Beth Israel-Lahey merger should include restrictions, Mass. panel says

The proposed merger between Beth Israel Deaconess Medical Center, Lahey Health System and other hospitals in Massachusetts hit a speed bump Thursday when a key state advisory panel recommended that regulators impose enforceable restrictions on the deal to mitigate potential cost and access problems.

The Massachusetts Health Policy Commission said in its new report that the proposed merger could increase total healthcare spending by as much as $171 million annually. That could result from the new system's significantly enhanced leverage with payers.

In addition, the commission found that the new system, to be called Beth Israel Lahey Health, would have a low mix of Medicaid, lower-income and minority patients compared to other large eastern Massachusetts systems. It said the merger parties have so far declined to make any commitments to expand access for Medicaid patients.

The findings were similar to the commission's previous report in July, which the merger partners rejected in a 64-page rebuttal.

"While these are fine institutions, they put the merger together in a way that could, if they did nothing else, create more serious problems for low-income patients and for community hospitals," said Stuart Altman, the commission's chair and a health policy professor at Brandeis University. He called the commission's estimates of spending increases resulting the merger "conservative."

Dr. Kevin Tabb, CEO of Beth Israel who's been named to serve as CEO of Beth Israel Lahey Health, said the merger partners will work collaboratively with state officials to address the concerns raised by the commission.

"We are confident that the creation of Beth Israel Lahey Health would strengthen patient care, reduce healthcare cost growth and expand access—as well as bring meaningful competition to the Massachusetts healthcare market," he said in a written statement.

In their August rebuttal, the merger partners argued the commission's methodology was flawed and that the merger would yield an estimated $149 million to $270 million in annual savings five years after the tie-up was completed.

The deal, signed last October, involves Beth Israel in Boston and Lahey in Burlington, Mass., as well as Boston's New England Baptist Hospital, Mount Auburn Hospital in Cambridge and Anna Jaques Hospital in Newburyport. The new system would feature 10 acute-care hospitals, the largest in the state. It would also have three affiliate hospitals in the Cambridge Health Alliance, Lawrence General Hospital and Metrowest Medical Center and more than 4,000 physicians.

The new system would be the second largest in Massachusetts, behind Partners HealthCare. The merger partners say the deal ultimately would lower costs, in part by luring patients from Partners.

The new commission report said that while the merger partners' plans to shift care to lower-cost settings may result in savings, those savings would not offset spending increases if the parties obtain the projected price increases. It noted that the parties have declined to make any commitments to limit future price hikes.

Altman said he expects the merger partners to respond with proposals to address the commission's concerns, unlike their response to the preliminary report. "I'm pretty optimistic this time they'll take it much more seriously," he said.

He expressed confidence that Massachusetts Attorney Maura Healey and the state Department of Public Health, who have regulatory authority over hospital mergers, will require significant modifications to the merger agreement.

The proposed merger may not be finalized until 30 days after the commission's report. The attorney general and the commissioner of the Department of Public Health could take further action affecting the 30-day timeline.

Altman urged other states to establish a similar model of fact-finding and review when hospital systems propose to merge. "This is a very helpful process," he said. "We've allowed too many mergers to go forward with negative implications, and we've done nothing to mitigate them."