In Massachusetts, the expansion of Partners HealthCare is offering a fractious case study of integration and health reform and begs the question: how big is too big?
Two decades after its founding with the merger of Massachusetts General and Brigham and Women’s hospitals, Partners HealthCare is the largest and highest paid health system in Massachusetts, reimbursed more than its academic medical center peers, as an investigation by Massachusetts’ attorney general found.
And after a year of proposals, negotiations and public comment, Partners is on track to continue expanding in the state. Some critics are saying Partners is getting too big – with the power enough to influence prices in the market and stifle competition.
Partners, meanwhile, has defended its expansion as necessary for providing what is perhaps the most advanced and complex care in New England, while also meeting the cost reduction goals of the Affordable Care Act.
“We have made a commitment to the Commonwealth and our patients to lead in improving healthcare quality and addressing cost,” wrote Partners’ CEO Gary Gottlieb, MD, in the Boston Globe recently.
Partners is currently seeking to acquire two large suburban providers, the South Shore Hospital in Weymouth and Hallmark Health System in Melrose. Last spring, Martha Coakley, Massachusetts’ attorney general and Democratic gubernatorial candidate, negotiated a settlement to allow the acquisition. Superior Court Judge Janet Sanders has yet to decide on the settlement.
The settlement, revised in September after more than 100 public comments, would require Partners to cap prices at Hallmark for six-and-a-half years, with increases set at either general or medical inflation, whichever is lower. Partners would also have to continue the current level of psychiatric and behavioral services at both Hallmark facilities for five years.
The proposed agreement also caps Partners’ price increases at the lower of the rate of general or medical inflation across its network through 2020. Additionally, it ends Partners’ ability to seek “all or nothing” networks, bars contracts with affiliate physician groups that are not part of its hospitals for 10 years, and prohibits hospital acquisitions in eastern Massachusetts for the next seven years.
Coakley argued that the agreement will curb the health system’s financial power and “fundamentally alter the way Partners contracts with health insurers” for at least a decade.
Consolidation, integration and reform
While the state’s largest commercial payer, Blue Cross and Blue Shield of Massachusetts, has remained neutral, the expansion has still drawn a fair amount of criticism, including opposition from rival hospitals like Atrius Health, Beth Israel Deaconess Medical Center and Tufts Medical Center, and skepticism from antitrust advocates and local media, who say that the settlement doesn’t go far enough to curb Partners’ growing power.
Among the critics is Paul Levy, the former president of Beth Israel Deaconess Medical Center, which is a teaching affiliate of Harvard University.
Levy, CEO of Beth Israel from 2002 to 2011, argues that Coakley’s settlement seems to ignore her own investigation’s findings, since it does not address the “provider price disparity.”
“The AG spent several years documenting the fact that Partners' market power is responsible for the substantially higher rates it receives from insurers for the same work done by other academic medical centers, community hospitals, and physicians,” he wrote in his well-known blog.
The price disparities between Partners and its peers have been unfair and, in retrospect, legally questionable, he has argued on his blog, and what’s more, the Federal Trade Commission, which has been taking a more aggressive stance on hospital consolidation, has been absent from the discussion around Partners’ continuing expansion.
“The U.S. government has taken a bye on the Partners case,” Levy said in an email to Healthcare Finance News. The FTC declined to respond.
It is somewhat unusual that the attorney general, rather than the FTC, has taken the lead in negotiating an agreement in the Partners case, attorney Mark Rust, managing partner at Barnes and Thornburg, told Healthcare Finance News. But then again “this seems to be a very unique situation in a variety of ways, a unique set of circumstances economically and politically,” he said.
Tacit approval from the FTC, with no intervention or even comment in the case, may be the Obama administration's way of letting health reform play out in Massachusetts, which tried to pioneer universal coverage in 2006 but still had to legislate price controls in 2012.
“I would be extremely surprised if Martha Coakley is going into court with an agreement that is not already blessed by the FTC,” Rust said. “I don’t think that Partners would be agreeing to this settlement if they thought there was a chance the FTC was going to come in and undo it.”