Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Massachusetts Health Policy Commission comments on proposed acquisitions, (Jul 18, 2014)
By Peter Reap, J.D., LL.M.
Pursuant to a public comment process established by the Massachusetts Suffolk Superior Court in its role adjudicating a complaint brought by the Massachusetts Attorney General challenging the acquisition of South Shore Health and Educational Corp. (SSH”) and Hallmark Health System by Partners Healthcare Systems Inc., the Massachusetts Health Policy Commission (“HPC”) has submitted its detailed comment in a letter to Judge Janet L. Sanders.
According to the letter, the HPC has two distinct responsibilities relevant to the acquisition and its proposed settlement: (1) producing an annual report on health care spending; and (2) providing objective, data driven analyses of the impacts of specific provider transactions. Therefore, the HPC’s comment is grounded in four reports completed by the HPC in the past year containing data driven analyses of the Massachusetts health care market and proposed health care transactions encompassed in the civil action against Partners, the HPC stated.
The HPC’s reviews of Partners’ proposed acquisitions found impacts across all of the factors relevant to health care costs, with increases in spending anticipated to exceed potential savings from decreased utilization through care delivery reforms and population health management. From the HPC’s review of the data and evidence, it found:
For the three major commercial payers, the combined transactions are anticipated to increase total medical spending by more than $38.5 million to $49 million per year as a result of unit price increases and shifts in care to higher-priced Partners facilities.
The resulting consolidated system is anticipated to have increased ability and incentives to leverage higher prices and other favorable contract terms in negotiations with payers, the costs of which are not included in the above projection.
The parties to these transactions have not provided adequate evidence of how corporate ownership is instrumental to achieving the desired care delivery reforms, and their own experience and that of other providers offer compelling alternative approaches to effectively improving coordinated care delivery.
Massachusetts law establishes a statewide benchmark for a sustainable rate of growth of total health care expenditures, set at 3.6% for 2014, the HPC notes. This target is not a short-term goal, but one that is envisioned to be maintained as outlined in the law for the next decade and beyond. While recent spending growth in Massachusetts has slowed in line with slower national growth, sustaining lower growth rates over the long term will require a concerted effort to advance a more competitive, value-based health care market and efficient health care delivery system.
The comment reflects the HPC’s view that all factors that impact total medical spending growth should be closely monitored and moderated in order to achieve the benchmark. Consistent with the HPC’s role to provide data driven analyses of factors and transactions that affect the Commonwealth’s ability to meet its benchmark, the comment includes findings from HPC reports of market and total medical expenses impacts from the proposed transactions that are not addressed by the current agreement, such as shifts in patient care to higher-priced providers and the impact of unit price increases over time. Increased spending as Partners providers grow their non-risk books of business is not monitored by the current agreement. Growth in unit prices from these transactions will set a permanently increased baseline upon which future price increases will be negotiated and will permanently increase baseline total medical spending in areas of the state that have thus far not experienced the market impact of a local Partners facility. Moreover, without lasting change to the market structures and incentives that underlie the operation of bargaining leverage, price caps on their own may not be effective in keeping costs down.
Finally, the HPC noted that Partners, Hallmark, and SSH have consistently advocated for these transactions on the basis that they will lower total medical spending, and have publicly stated their purpose in consolidating is not to raise prices. As such, increases in total medical spending and growth in unit prices would be inconsistent with those claims.
News: Antitrust