Beth Israel, Lahey Health Merger Gets FTC, Massachusetts AG's Approval

The condition-laden approval stipulates a seven-year price cap that guarantees that the merged health system's price increases will be kept below the state's healthcare cost growth benchmarks.

The proposed merger of Beth Israel Deaconess Medical Center and Lahey Health System cleared a huge hurdle today when Massachusetts Attorney General Maura Healey announced her conditional support.

The approval comes with what Healey called an "unprecedented" seven-year price cap that guarantees that the merged health system's price increases will be kept below the state's Health Care Cost Growth benchmark.

"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 media release.

"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 health care they deserve," she said.   

The deal also cleared a key federal hurdle when the Federal Trade Commission voted to close its investigation in light of Healey's agreement.

"The assessment of whether to take enforcement action was a close call. However, based on Commission staff’s work and in light of the settlement obtained by the Massachusetts AG, we have decided to close this investigation," the FTC said in a media release.

Kevin Tabb, MD, CEO of Beth Israel Deaconess Medical Center, who will serve as CEO of Beth Israel Lahey Health, called the state and federal approvals "an important step forward in making our vision a reality."

"We appreciate the enormous effort that the Attorney General, her staff and the Federal Trade Commission have devoted to our proposal.  We share their commitment to health care 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,” Tabb said.

Massachusetts' Health Care Cost Growth benchmark controls the annual growth of total medical spending in the state and is now set at 3.1%. Over the seven-year term, the cap will avoid more than $1 billion of the potential cost increases projected by the state's Health Policy Commission.

When finalized, the merged, 13-hospital health system will be will one of the largest in the Bay State.

The merger push began in 2017, with Beth Israel and Lahey justifying the consolidation as a market-based attempt to address rising costs, price disparities, and healthcare access issues.

However, the deal has faced headwinds since its inception.

Even as late as this September, the Massachusetts Health Policy Commission noted that the merger would create a health system roughly the same size as Partner's HealthCare System, the state's largest health system, which would "increase substantially" market concentration in eastern Massachusetts.

"BILH's enhanced bargaining leverage would enable it to substantially increase commercial prices that could increase total healthcare spending by an estimated $128.4 million to $170.8 million annually for inpatient, outpatient, and adult primary care services," MHPC said.

In addition, the commission said spending on specialty physician services could increase by as much as $60 million annually if the merged health system obtains similar prices increases for those services. 

"These would be in addition to the price increases the parties would have otherwise received," the commission wrote. "These figures are likely to be conservative. The parties could obtain these projected price increases, significantly increasing healthcare spending, while remaining lower-priced than Partners."

Those concerns appeared to have been alleviated on Thursday, when MHPC Commissioner Martin Cohen said "the investments required by the settlement will have a real impact on access to treatment for mental health and substance use disorders for patients across Eastern Massachusetts."

Healey's assurance of discontinuance also includes requirements that the merged Beth Israel Lahey Health pledge $71.6 million to support healthcare services for underserved areas.

The deal also requires BILH to strengthen its commitment to MassHealth; engage in business planning with its safety net hospital affiliates; enhance access to mental health and substance use disorder treatment; and retain a third-party monitor to ensure compliance with the terms.

The deal exempts affiliated safety net hospitals from the price-cap constraints. Lawrence General Hospital CEO Dianne J. Anderson said the exemption for her safety net will "ensure a commitment to joint, long-term planning for distribution of health care resources across the region."

The $71.6 million that BILH will spend over eight years for underserved areas will include:

• $41 million to fund affiliated community health centers and safety net hospitals, which guarantees support at the systems' historic levels.
   
• At least $8.8 million in additional financial support for affiliated community health centers and safety net hospitals.
   
• At least $5 million in strategic investment to expand access to healthcare for low-income communities through community health centers.
   
• At least $16.9 million to develop and expand behavioral health services across the BILH system.