A New Demand For Mass. Health Mergers: Show Proof Of Savings

What seemed like a routine meeting of a state commission in the basement of Boston’s beautiful main public library may become a milestone for health care reform in Massachusetts.

It could be the “Show Me The Money” moment for health care cost control.

From here on out, hospitals, physician groups and other providers proposing to merge will have to show the state’s Health Policy Commission (HPC) that the newly formed entity would save money and that those savings would be passed along to consumers.

“Just because you get efficiencies” as the result of a merger or acquisition “doesn’t mean it will transfer to lower spending,” HPC Chairman Stuart Altman said. “We need evidence that points to lower premiums and lower costs for patients that have to pay for [health care] themselves.”

Stuart Altman, chair of the state Health Policy Commission

Stuart Altman, chair of the state Health Policy Commission

Great. This is what employers and consumers have been waiting to hear — that all this talk about not letting health care costs rise two, three or four times faster than inflation will actually mean low increases in our premiums, co-pays and deductibles.

But if you’re a hospital or physician group executive, you’re probably asking: How the heck am I suppose to prove savings translate to lower premiums? Insurers set premiums. Who’s going to tell the insurers they have to pass savings along to customers?

I called Altman back to ask: What kind of evidence will the HPC expect hospitals and physicians to provide?

“That’s a good question,” Altman said. “I don’t want to prejudge, but providers could agree not to take increases as a result of the merger,” or “not to use market clout to help new doctors or hospitals get a higher rate.”

OK. That tells us how providers might “prove” lower expected costs after a merger, but that doesn’t tell us how providers would prove the savings they generate will be passed along to us, the consumer. Stay tuned. We’re in the midst of some real-world trials.

Partners Merger Plan

The HPC unanimously approved a report Wednesday that may derail the proposed merger of Partners HealthCare and South Shore Hospital.

The report says the deal would increase health care spending in Massachusetts by $23 million to $26 million a year, and that’s a conservative estimate.

Partners disputes the findings and claims the deal would save $27 million a year, largely through more efficient and better coordinated care. The commission says that savings goal is a nice aspiration with no grounding in reality.

Altman says the HPC does not object to Partners’ expansion in other areas of the state, in principle. He says its findings on the Partners-South Shore deal will have no bearing on a review of Partners’ plans to acquire Hallmark Health and its two hospitals on the North Shore.

The commission can’t block any of these deals; it can only issue a report and send it to the state attorney general, who does have the authority try to stop mergers and acquisitions.

It sounds like we’ll hear something from Attorney General Martha Coakley or the U.S. Department of Justice (DOJ) soon. Those two offices have been looking into allegations that Partners has used market clout to demand higher rates from insurers.

One hint that those investigations will wrap soon came from Partners Wednesday. Now that the HPC has finished its review, Partners can close a deal with South Shore in 30 days. But Partners chief of staff Peter Brown says he doesn’t know when Partners will take the next step.

“The attorney general and the Department of Justice have been reviewing this transaction and we will continue to cooperate with them,” he said. “We are committed to this [South Shore] affiliation.”

The AG and the DOJ could file suit to stop the Partners-South Shore merger, but some hospital consultants say a negotiated agreement that requires proof of savings is more likely. Would that agreement require proof of savings for consumers? That would set a new precedent.

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  • http://byrondennis.typepad.com/theabcsofmedicare/ Dennis Byron

    Martha

    1. Future merger partners do not have to show the HPC anything. The HPC is toothless (thank god!) as you point out further down in the story. I suppose any future proposed merger partners will make a show for PR sake but PR is all this is from both sides
    2. $18 million in new costs (the so-called higher costs minus the so-called efficiencies per HPC) or $27 million in new savings (per Partners) in light of the HPC’s never explained $65 billion total of medical expenditures in Massachusetts is .0003% either way (or less; I always have trouble with all those zeros). It’s below noise level but tens of thousands of taxpayer dollars were wasted on this PR exercise

    The HPC kind of a dissed Melrose and Medford though.

    And the really interesting thing in the HPC report is that the HPC says that accountable care organizations and all the other academic gobbledygook that goo goos are always claiming will save money… apparently won’t.