State Green Lights Partners, Mass. Eye and Ear Hospital Merger

February 20, 2018 - Massachusetts public health officials recently approved a proposed hospital merger between the state’s largest hospital system, Partners HealthCare, and specialty hospital Massachusetts Eye and Ear.

The Public Health Council unanimously voted to allow the hospital merger deal after an extensive public debate over whether a Partners and Mass Eye and Ear merger would increase healthcare costs for patients, The Boston Globe reported.

The state’s Health Policy Commission reported in November 2017 that a hospital merger between the two provider organizations would increase healthcare spending from $20.8 million to $61.2 million a year.

Partners would seek greater private payer rates after acquiring Mass Eye and Ear, resulting in significant commercial revenue boosts, the commission argued.

“The parties anticipate certain operating savings, but they concede that they expect some rate increases as a result of the transaction, declining to offer any commitment to limit such increases,” Stuart Altman, Health Policy Commission Chairman stated on November. “These increases will impact consumers and businesses in the Commonwealth who will likely see higher premiums as a result.”

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“Additionally, these higher prices may impact tiered and limited network products, either by undermining the savings those products offer or by reducing access to Massachusetts Eye and Ear's high-quality specialty care for members of those plans,” he continued.

However, Partners and Mass Eye and Ear spokespeople asserted that the hospital merger deal would bring community benefits and help improve the financial standing of Mass Eye and Ear.

The organizations explained that Mass Eye and Ear recently experienced financial setbacks because of its specialty hospital status. Mass Eye and Ear told the Health Policy Commission that decreasing federal reimbursement rates for hospital services and medical education, reductions in federal funding for research, and increases in pharmacy and nursing costs troubled the specialty hospital.

The lack of integrated population health management resources also prevented Mass Eye and Ear from engaging in risk-bearing value-based contracts because the hospital could not effectively manage patients across the care continuum.

The hospital merger deal would improve the financial and value-based challenges impacting Mass Eye and Ear. The merger would result in savings from economies of scale, access to greater group purchasing and vendor contracts, and process improvements, the organizations explained.

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The merger would also allow Mass Eye and Ear to successfully participate in an accountable care organization (ACO) model. The specialty hospital would be able to share directly in savings realized under the ACO model because the hospital would have access to its own primary care base.

After a review of the proposed hospital merger deal, the state’s Public Health Council agreed.*

“As a specialty services provider without a primary care base, MEEI [Massachusetts Eye and Ear Infirmary] is unable to enjoy full participation in accountable care contracts, which incorporate both financial and quality metrics. The transaction is expected to provide MEEI access to an extensive research infrastructure and data management tools for population health management and care delivery innovation,” the council wrote.

The hospital merger deal could also improve Partners’ performance on financial and quality metrics for patients in the Partners network. Although, it is unclear if patients with primary care providers outside of Partners would enjoy the same improvements.

“Staff believes that MEEI rate increases resulting from contracting as a Partners organization could threaten access if the diversity of Medicaid Managed Care Plans were to become limited,” the council explained. “In addition, rate increases may change the tier ranking for MEEI services, resulting in higher out-of-pocket costs for patients.”

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However, the council added that the long-term suitability of Mass Eye and Ear is at risk without the hospital merger deal, resulting in possible closures and patient access issues. The specialty hospital may also seek a merger with a different hospital system if the deal with Partners is denied.

After weighing the pros and cons, the Public Health Council concluded that the Partners acquisition of Mass Eye and Ear met the determination of needs requirements. But the organizations would need to follow conditions, including developing measurable benchmarks to assess the impact of care coordination on patient outcomes and demonstrating that its proportion of MassHealth and Medicaid Managed Care payer mix will not drop.

The hospital merger transaction between the provider organizations is scheduled to close by April 1, the Globe reported.

Partners is also looking to close another hospital merger deal later this year. The health system recently signed a definitive agreement to merge with Rhode Island-based Care New England Health System.

However, local healthcare stakeholders in Rhode Island have challenged the proposal, also citing rising healthcare costs as a potential result of the deal.

*CORRECTION: Previous version of this article stated that the Health Policy Commission agreed. This should be attributed to Public Health Council.