The Codcast: A devilish health care merger

Two of the state’s leading health care analysts say they aren’t sure whether creating a powerful alternative to Partners HealthCare will reduce health care costs in Massachusetts or increase them.

“It’s the devil you know versus the devil you don’t know,” said John E. McDonough, a professor of public health practice at the TH Chan School of Public Health at Harvard University. “Are we better off having one Partners or two Partners?”

Paul Hattis, an associate professor of public health and community medicine at Tufts Medical School, said he also has mixed feelings about the “fight fire with fire” approach advocated by proponents of a merger between Beth Israel Deaconess Medical Center of Boston, Lahey Health of Burlington, New England Baptist Hospital in Boston, Mount Auburn Hospital in Cambridge, and Anna Jaques Hospital in Newburyport. The proposed health care goliath currently goes by the name of NewCo.

As Hattis and McDonough explain in this week’s CommonWealth Codcast, there is uncertainty over whether the new hospital system will use its clout to take business away from Partners and force a price war that will lead to lower health care costs overall or whether NewCo will destabilize the remaining players in the market and attempt to use its clout to boost revenues by raising its prices.

According to McDonough, Partners controls nearly 27 percent of the state’s inpatient and outpatient hospital market. NewCo would represent about 25 percent of the market, he said, giving the two systems together just over half of the market. In terms of revenue, however, there remains a vast disparity between Partners and its would-be challenger. Partners rakes in about $13 billion in annual revenue, compared to $5 billion for NewCo using 2016 data.

McDonough said most employers currently don’t feel they can offer health insurance plans without access to the prestigious Partners network, which includes Brigham and Women’s and Massachusetts General. The big question is whether a high quality, lower cost network can change the mindset of employers and their employees. He noted Massachusetts has the fourth highest commercial health insurance rates in the country, but the standard individual health plans offered by the state’s Health Connector are the second lowest in terms of price in the nation – in part because Partners isn’t part of the covered network.

Still, McDonough isn’t convinced NewCo will end up benefiting the end users of health care. “There’s very little evidence in these kinds of mergers, acquisitions, consolidations that the savings in any way flow back to patients or employers,” he said.

Hattis also pointed out that Michael Wagner, the CEO of Tufts Medical Center, thinks NewCo will take commercial business away from non-Partners hospitals and leave those facilities weakened, unable to use commercial business to subsidize Medicaid and Medicare care. The result could be more instability and concentration in the marketplace, themes Hattis raised in an op-ed article for CommonWealth earlier this year.

One questionmark is whether NewCo will be a true merger of the participating hospitals, the way Beth Israel and Deaconess combined in 1996, or whether it will be more of an affiliation, the way Brigham and Women’s and Massachusetts General combined under the Partners brand in 1994. So far, the indications from NewCo officials are that the combined company will be more of an affiliation.

Pressed to give a thumbs-up or thumbs-down on the merger, both Hattis and McDonough said they would wait for a review being conducted by the Health Policy Commission before deciding. McDonough acknowledged the verdict from the commission isn’t likely to be straightforward because so many variables are involved.

McDonough said the wisest course may be to turn back the clock on the 1994 merger of Brigham and Women’s and Massachusetts General. “The smartest thing to do right now would be to divide Partners in half,” he said.



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