The proposed merger between Spectrum health and Beaumont Health which would form the largest health care system in the state of Michigan has raised concerns from a state-wide business-worker coalition that is worried about the resulting potential for higher prices.
The base of Novi Economic Alliance for Michigan fears that the new health care system created from the merger will have a huge influence on the market that could lead to higher prices and higher costs for employers, President Bret Jackson said.
“We are really concerned about a massive consolidation like this. And that would be huge. It would be a monster, ”Jackson said. “We are really concerned about the impact on prices. ”
The Economic Alliance highlights studies that indicate hospital mergers don’t translate into lower costs, improved quality and patient benefits – findings the American Hospital Association disputed in an analysis from 2019.
Jackson cites a RAND Corp study. of 2020 which analyzed what self-insured employers and insurance companies paid hospitals for care compared to the payments they received from Medicare from 2016 to 2018.
the Analysis showed that Medicare Michigan paid Spectrum Health hospitals in western Michigan more than Beaumont hospitals in southeast Michigan from 2016 to 2018. This raises concerns about the potential effect on prices for care under of the new health care system, Jackson said.
The RAND researchers noted that “although consolidation is linked to higher prices, it has not been associated with improved quality, and higher-priced suppliers often do not have higher quality than the higher-priced suppliers. low-cost suppliers “.
Jackson said his phone “sort of rang out of order” last week after Spectrum and Beaumont publicly announced their intention to explore a merger and create a new healthcare system. All of the callers “were equally concerned about the impact on price and quality,” he said.
The Economic Alliance represents the employers – many of whom are based in Southeast Michigan – who collectively provide health insurance to 900,000 people.
The resulting new health system would include 22 hospitals, 305 outpatient centers, more than 7,500 salaried, affiliated and independent physicians, and approximately $ 13 billion in operating revenue.
Jackson is hoping the Michigan attorney general’s office will take a close look at the deal given the potential size and influence of the new healthcare system in the market.
The state attorney general typically reviews transactions when a for-profit entity acquires a non-profit organization to provide protection for charitable assets. This was the case years ago in Grand Rapids as part of the proposed acquisition of non-profit Metro Health by for-profit company Community Health Systems Inc. This deal never came to fruition. Metro then merged with the University of Michigan healthcare system.
In cases where two nonprofit entities merge, as proposed in the Spectrum-Beaumont Agreement, the Attorney General may conduct a review.
“I think there should be a thorough review by the attorney general,” Jackson said. “This is a major financial transaction, and because these are nonprofit entities, they have a duty to serve the citizens of Michigan. Thus, the Attorney General, as a watchdog, has an obligation to ensure that the citizens of Michigan are well served. ”
Executives at Spectrum and Beamont hope to complete regulatory reviews, due diligence and integration by fall.
In a press release from Monday to MiBiz, Spectrum Health said, “The attorneys informed the Attorney General’s Office’s Business Oversight Division prior to the announcement and have been in contact with that division to ensure they have all the information they have. need to be sure that this integration will not result in any damage to charitable assets held by either organization. Because this is not a merger, divestiture, sale of assets, or transaction in which a for-profit organization is involved, we hope the Attorney General will not have no worries. ”
In a statement to MiBiz Last week AG spokesperson Kelly Rossman-McKinney said, “Yes, we have an important role to play in preserving charitable assets, including nonprofit hospitals. Charitable entities must give written notice to the Attorney General before finalizing transactions that may affect charitable assets. ”
CONSOLIDATION IS ABOUT GROWTH
Allan Baumgarten, a Minnesota health care consultant who tracks the Michigan market, believes federal trade regulators will also be looking closely and “certainly could” challenge the merger, which is being reviewed under the 1976 Law. Hart-Scott-Rodino antitrust improvements.
The Federal Trade Commission (FTC) is increasingly concerned about consolidating health care, Baumgarten said. While Spectrum and Beaumont do not have a market overlap, the size and scale of what they want to create could very well be the subject of federal and state scrutiny.
“There is enough research that says that mergers of this magnitude within states, and maybe even crossing state borders, in fact result in higher prices, and we believe that will be something that will do the trick. ‘subject to serious study by the FTC and the Michigan AG office,’ Baumgarten said.
Baumgarten recalls how the FTC “vigorously” but unsuccessfully challenged the 1997 merger between Butterworth Hospital and Blodgett Memorial Medical Center that created Spectrum. A consent decree to settle this matter provided for temporary caps on Spectrum’s price increases.
“The FTC has a long memory and is inclined to take a very careful look at mergers of this size, especially if they believe there is likely a chance that there will be additional market power for the merged entity and the significant potential for it to be. market power is used in ways that do not benefit the communities served by these health systems, ”he said.
Spectrum Health President and CEO Tina Freese Decker said last week that she did not expect any difficulty with regulatory reviews as the two health systems operate in separate, overlapping markets. not.
“We believe this new organization will benefit patients, our team members and the State of Michigan, and we are confident that regulators will respect that our organizations are mission-oriented,” she said. . “I don’t anticipate the regulatory concerns. If there are any that are raised, we will respond to them.
While executives declined to give details of potential cost savings from the proposed merger, Freese Decker stressed that “our goal is affordability,” citing Spectrum’s emphasis on a care approach. and value-based health improvement.
“Our goal is to generate greater value,” she said. “What we’re trying to do is help people be healthy. If they can be healthier, avoid emergencies, get everything they need so they don’t have to go to the hospital, we’re going to save money for the health care system, and when you do, then the total cost of care is reduced.
Jackson said the concerns of members of the Economic Alliance are not against Spectrum Health. The Grand Rapids-based healthcare system has historically been a high-quality provider of care that scores well in The Leapfrog Group’s Semi-Annual Hospital Safety Report, and the Economic Alliance has presented Spectrum with several quality awards. , did he declare.
In the Leapfrog Group’s most recent report in April, Spectrum Health’s Lakeland Community hospitals in Niles, United Memorial in Greenville, Zeeland Community and Big Rapids all received an “A”. Spectrum Health’s Lakeland Hospital in St. Joseph, Blodgett Hospital in East Grand Rapids, and Butterworth Hospital in Grand Rapids all received “B” grades.
“I don’t think there is a lack of knowledge or comfort with Spectrum. Around our table we try a lot to interface with Spectrum and people know who they are and respect the work they do, ”Jackson said. “They are known as a good high quality system.”
At last week’s press conference, Beaumont Board Chair Julie Fream said the two healthcare systems “are committed to providing the highest quality care” and that she was “convinced that together we will raise the bar for health care in our state.”