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Report: Lahey-Winchester Hospital Deal Would Save $2.7M

Lahey last year announced a plan to acquire Winchester Hospital.

Courtesy photo.
Courtesy photo.
The state’s Health Policy Commission issued the following report on Lahey Health System’s plan to purchase Winchester Hospital:

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The Massachusetts Health Policy Commission (HPC) today issued its Preliminary Cost and Market Impact Review (CMIR) Report examining the proposed acquisition of Winchester Hospital and its subsidiaries, including Winchester Physician Associates, by Lahey Health System.

Based on its comprehensive review, the HPC estimates cost savings of up to $2.7 million per year as a result of potential decreases in Winchester physician prices and shifts in utilization from higher-priced hospitals to Lahey facilities. However, these savings depend on the resulting system not raising its prices relative to other providers, or adding facility fees.

Report URL here: http://www.mass.gov/anf/docs/hpc/material-change-notices/preliminary-report-on-lhs-wh-transaction.pdf

A CMIR is a review that analyzes the likely cost, quality, access, and market impacts of proposed provider transactions. The HPC’s report includes analysis of information from the parties and other market participants as well as publicly available data.

The HPC reports that Lahey and Winchester have described a business case for keeping their prices below those of currently higher-priced providers. In its conclusion, the HPC invites the parties to respond to the concerns outlined in the Preliminary Report regarding potential increases in Lahey’s rates over time that could cancel out or even exceed the cost savings the HPC has modeled.

“The HPC remains firmly committed to monitoring the marketplace trends that may exacerbate health care cost growth. Today, we fulfilled that responsibility by presenting the facts gathered during a thorough and objective review. These findings bring transparency, accountability, and better understanding to the public dialogue around how to achieve our collective goal of a more effective and efficient health care system,” said Dr. Stuart Altman, Chair of the HPC.

David Seltz, HPC’s Executive Director, added, “In this case, the evidence shows how the proposed transaction has the potential to reduce overall spending, and result in savings that will be passed on to employers and consumers. We look forward to reviewing the parties’ written response to our findings.”

The parties have 30 days from today to provide written comment on the HPC’s Preliminary Report. The HPC will review those comments and expects to release the Final CMIR Report and any recommendations at the next board meeting on May 22, 2014. A proposed transaction may not be completed until 30 days following the issuance of a final CMIR report.

This is the HPC’s second CMIR report. The HPC completed its first CMIR in February, issuing a Final Cost and Market Impact Review (CMIR) Report examining Partners HealthCare System’s proposed acquisitions of South Shore Hospital and Harbor Medical Associates. As a result of its comprehensive review, the HPC found that these transactions would increase health care spending, likely reduce market competition, and result in increased premiums for employers and consumers. The report concluded that the transactions warrant further review and commissioners voted unanimously to refer it to the Attorney General.

Chapter 224 of the Acts of 2012, the Commonwealth’s nation-leading health care cost containment law, tasks the HPC with many important responsibilities to support the Commonwealth’s efforts to meet the health care cost growth benchmark, including fostering innovative health care delivery and payment models as well as monitoring and reviewing the impact of changes within the health care marketplace. For 2013 and 2014, the law’s benchmark limits annual growth in total health care expenditures to 3.6%, in line with the state’s long-term projected economic productivity.

In monitoring the health care marketplace, Chapter 224 directs providers proposing to undertake significant changes to provide to the HPC measurable indicators of how those changes are likely to result in improved performance and lower total medical expenditures. Provider changes, including consolidations and alignments, have been shown to impact health care market functioning, and thus the performance of our health care system in delivering high quality, cost effective care. With the newly required filing of notices of material change by providers, the HPC now tracks the frequency, type, and nature of changes in our health care market. The HPC may also engage in a more comprehensive review of particular transactions anticipated to have a significant impact on the health care cost growth benchmark or market functioning. The result of such CMIRs is a public report detailing the HPC’s findings.

More information on the CMIR process, including examples of cost, market, and public interest factors that the HPC may examine, all material change notices filed with the HPC, and all HPC reports and written responses are available at www.mass.gov/hpc.

Fred Van Magness Sr. April 18, 2014 at 11:27 AM
I fear that this will lead to a reduction in quality at Winchester Hospital once Lahey gets their paws on things. Lahey has always been treatment option, so their is no real benefit to this move. And reducing Winchester physician payments will do little other than reduce the quality of physicians. Winchester has always been top notch, but I fear for the future.

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