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15 Things to Know About the Deal Between Partners HealthCare, Massachusetts AG Martha Coakley

There are several characters and storylines in Boston-based Partners HealthCare's proposed acquisitions of South Shore Hospital in Weymouth, Mass., and Hallmark Health System in Melrose, Mass.

Here are 15 things to know about merger matters in Massachusetts right now, which involve the most powerful healthcare provider in the state and a gubernatorial hopeful.  

1. To set the stage: Partners HealthCare was founded in 1994 with the merger of Massachusetts General Hospital and Brigham and Women's Hospital, both in Boston. The system is a major affiliate of Harvard Medical School and today includes several hospitals, including North Shore Medical Center, Newton-Wellesley Hospital, Martha's Vineyard Hospital, Cooley Dickinson Hospital and Faulkner Hospital. The system also has five of its own community health centers and more than a dozen affiliated with it. Partners is affiliated with several research and specialty hubs, including Harvard Clinical Research Institute and Dana Farber/Partners CancerCare. Partners also includes Neighborhood Health Plan, a nonprofit that covers more than 300,000 commercial and MassHealth members.

2. Partners has a firm hold on hospital dollars in the state. Massachusetts' first annual healthcare report last year found Partners received 31 percent of the money Massachusetts commercial payers spent on acute-care hospital services in 2012.

3. Partners first announced its pending merger with 378-bed South Shore in December 2012. In October 2013, Partners announced its intention to acquire two-hospital Hallmark Health System. The Massachusetts Health Policy Commission, an entity formed by Governor Deval Patrick's 2012 healthcare cost-control law, decided to review the deals.

4. The commission released its findings for Partners' proposed deal with South Shore first, finding it would increase total medical spending by $23 million to $26 million each year due to increases in physician prices and increased utilization of Partners and South Shore facilities. The commission also said the expanded Partners system would have more leverage to negotiate prices with private payers. Unable to block the deals, the commission recommended Massachusetts Attorney General Martha Coakley review the deal.

5. In May, Ms. Coakley, a Democratic candidate for governor, reached a conduct settlement with Partners after months of investigation. The agreement would let the system complete its acquisition of South Shore Hospital and Hallmark Healthcare with some conditions. The conduct settlement was unique, as most regulatory bodies favor structural settlements.
The first condition of the AG-Partners agreement requires the system to limit future price increases across its entire network to the rate of general inflation (currently about 1 to 1.5 percent) through 2020. The second condition would substantially limit Partners' joint contracting with commercial payers. For 10 years, payers will be able to negotiate separately with four different categories of Partners' providers: (1) academic medical centers, (2) community hospitals and physicians, (3) South Shore Hospital and (4) the Hallmark hospitals. South Shore Hospital and the Hallmark hospitals will remain separate components for seven years and then become part of the community hospitals group.

In June, Partners and the AG filed the final agreement for court approval.

6. In July, after the AG-Partners agreement was announced, the commission released its findings on the effects of the proposed Partners-Hallmark deal, finding Partners' takeover would reinforce its market power, raise spending on medical care by $15.5 million to $23 million per year and increase premiums for employers and consumers.

7. In addition to the Massachusetts AG, the Department of Justice's antitrust division investigated Partners' proposed acquisitions. Although the FTC usually investigates healthcare provider transactions, the DOJ had been investigating alleged anticompetitive behavior by Partners and several Massachusetts payers in Eastern Massachusetts since at least 2010. The DOJ is not a party to the AG-Partners settlement.

8. On July 1, Massachusetts Suffolk Superior Court Judge Janet L. Sanders ruled that the tentative settlement reached between the state and Partners would be delayed in light of the commission's findings about Hallmark. The judge's ruling subjects the settlement to a public comment period of three weeks, with responses from the AG's office due by August 1, and a hearing before the court on August 5, prior to the settlement's being finalized by the court.

