Beth Is­rael-La­hey Health merger clears fi­nal ap­proval with con­di­tions

Modern Healthcare - - Mergers and Acquisitions - By Alex Kacik

MAS­SACHUSETTS’ at­tor­ney gen­eral last week gave a con­di­tional green light on the merger be­tween Beth Is­rael Dea­coness Med­i­cal Cen­ter and La­hey Health that would cre­ate the sec­ond-largest sys­tem in the state.

The con­di­tions in­clude a seven-year price cap; par­tic­i­pa­tion in MassHealth, the state’s com­bined Med­i­caid and Chil­dren’s Health In­sur­ance Pro­gram; and $71.6 mil­lion in in­vest­ments sup­port­ing health­care ser­vices for low-in­come and un­der­served com­mu­ni­ties in Mas­sachusetts.

The price cap guar­an­tees Beth Is­rael La­hey Health’s price in­creases will re­main be­low the state’s an­nual health­care cost growth bench­mark of 3.1% for seven years. That will pre­vent more than $1 bil­lion of the po­ten­tial cost in­creases over that span pro­jected by the Mas­sachusetts Health Pol­icy Com­mis­sion, ac­cord­ing to At­tor­ney Gen­eral Maura Healey.

The con­di­tions out­lined in Healey’s agree­ment also re­quire Beth Is­rael La­hey Health to co­or­di­nate ser­vices with its safety-net hos­pi­tal af­fil­i­ates—Lawrence (Mass.) Gen­eral Hos­pi­tal, Cam­bridge Health Al­liance and Sig­na­ture Brockton (Mass.) Hos­pi­tal—and boost ac­cess to men­tal health and sub­stance use dis­or­der treat­ment across the sys­tem. The res­o­lu­tion re­quires 10 years of third-party over­sight to en­sure com­pli­ance.

The reg­u­la­tory re­view process is now com­plete and the merger is ex­pected to close in the first quar­ter of next year.

“Through this set­tle­ment, Beth Is­rael La­hey Health will cap its prices, strengthen safety-net providers across the re­gion and in­vest in needed be­hav­ioral health ser­vices,” Healey said in a state- ment. “These en­force­able con­di­tions, com­bined with rig­or­ous mon­i­tor­ing and pub­lic re­port­ing, cre­ate the right in­cen­tives to keep care in com­mu­nity set­tings and en­sure all our res­i­dents can ac­cess the high-qual­ity health­care they de­serve.”

Fol­low­ing the AG’s an­nounce­ment, the Fed­eral Trade Com­mis­sion voted to close its in­ves­ti­ga­tion of the merger. The as­sess­ment of whether to chal­lenge the trans­ac­tion was a close call, in­ves­ti­ga­tors said in a state­ment.

“How­ever, based on com­mis­sion staff’s work and in light of the set­tle­ment ob­tained by the

The con­di­tions out­lined in Mas­sachusetts At­tor­ney Gen­eral Maura Healey’s agree­ment also re­quire Beth Is­rael La­hey Health to co­or­di­nate ser­vices with its safety-net hos­pi­tal af­fil­i­ates.

Mas­sachusetts AG, we have de­cided to close this in­ves­ti­ga­tion,” the FTC said, adding, “The com­mis­sion has in­ves­ti­gated and suc­cess­fully chal­lenged many health­care provider merg­ers in re­cent years, and we re­main fully com­mit­ted to us­ing all the tools at our dis­posal to pro­tect com­pe­ti­tion and con­sumers in this im­por­tant area of the econ­omy.”

Beth Is­rael Dea­coness of­fi­cials hailed the de­ci­sion as an im­por­tant step in mak­ing its vi­sion a re­al­ity.

“We share their com­mit­ment to health­care in­no­va­tion in Mas­sachusetts, and we are ea­ger to build on the strengths of our legacy or­ga­ni­za­tions and de­liver on our promise to our pa­tients, their fam­i­lies and our com­mu­ni­ties,” Dr. Kevin Tabb, CEO of Beth Is­rael Dea­coness Med­i­cal Cen­ter, who is slated to be the chief ex­ec­u­tive of Beth Is­rael La­hey Health, said in a state­ment.

