• The Proposed Hospital Mega-Merger in Rhode Island Shouldn’t Happen

    The two largest hospital systems in Rhode Island, Lifespan and Care New England (CNE), submitted an application to the state in April to form a new health system in partnership with Brown University.* In spite of proponents’ claims to the contrary, this mega-merger would likely raise health care costs, wouldn’t meaningfully affect care quality, and would do nothing to keep care local.

    The merger would likely raise health care costs

    A robust body of evidence supports the idea that hospital mergers, regardless of the tax-exempt status of merging parties, generally raise commercial prices. This happens because hospitals with more market power have more leverage to charge health plans higher prices. Since a merged Lifespan-CNE system would control 68% of the acute care beds in the state if approved, its hospitals could (and would) demand ever-higher reimbursement from commercial payers.

    To reassure policymakers, Lifespan, CNE, and Brown have pointed to state regulations that limit hospitals’ ability to increase the rates they charge commercial health insurers. These rate caps are undeniably a potent tool for containing health care costs. However, they do not prevent hospitals from driving up prices for services rendered to health plans regulated exclusively by the federal government under the Employee Retirement Income Security Act (ERISA). Since ERISA-covered plans account for about 43% of the commercial insurance market in the state, the new hospital system could extract enormous profits using this loophole, which would raise premiums for thousands of Rhode Islanders.

    The merger likely wouldn’t improve care quality or patients’ experiences

    A study published in the New England Journal of Medicine last year found that hospital consolidation was not associated with significant differences in rates of mortality or hospital readmission. Worse, the study authors observed a statistically significant association between hospital mergers and lower-quality patient care experiences.

    To be taken seriously, hospital systems hoping to consolidate should demonstrate what Harvard professors Leemore Dafny and Thomas Lee have called cognizable efficiencies. This means that promised gains in care quality or patient experiences need to be empirically measurable and likely to emerge. It also means that the onus is on hospital systems to explain why a merger is their only means of achieving better quality. Until Lifespan, CNE, and Brown University do just that (to date, they have not), Rhode Island policymakers should have little faith that quality improvements will materialize.

    Hospital care can stay local without this transaction

    For Rhode Island officials and patients alike, the potential economic and health-related dangers of outsourcing hospital care to Boston or New Haven are top of mind. When Partners HealthCare attempted to acquire CNE a few years ago, for example, the outcry was swift and emphatic. An editorial in the Providence Journal, entitled “The threat to R.I. health care,” ominously asked whether the Boston system was already “draining off Rhode Island patients.”

    Contrary to what Lifespan, CNE, and Brown might claim, Rhode Islanders can keep their hospital care in-state without agreeing to this deal. Under the Hospital Conversions Act, the state’s Department of Health and Attorney General both have the power to veto hospital transactions that threaten Rhode Island health care. If a hospital system based in Connecticut or Massachusetts tries to acquire Lifespan or CNE down the line, state officials could unilaterally prevent such a deal under current law.

    In any case, approving this merger will not prevent a consolidated Lifespan-CNE entity from attempting to merge with out-of-state systems in the future. In fact, it might be harder to prevent just that from happening, given the massive political influence that a merged Lifespan-CNE-Brown system would wield at the Rhode Island State House.

    Conclusions

    While the prospect of a world-class, locally based health system in Rhode Island may seem alluring at first, policymakers should block this merger.

    At the federal level, the Federal Trade Commission should bring an action against this deal on the grounds that it would “substantially lessen competition.” At the state level, officials at the Rhode Island Department of Health and Attorney General should use their authority under the Hospital Conversions Act to reject this merger.

    Rhode Islanders deserve world-class, local, and affordable hospital care. But this merger won’t help make that a reality. As Dr. Thomas Tsai and Dr. Ashish Jha, dean of the Brown University School of Public Health, wrote in JAMA in 2014, “Higher health care costs from decreased competition should not be the price society has to pay to receive high-quality health care.”

    @liambendicksen

    Research for this piece was supported by Arnold Ventures.

    *Disclosure: I am currently an undergraduate student at Brown University. I also work for a research group, the Program On Regulation, Therapeutics, And Law (PORTAL), which operates under the umbrella of Mass General Brigham. Formerly known as Partners HealthCare, Mass General Brigham signed an agreement to acquire Care New England in early 2018, though the Boston-based system backed out the following year.

     
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