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Third time's not a charm: Why the Lahey-Beth Israel merger has failed three times

Why have 2 Boston hospitals failed to merge — 3 times?

Burlington, Mass.-based Lahey Health and Boston-based Beth Israel Deaconess have attempted to join forces numerous times, but to no avail.

They tried to merge in 2011. They took another stab at it when they teamed up with Newton, Mass.-based Atrius Health in 2012. Merger talks were once again sparked earlier this year, only to fall through in September.

Despite the effort, the health systems can't seem to pull it together and unite. But their attempts at merging show more than a lack of a solid relationship — they provide a deeper look at the background of healthcare in Massachusetts and the power of market share.

For years, Beth Israel Hospital and Lahey Hospital & Medical Center, formerly Lahey Clinic, functioned on their own: Beth Israel was — and still is — a teaching affiliate of Harvard Medical School, while Lahey was located close by, near Boston University. In the 1970s, Lahey — which is now affiliated with Tufts University School of Medicine — moved 15 miles out of downtown Boston to Burlington, where it sits today.

By the 1990s, Boston's healthcare landscape was about to change dramatically. In 1994, Partners HealthCare was formed out of the affiliation between Massachusetts General Hospital and Brigham and Women's Hospital, both based in Boston. According to some observers, Partners has been a force to be reckoned with since then, with private insurers offering affiliated hospitals and physicians the highest reimbursement rates.

Although Beth Israel was invited to be part of the affiliation, it never happened. Instead of joining Partners, Beth Israel decided to pursue a different partner of its own: Boston-based Deaconess Hospital. Together, the systems hoped to gain leverage against Partners.

But the 1996 merger between the two didn't go as easily as planned. According to some, the choice to merge was met with physician anger, primarily due to the fundamental cultural differences between the hospitals. Not only were there religious differences, but also workforce distinctions: Beth Israel was academically oriented while Deaconess physicians were independently minded.

Additionally, the attempt at overpowering Partners didn't work out. "The subsequent merger between Beth Israel and Deaconess was an attempt to attain greater leverage also, but it was not very successful because that combined entity was not as indispensable clinically or as powerful politically and financially as Partners," says Alan Sager, PhD, a professor of health policy and management at the Boston School of Public Health.

Merger talks
Talks of a merger between Beth Israel and Lahey went public in 2011 with a deal that fell through. The systems eagerly began talks in pursuit of the power they could harbor against Partners, an affiliation containing the two largest hospitals in the state. Knowledgeable observers have noted the systems' interest in building their own network — which would indeed have made sense given their geographic proximity and clinical similarities.

Another attempt at merging, this time with Atrius Health, collapsed in 2014. Discussions of a merger between the three organizations began in 2012 between the CEOs of the organizations as well as the Beth Israel board. The possibility of merging appeared logical: Lahey covered patients from northern Massachusetts, Beth Israel covered patients from the southern part of the state and Atrius' patients came from central and eastern Massachusetts. But the merger never happened.

In a statement, Marci Sindell, chief external affairs officer for Atrius Health, attributed the failed merger to Atrius' separate projects. "[Atrius Health, Beth Israel Deaconess Medical Center, Harvard Medical Faculty Physicians at BIDMC and Lahey Health] mutually decided to discontinue those discussions to focus our attention on significant initiatives we were individually pursuing," Ms. Sindell's statement said. "Atrius Health at that time was evaluating its own governance structure and has since merged its three medical groups and Atrius Health into a single organization, which will allow us to be more effective and efficient."

Merger talks between Lahey and Beth Israel went public again in early September 2015, but collapsed for the third time in four years later that month.

The big question
When it boils down to it, the fundamental question remains: Why hasn't the merger happened? Neither a deal between Lahey, Beth Israel Deaconess and Atrius nor a deal between Lahey and Beth Israel has occurred. 

"Although I have no specific knowledge in this case, merger negotiations generally fall through because of a disagreement over power — between the two CEOs, the two boards or the senior clinical and administrative leaders," says Paul Levy, former president and CEO of Beth Israel Deaconess Medical Center.

Dr. Sager agrees. "[Lahey and Beth Israel Deaconess] have very different histories," he says. "They're governed in different ways."

Insiders claim the 2012 discussions between Lahey, Beth Israel and Atrius were forward-thinking and productive until it became clear the ultimate system would have one CEO and one hospital board. The competing interests of so many leaders led to the merger's demise. Observers surmise similar issues — primarily how the new system should be governed and by whom — caused this year's merger to fail as well.

A statement from Andrew Mastrangelo, Lahey's director of media relations, did not confirm such speculation: "Lahey Health continually seeks collaborative partnerships with healthcare organizations that share our mission to deliver coordinated, high-quality care for our patients at an affordable cost. We cannot comment on those specific discussions."

Beth Israel Deaconess also kept mum: "We are always open to opportunities to affiliate with providers that share our commitment to high-quality, affordable care, but we don't comment on any specific discussions," said a public statement.

Is it possible?
Is there still potential for a merger between Lahey and Beth Israel Deaconess? Maybe. But drastic changes would have to be made.

Perhaps, given the differences between the organizations, both systems' CEOs would have to retire for a merger to work. The systems could also rethink their leadership strategy, creating a shared system of power in which one person serves as CEO and another serves as president. A deal between Penn State Milton S. Hershey (Pa.) Medical Center and Harrisburg, Pa.-based PinnacleHealth utilized such a strategy. Although it's pending approval from the FTC and the state attorney general, the two systems will combine to for a new enterprise, Penn State Health. Michael Young, PinnacleHealth's president and CEO, will be appointed president and COO of the new enterprise. A. Craig Hillemeier, MD, Penn State Hershey's CEO, will be the CEO of the new system.

Ultimately the decision chalks up to what's best for everybody, from patients to leaders to providers. "We get caught up in what's good for this institution or that, but we find very little ways to find what's good for everyone," says Dr. Sager.

Regardless, the ability to merge two completely different hospitals into one fluid system is an overwhelming challenge that takes leadership and intense focus. For now, Lahey and Beth Israel find they are better left on their own.

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