with all regulatory agencies—including the attorney general's office—to articulate all that Beth Israel Lahey Health seeks to accomplish together as a system and our plans for making that vision a reality."

Healey wrote that nationally, healthcare systems' prices tend to increase following mergers, citing congressional testimony by Carnegie Mellon University Professor Martin Gaynor. She pledged to follow up with both health systems to learn how they envision operating the resulting system.

Hospital mergers in Massachusetts can't go forward without approval from the state's Public Health Council, the Health Policy Commission and the attorney general. The Public Health Council voted to endorse the proposed merger, which also includes Boston's New England Baptist Hospital, Mount Auburn Hospital in Cambridge and Anna Jaques Hospital in Newburyport, in April.

Once the state's Health Policy Commission releases its preliminary report on the deal, the parties involved and other interested parties have 30 days to submit responses. The commission will issue its final report in September. The commission does not have the authority to block proposed transactions, but deals cannot close until it issues its final report, which may identify areas that need further review. A representative with Healey's office said if the attorney general determines the deal should not move forward, she would file a lawsuit to prevent its closure.

The combined entity would capture the state's second-largest inpatient, outpatient and primary care market shares—nearly in line with Partners Healthcare. It would have 10 hospitals, three affiliate hospitals and more than 4,000 physicians.

Beth Israel and Lahey have discussed merging in the past, but previous attempts fell apart. The two systems signed a letter of intent to merge in January 2017.