THE CEO OF TUFTS MEDICAL CENTER took issue with the stated rationale behind the proposed megamerger of Beth Israel Deaconess Medical Center, Lahey Health, and several other hospitals, saying the combined entity would not end up challenging Partners HealthCare for supremacy in Massachusetts.
“This is a false argument,” said Michael Wagner, testifying at an educational hearing on Tuesday hosted by the Boston City Council.
If the merger wins approval, Wagner said, the market would be left with a duopoly controlling 54 percent of the state’s commercial health care market. Wagner said he expects BI-Lahey will raise its prices and steal commercial business away from hospitals other than those owned by Partners. Without the cross-subsidization provided by the more lucrative commercial business, Wagner said those hospitals will have a much harder time serving Medicaid patients and some of them will likely go out of business.
“My concern is that this merger will result in increased disparities and increased costs while reducing access, especially for underserved communities,” Wagner said, claiming that the megamerger would result in a hospital system with only 14 percent of its patients covered by Medicaid. At Tufts, he said, the percentage is 31 percent.
David Spackman, senior vice president of legal services at Lahey Health, took a very different position. He said the problem in the marketplace is Partners, which is able to charge 30 to 50 percent more than the rest of the industry simply because of its market clout. Spackman never mentioned Partners by name in his remarks; taking his cue from the depiction of the evil Voldemort in the Harry Potter movies,
he referred to Partners as the “system who will not be named.”
“How are you going to fix that problem?” Spackman asked. “You’ve got three different ways. The Legislature can impose price controls, but that’s not going to happen. The attorney general can take Partners apart. That’s not going to happen, nor should it. Maybe we actually need to build competition.” He added: “We’re trying to bring true competition to Massachusetts. There is none.”
Spackman said all of the hospitals involved in the merger provide high-quality care at low cost. “Separately, we have done it well,” he said. “Together we can do it much better.”
Spackman said every type of patient population – commercial, Medicaid, Medicare – would benefit from the competition. He told city councilors worried about layoffs that the merged entity will increase its market share, presumably at the expense of Partners.
“We expect to grow. We expect to expand services,” he said. “This is not a strategy of shrinkage.”
Bonny Gilbert, the chair of the Greater Boston Interfaith Organization, said her group is not opposed to the merger but wants strict controls on the new entity’s pricing. She said she was disappointed that the Department of Public Health removed a provision in its approval of the merger that would have required the combined entity to live within the health care cost benchmark set by the Health Policy Commission.
“We consider this condition to be a base-minimum first step,” Gilbert said.
The provision was replaced with language requiring the merged entity to come up with a plan to reduce its expenses if the benchmark is exceeded.
Spackman said BI-Lahey pushed for the change in language because it is not fair to hold the new entity to a requirement not faced by other health care providers. Spackman said failure to come in under the benchmark, which is a somewhat arbitrary goal because many of the cost factors (pharmacy costs are one example) are not under a provider’s control, could trigger enormous financial penalties.
“We want to be a competitor; we don’t want to be disadvantaged,” Spackman said. “We want a level playing field. We don’t want a playing field that’s stacked against us.”
Partners, however, already is operating under the same requirement. As a condition of its merger with the Massachusetts Eye and Ear Infirmary, the hospital system is required “to ensure that its health status adjusted total medical expense does not exceed the health care cost growth benchmark.”