It may not be quite at epidemic levels, but merger mania has definitely taken hold in the healthcare field, and most certainly in New England.
One of the latest examples is the proposed partnership of Beth Israel Hospital in Boston, the Lahey Clinic of Burlington, Mass., and Atrius Health, a Newton, Mass.-based consortium of Harvard Vanguard Medical Associates. Atrius Health is the largest physician organization in Massachusetts, with 1,000 physician members.
Expect to see a lot more of such alliances in coming months, according to Tim Gens, executive vice president at the Massachusetts Hospital Associatio
"Massachusetts is in the forefront of changing the delivery and the payment systems for healthcare. No state is trying to accomplish as much as quickly," Gens explained. That means more full mergers or clinical affiliations in order to provide for larger patient populations and to find new efficiencies, he noted.
In April, employees of Beth Israel Hospital and Lahey Clinic received internal communications that an affiliation was proposed for the two healthcare centers, along with Atrius Health and five other doctor groups. In-house physicians at Lahey Clinic and Beth Israel would also be involved.
"As we have been discussing for some time, one of our most important objectives for the future is to expand and strengthen our network of partnerships and relationships," stated Kevin Tabb, MD, president and CEO of Beth Israel Deaconess Medical Center in the employee memo. "It is part of our strategic imperative to rethink how we deliver care to patients in light of the rapid and fundamental changes in healthcare."
In an email to Healthcare Finance News, Jerry Berger, BIDMC's director of media relations, said that to call these talks between BIDMC and the others a merger is premature and inaccurate at this time. The talks are about what relationship, if any, there should be between the organizations.
If an affiliation does take place, the combined Beth Israel and Lahey networks would create a 1,577-bed system, the third largest in Eastern Massachusetts. Partners HealthCare System has 2,400 beds and Steward Health Care System has 2,096 beds.
The possible affiliation shouldn't come as a surprise to those watching the healthcare space in New England. When Tabb assumed the role of president at Beth Israel in 2011, replacing Paul Levy, he announced that he would "move aggressively" to pursue new relationships. Beth Israel and Lahey had reportedly been in talks for a possible affiliation in 2010 when Levy was still in charge.
Subsequently, Lahey merged with Northeast Health System, owner of Beverly Hospital and two other North Shore hospitals, in July 2011. And in January of this year, Beth Israel acquired Jordan Hospital in Plymouth, Mass. Jordan Hospital had been previously owned by Tufts Medical. Lahey had reportedly been in talks with Tufts for a possible merger there, but those talks broke off and Lahey instead engaged with Beth Israel.
Providers, heal thyself
Healthcare providers are under heightened pressure to provide increased levels of care to larger populations, said Tim Gens, executive vice president at the Massachusetts Hospital Association. "This is a very positive development. But it also means you must provide a wide range of services."
Providing that wider range of services is behind much of the merger activity, Gens said. The ultimate goal is greater efficiency in the system. Adding to that are regulatory requirements and healthcare reform.
"Massachusetts is in the forefront of changing the delivery and the payment systems for healthcare. No state is trying to accomplish as much as quickly," Gens explained. That means more full mergers or clinical affiliations in order to provide for larger patient populations and to find new efficiencies, he noted.
The American Hospital Association confirmed the affiliation trend sweeping the industry, releasing a report on the subject recently.
"Coming on the heels of the recession, hospital merger/acquisition activity began to accelerate," an association spokesman said. "Hospitals began acquiring other hospitals and hiring medical staff in an effort to provide the leadership needed to reform a siloed healthcare system that nearly everyone from the Institute of Medicine to the Medicare Payment Advisory Commission (MedPAC) has singled out as one of the main culprits in higher cost, lower quality healthcare."
According to the AHA the government and private sector are creating incentives, such as global payments and penalties for readmissions, which are driving mergers and acquisitions and other affiliations.
In order to best meet the challenges created by the new incentives, the AHA said the best option for hospitals is to become leaner and more closely aligned with the medical staff.
"To achieve these worthy goals, mergers may be the only recourse, as decades old regulatory barriers can keep hospitals and doctors from working closely together to improve care and reduce costs unless they are under the same ownership umbrella," the association said in its report.
Both Moody's and Standard and Poor's seem to agree with the AHA's assessment, with each reporting a negative financial outlook for hospitals last year.
In Moody's Outlook 2012, the firm said, "The healthcare industry is undergoing a fundamental transformation in which the very model of healthcare delivery is being questioned and changed ... Hospitals that successfully improve operating efficiencies, engage in growth strategies, and align more closely with physicians will be better poised to adapt to ongoing challenges."