The Mas­sachusetts Health Pol­icy Com­mis­sion, which has pro­duced crit­i­cal re­ports of the merger cit­ing a po­ten­tial to in­crease health­care costs by up to $251 mil­lion per year, com­mended the

con­di­tions the at­tor­ney gen­eral placed on the deal that would help mit­i­gate its con­cerns. The com­mis­sion said they will have a real im­pact on ac­cess to treat­ment for men­tal health and sub­stance-use dis­or­ders for pa­tients across eastern Mas­sachusetts.

“Mov­ing for­ward, the HPC, in col­lab­o­ra­tion with (the state De­part­ment of Pub­lic Health) and the (at­tor­ney gen­eral’s of­fice), will pro­vide sub­stan­tial pub­lic over­sight and ac­count­abil­ity of this new sys­tem to en­sure that it fol­lows through on its com­mit­ments and con­trib­utes to our shared goals of re­duc­ing health­care spend­ing while im­prov­ing ac­cess to high-qual­ity care,” said Stu­art Alt­man, chair of the com­mis­sion.

Nearly $50 mil­lion of the $71.6 mil­lion in­vest­ment will fund and sup­port af­fil­i­ated com­mu­nity health cen­ters and safety-net hos­pi­tals. At least $16.9 mil­lion will be used to de­velop and ex­pand com­pre­hen­sive be­hav­ioral health ser­vices across the or­ga­ni­za­tion to in­crease ac­cess to men­tal health and sub­stance use dis­or­der treat­ment. At least $5 mil­lion will be ear­marked for strate­gic in­vest­ment to boost ac­cess to health­care for low-in­come com­mu­ni­ties through col­lab­o­ra­tions with lo­cal or­ga­ni­za­tions and other means.

The at­tor­ney gen­eral’s agree­ment re­quires Beth Is­rael La­hey Health to make good-faith ef­forts to en­roll all li­censed providers in MassHealth within three years and sub­mit a plan to do so within 18 months. The com­bined en­tity guar­an­tees there will be no caps on MassHealth pa­tients, and that it will help with a new ad­ver­tis­ing pro­gram that aims to in­crease MassHealth pa­tients.

Beth Is­rael La­hey Health will be the state’s sec­ond-largest sys­tem by rev­enue, be­hind Part­ners Health­Care.

Beth Is­rael and La­hey ex­ec­u­tives ar­gued that their com­bi­na­tion is nec­es­sary to heal a dys­func­tional Mas­sachusetts health­care mar­ket. It’s the only way to check Part­ners, they said. Ex­ec­u­tives said they plan to ex­pand the state’s now-limited be­hav­ioral health ser­vice net­work, help­ing di­vert pa­tients from costly emer­gency de­part­ments. They pledged to use their com­bined pur­chas­ing power and ex­per­tise to lower costs, which they say will out­pace any po­ten­tial price in­creases.

The main con­cern raised by the com­mis­sion was that Beth Is­rael La­hey Health would have greater bar­gain­ing lever­age with com­mer­cial pay­ers that would al­low it to in­flate prices by 5% to 10% a year.

The merger in­cludes Beth Is­rael in Bos­ton and La­hey in Burling­ton, as well as Bos­ton’s New Eng­land Bap­tist Hos­pi­tal, Mount Auburn Hos­pi­tal in Cam­bridge and Anna Jaques Hos­pi­tal in New­bury­port. The com­mis­sion called it one of the most com­pli­cated merg­ers in the coun­try.

The com­bined en­tity will have a net­work of 10 hos­pi­tals, the largest in the state. It would also have three af­fil­i­ate hos­pi­tals in Cam­bridge Health Al­liance, Lawrence Gen­eral, Metrow­est Med­i­cal Cen­ter in Fram­ing­ham, and more than 4,000 physi­cians. ●


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