Beth Israel And Lahey Health Again Propose Merger

Lahey Health and Beth Israel Deaconess Medical Center (BIDMC) are again proposing to merge.

It's the fourth time in at least six years that word has surfaced of a deal between these two major systems. This time there’s a letter of intent and some details about what would be the largest hospital merger in Massachusetts since the mid-1990s.

Administrators says the two networks complement each other. Lahey has one of the largest behavioral health divisions in the state and a hospice program, while BIDMC has much a much stronger teaching and research focus. The combined network would include hospitals and doctors from the New Hampshire border to Cape Cod.

"Together our systems will provide a full range of coordinated services across complementary geographies and will help contain rising health care costs that are such a concern in the state," said Jamie Katz, a senior vice president and general counsel for BIDMC.

Both hospitals position themselves as delivering quality that can compete with the state's largest health care system, Partners HealthCare, at a lower price. The merger might help Lahey and BIDMC compete with Partners.

"If you want competition, if it's the only game in town to rein in health care costs, you need more competitors," said Alan Sager, a professor of health law, policy and management at the Boston University School of Public Health. "Every merger means fewer competitors and more leverage for the parties that merge to squeeze higher prices and premiums out of everybody who lives or works or does business in Massachusetts."

A merger might trim costs for the two hospital networks, but that’s no guarantee that the hospitals will charge patients or insurers less.

"They might figure out that they need one [human resources] department not two, so they’ve saved money by firing everybody, but that doesn’t mean that they’re going to reduce their prices. That just means that they have made more profit," said Amitabh Chandra, the director of health policy research at the Harvard Kennedy School of Government. "The proposed merger is unambiguously bad news for patients and payers."

Key state lawmakers say the deal will get a careful review.

"The Health Policy Commission will give this a very thorough vetting," said Sen. Jim Welch, co-chair of the Joint Committee on Health Care Financing. "If they feel as though it's going to be an increased cost to consumers or a net increase in any shape or form, they'll make that known. "

Jon Hurst, president of the Retailers Association of Massachusetts, says he's keeping an open mind. But he is wary because the last major hospital merger in Massachusetts established Partners, now the most expensive hospital system in the state.

"We want to make sure that we aren’t creating another Partners," Hurst said. "We just need to see what the real plans are and what the outcomes will be."

Administrators at Lahey and BIDMC say they would be only half the size of Partners after the merger, and would still have significantly lower prices.

Partners says it will follow the regulatory review of the Lahey/BIDMC deal with interest.

"As health care reform here and across the nation continues to evolve, provider consolidation is increasingly a necessary approach to dealing with the complex demands that we face collectively," said Partners spokesman Rich Copp.

Lahey would maintain its affiliation with Tufts Medical School, and BIDMC would train Harvard Medical School students.

Many in the health care industry have assumed that prior deals between BIDMC and Lahey fell apart because the two systems couldn't figure out who would run the single merged entity. Under this agreement, the CEO would be Dr. Kevin Tabb, who leads BIDMC. Lahey's CEO, Dr. Howard Grant, would return to his family and deep professional roots in Philadelphia. The board of the combined hospitals would have an equal number of members from Lahey and BIDMC.