Beth Israel, Lahey Health Hospital Merger May Up Costs, MA AG Says

July 13, 2018 - The proposed hospital merger between Beth Israel Deaconess Medical Center and Lahey Health is facing pushback from the Massachusetts Attorney General despite a previous endorsement from a key state board.

Local news sources are reporting that Attorney General Maura Healey recently sent a letter to the state’s Health Policy Commission warning them that the potential hospital merger could increase healthcare costs and reduce care access in the region.

Healthcare costs and prices tend to rise after a hospital merger, research shows. A 2016 study by the Medicare Payment Advisory Commission (MedPAC) found that hospital mergers disincentivize health systems to lower their costs, and a more recent analysis by PwC’s Health Research Institute predicted hospital mergers to drive a 6 percent boost in medical costs by 2019.

Healey fears that the largest healthcare transaction the state has seen in several decades would also lead to higher healthcare costs.

The proposed hospital merger deal would not only combine Beth Israel and Lahey Health, which both report billions in net patient revenue, but three other local hospitals. The merger would create “Beth Israel Lahey Health,” a 13-hospital system with over 800 primary care physicians and more than 3,500 specialists spanning from southern New Hampshire to Cape Cod.

READ MORE: 6 Major Hospital Merger Deals Making Headlines in 2018

The new health system would generate revenue of more than $5 billion annually.

The new hospital system would rival Partners HealthCare, which is the largest health system in Massachusetts with 16 hospitals and over $7.2 billion in net patient revenue, according to data from Definitive Healthcare.

The Massachusetts Public Health Council approved the proposed hospital merger deal in April 2018.

But the deal must clear several more hurdles before the two major Massachusetts health systems can merge. The state’s Health Policy Commission and attorney general must also greenlight the deal.

Healey did not indicate if she would attempt to block the potential hospital merger after expressing her concerns, The Boston Globe reported. However, she does have the authority to legally challenge the deal.

READ MORE: How Do Hospital Mergers Lower Costs, Drive Quality Improvement?

Stakeholders expect the Health Policy Commission to release their report on the merger later this month.

Spectrum Health eyes merger with Lakeland Health

Michigan-based Spectrum Health is exploring a hospital merger deal with non-profit Lakeland Health, the health systems recently announced in a joint statement.

Spectrum Health is a non-profit health system of 12 hospitals, 180 ambulatory sites, and 3,600 physicians and advanced practice providers. The health system has over $2.4 billion in net patient revenue, Definitive Healthcare data shows.

The proposed hospital merger would combine Spectrum Health with a three-hospital health system in southwestern Michigan. Lakeland Health boasts more than 4,000 employees and 450 providers.

“We have a long-standing relationship with Lakeland Health and admire their excellent clinical care, strong leadership team and commitment to the community,” stated Richard C. Breon, Spectrum Health President and CEO.

READ MORE: Hospital Mergers and Acquisitions Causes Cancer Costs to Rise

“Our board has spent the past year diligently focused on our growth and partnership strategy in the context of current and anticipated future trends in the industry, such as consumer-centric care and precision medicine. This integration brings benefits to both organizations in terms of improving affordability, quality and access.”

Lakeland Health President and CEO Loren B. Hamel also emphasized that the hospital merger deal would bring lower healthcare costs and improved outcomes through standardization.

“The benefits of integration will be many. We see great value in sharing and standardizing our approaches to continuously improving the health care we provide, to enhancing the overall health of the communities we serve, to lowering the overall cost of care, and to make our organizations the best places to attract the best talent,” he said.

Lakeland Health would become a division of Spectrum Health under the merger. The health system would retain oversight by a local board of directors, local capital investment considerations, and local philanthropic efforts, the health stems reported.

Spectrum Health and Lakeland Health expect a final hospital merger agreement by Oct. 1, 2018.

Sanford Health in SD considers expanding into Chicago market

Shortly after closing a deal with long-term care provider The Evangelical Lutheran Good Samaritan Society, South Dakota-based Sanford Health may be expanding east.

Local news sources are reporting that the 45-hospital system is looking to expand its footprint in Chicago. The health system’s President and CEO Kelby K. Krabbenhoft teased the potential expansion while announcing the Good Samaritan deal.

“The board authorized me last week to pursue discussions in Chicago, Illinois, and a board vote down there is happening tonight,” Krabbenhoft said during the announcement, according to an Argus Leader report. “And so, it’s very real. It's happening as we speak.”

The health system, which has over $3.3 billion in net patient revenue, did not go into further detail about its acquisition plans in the Chicago market. The system told the local news source via email that it “continues to explore growth opportunities locally, regionally and nationally.”

“We are in discussions with various entities, including one in Chicago,” the health system added in the email. “Both of our respective boards have expressed interest in continuing these discussions.”

Humana, private equity firms complete the acquisition of Kindred Healthcare

Post-acute care provider Kindred Healthcare. Inc. is now under the management of the private payer Humana and two private equity firms, TPG Capital and Welsh, Carson, Anderson & Stowe, a recent press release announced.

The three companies bought Kindred Healthcare for $4.1 billion in cash after signing a definitive agreement to purchase the post-acute care organization on Dec. 19, 2017. The purchase includes the assumption or repayment of Kindred Healthcare’s net debt.

The three buyers jointly announced that Kindred Healthcare’s long-term acute care hospitals, inpatient rehabilitation facilities, and contract rehabilitation service businesses separated from the post-acute care organization’s home health, hospice, and community care offerings.

The home health, hospice, and community care component of the organization is now known as Kindred at Home, while the remaining business lines will remain known as Kindred Healthcare.

TPG Capital and Welsh, Carson, Anderson & Stowe will operate Kindred Healthcare as separate specialty hospitals. Kindred at Home will be a stand-alone company, with Humana owning 40 percent and the private equity firms owning the remaining 60 percent.