9. This week, the Massachusetts Health Policy Commission released more findings. The commission's comments to Judge Sanders "did not explicitly oppose the settlement" but "expressed skepticism that some of its provisions would contain costs," according to Boston Globe report. The panel's findings projected the two transactions — even with the proposed price caps — will boost health spending by $38.5 million to $49 million a year by the state's three largest health insurers.

10. Boston's NPR news station WBUR explained the finding this way:

"[P]icture a colleague, neighbor, maybe your grandmother — someone who’s had hip replacement surgery. Now picture two hospitals.

'In one place,' said [Commission chairman Stuart Altman] Altman, 'a hip costs $10,000 to replace. In another, it's $15,000.'

Under Coakley's deal, prices at each of these Partners hospitals would rise slowly. But there's nothing to keep Partners from sending more patients to the $15,000 facility. If more patients have hips replaced at the higher-cost hospital, then total health care costs would go up, even if prices don't."

11. Healthcare providers across the state formed a coalition in opposition to the proposed mergers and AG-Partners agreement. Members include Beth Israel Deaconess Medical Center, Lahey Health, Tufts Medical Center and others that claim the settlement will let Partners push prices even higher. In June, the coalition members delivered a letter to Ms. Coakley outlining their concerns and raising questions about why the settlement proposal bypassed the Health Policy Commission's Market Impact and Cost Review process.

"Although we are competitors, we have joined together to draw attention to the threats posed to the Massachusetts healthcare system by the proposed deal between the Attorney General and Partners HealthCare," Howard Grant, JD, MD, president and CEO of Lahey Health, said in a news release. "Members of the public, as well as healthcare providers, have received little information about this deal, though it will permanently transform how we deliver and receive healthcare."

12. Partners is a significant player in the state's political scene. The nonprofit system is the largest employer in the state with about 60,000 people. It is also the biggest lobbyist on Beacon Hill, according to Commonwealth Magazine. Political candidates count on Partners employees for a significant portion of donations. Thus, the deal and surrounding controversy has major implications for lawmakers and their careers — especially since this is year of a gubernatorial election in Massachusetts. There have been several reports documenting candidates' neutrality, opposition or support of the Partners acquisition.

When Steve Grossman, another Democratic candidate for governor, was asked to explain his position on the Partners-South Shore merger earlier this year, "he spent several minutes talking without ever answering the question," according to Commonwealth. Mr. Grossman later called the AG-Partners agreement a "common-sense solution" before modifying his opinion this week after the commission's report, saying the deal does not serve the best interests of the people of Massachusetts, according to the Boston Globe.

Don Berwick, MD, another candidate for governor and former acting CMS administrator, has circulated an online petition seeking to block the deal. He said he planned to deliver the petition to the attorney general's office, and ultimately to the judge, when he has 2,000 signatures, according to the Boston Globe.

13. The deal has attracted national attention and extended the broader conversation about what consolidation means for healthcare prices and costs. In July, The New York Times published and editorial that said "it looks as if Massachusetts made a serious mistake in 1994 when it let its two most prestigious (and costly) hospitals" merge into a single system. "The experience in Massachusetts offers a cautionary tale to other states about the risks of big hospital mergers and the limits of antitrust law as a tool to break up a powerful market-dominating system once it is entrenched," the editorial stated.

14. Partners President and CEO Gary Gottlieb responded to the editorial with a letter to the editor, touting the system's accolades in innovation, science, education and quality. "We have made the commitment to cap our prices and restrict our physician and hospital growth. As a result, we will become the most regulated health care provider in Massachusetts, if not the country," Mr. Gottlieb wrote.

15. Suffolk Superior Court Judge Janet L. Sanders will decide whether to approve the antitrust settlement. A hearing on the AG-Partners deal has been granted another extension Sept. 29. The public comment period will run through Sept. 15, and Ms. Coakley has until Sept. 25 to respond to the comments.

More Articles on Healthcare in Boston:
Massachusetts Provider Coalition Opposes Partners HealthCare
Partners HealthCare, South Shore Hospital Merger Postponed
Massachusetts Commission to Review Partners Healthcare, Hallmark Health Deal


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