In Massachusetts, Partners Healthcare, which includes the prestigious Massachusetts General Hospital, Brigham and Women’s Hospital, and six other hospitals in and around Boston, controls approximately $1 out of every $3.50 spent on health care. Health care spending per person averages 36 percent higher in Massachusetts compared with the national average. Partners, based on its reputation, commands pricing from insurers that is approximately 30 to 35 percent higher than other providers in Massachusetts. Despite this alleged monopoly on pricing, and despite findings from the Massachusetts Health Policy Commission that planned additional acquisitions by Partners would create a significant impact on costs and market functioning in southeastern Massachusetts, the Massachusetts attorney general’s office approved its acquisition of the South Shore Physician Hospital Organization and South Shore Hospital in May. Why?

Explaining health care politicsOne reason is that Attorney General Martha Coakley is a leading candidate for the Democratic nomination for governor. The Partners deal that was crafted by the attorney general’s office provides Coakley with credit for limiting price increases in southern Massachusetts until 2020, thus providing political rhetoric for campaign purposes and the “votes” from the largest employer in the state, Partners Health.

In her defense, Coakley has said, “Ultimately, we believe this agreement will do more to reduce costs, help adjust a dysfunctional marketplace, and level the playing field for providers and insurers, than any successful lawsuit would have had,” as reported in a Boston Globe article on the Partners deal.

Massachusetts Attorney General Martha Coakley

Massachusetts Attorney General Martha Coakley. Photo credit: Massachusetts AGO.

Why are hospitals and provider networks consolidating? Part of it has to do with physician groups being “patient feeder” networks, or revenue streams, for hospitals. Part of it has to do with economies of scale. And part of it has to do with being competitive or merely surviving.

Massachusetts realizes it needs to do something to control costs. It has appointed several commissions to evaluate health care, its costs, and making the delivery of health care more transparent. The Center for Health Information and Analysis (CHIA) provides regular reporting on payer and provider costs and other metrics such as quality of care. CHIA’s analysis is used by the Massachusetts Health Policy Commission (HPC) in reviewing mergers and acquisitions. The HPC does not have authority on its own to challenge a merger, but merger transactions cannot be finalized until the HPC issues a final report.

Up next for Partners? Its acquisition of Hallmark Health Corporation, which serves residents in northern suburban Boston and includes Melrose-Wakefield and Lawrence Memorial hospitals.

Guess what? HPC has rendered the same recommendation: that this acquisition is likely to increase health care spending in northeastern Massachusetts and reinforce Partners market power.

What do you think will happen?

Will politicians have the gumption to stop this? Will politicians in Massachusetts develop legislation that provides the HPC with more teeth and the authority to stop mergers, or will mergers continue unabated?

A very interesting dynamic is occurring in Boston. It has implications for other major medical centers and institutions across the country, and for consumers who ultimately pay the price—in increasing health care premiums and out-of-pocket costs.