Earlier this month, Yale New Haven Health officials announced plans to buy two other health systems, including three hospitals in central Connecticut, pending state approval.
Hospital representatives said the acquisition, the largest in recent years, would bring high-quality, cost-effective care to more residents throughout the state by expanding YNHH’s coverage area and leveraging its academic affiliation with Yale School of Medicine.
Consumer advocates and public health analysts say residents and insurance payers have a reason to be concerned about the deal. They say research is clear: A merger in which patients benefit the most is the exception, not the rule.
“Hospital consolidations typically are bad news for the pocketbooks of the individual families in Connecticut,” said Ted Doolittle, the state’s health care advocate. “They may be good for the individual pocketbooks of the hospitals, but that’s quite separate from the financial impact on families.”
Health care mergers and acquisitions have been rising in the last two decades, in Connecticut and elsewhere, leading to shrinking competition in the market and less choice for patients. That trend is expected to continue – analysts predict that the COVID-19 pandemic will fuel even more consolidation in the coming years.
In Connecticut, YNHH intends to buy the Eastern Connecticut Health Network and Waterbury Health systems from Los Angeles-based parent company Prospect Medical Holdings Inc. for an undisclosed price.
The acquisition would change ownership at Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital in Vernon and convert them from for-profit facilities to not-for-profit ones.
The two health systems employ about 2,900 workers in total and contain 708 certified treatment beds.
“Innovation has become a watchword for a post-pandemic healthcare environment,” Marna Borgstrom, CEO at YNHH, said in a statement. “And we are all exploring clear opportunities to enhance access to high-quality care while driving down costs.”
Potential impacts on health care quality
Studies have generally shown that while costs may decrease for hospitals and health systems, there are few direct savings for patients.
Elsa Pearson, policy director of the Partnered Evidence-based Policy Resource Center at the VA Boston Health Care System, said patients are more likely to see costs go up in either their out-of-pocket spending or their insurance premiums.
The health policy expert said a lot of it comes down to health care being a business.
“Hospitals make a lot of money, and even not-for-profit hospitals or nonprofit hospitals, they’re bringing in a lot of money,” Pearson said. “They have to stay in the black, and so mergers and acquisitions are one way to increase your bottom line or save yourself if you’re struggling financially.”
She added that provider choice and quality of health care can be affected, too, when there is less market competition.
“Your choice of providers goes down, and really this health care system starts making your care choices for you,” she said, “because if they’re the only provider in town, if they have a good connection with the only insurer in town, right, you’re kind of stuck.”
In a study published Jan. 2 in the New England Journal of Medicine, researchers from Harvard Medical School and Harvard Business School looked at the impact of hospital mergers on quality of care.
They analyzed performance data from 246 hospitals that were acquired from 2009 through 2013, and used a control group of 1,986 other hospitals that did not have changes in ownership.
Researchers found that acquired and merged hospitals “were associated with modest deterioration in performance on patient-experience measures and no detectable changes in readmission or mortality rates at acquired hospitals.”
In other words, Pearson said, health care quality either declines or stays the same, even when the purchasing deal may be financially appealing from a business standpoint.
“The industry is essentially this dichotomy of, technically it is a business and you have the right to make money and do well. At the same time, you’re supposed to be taking care of people, and that’s supposed to be kind of your main goal,” she said. “So, how do you balance those two things? And I think sometimes, we tend to favor the business side and the financial gains.”
Study authors did concede that their results show the average effects of mergers and acquisitions, and any benefits or harms may vary by individual purchase deal.
CT could step in with stipulations in regulatory review process
There is a system of checks and balances when it comes to health care mergers and acquisitions, both at the state and federal levels, though Pearson said it can be flawed and riddled with loopholes.
In Connecticut, acquisitions like the one being proposed by YNHH are subject to regulatory review by the Office of Health Strategy. An official application with a finalized agreement has not yet been submitted.
During the review process, the state could attach consumer-friendly stipulations to an approval. An example would be placing a cap on hospital and health system prices at the newly acquired facilities.
That was the case in the major merger of Beth Israel Deaconess Medical Center and Lahey Health in Boston, which was approved in 2018.
In that deal, the newly merged network agreed to keep its price increases below the state’s annual health care cost growth benchmark – limits on rate of growth in health care spending – for seven years.
While it may save patients and insurance consumers money in the short term, Pearson said it’s not a perfect solution.
“My pushback on that is, OK, well prices are still really high already, so even if you don’t raise prices, they are still unaffordable,” she said. “And two, who’s going to say what you’re going to do after that cap is over?”
Still, Doolittle said it’s something that Connecticut regulators should consider when reviewing the acquisition proposal by YNHH.
“They need to do that, plus more,” he said. “They need to think about price limitation in perpetuity, perhaps linking it to their new Connecticut health care cost growth benchmark.”
OHS launched Connecticut’s benchmarking program, as directed by Gov. Ned Lamont, in 2020.
Executive Director Vicki Veltri said the governor has also proposed $400,000 in his annual budget for her office to conduct a study, with a consultant, to evaluate the health care provider market in Connecticut.
“What we need to do is have a vision about where the state wants to go with health care planning,” Veltri said, “and then we can talk about the applications that come through the door to respond to that deliberate plan that we need to do.”
Pearson said the state could make other demands as well, such as requiring certain types of health care services to continue to be offered at the acquired hospitals and outpatient facilities.
YNHH officials in their initial announcement did commit to preserving local jobs and supporting employee pensions. Pearson said it could go a step further and guarantee that local leadership at the hospitals will remain the same.
“So, trying to maintain as much local autonomy, I guess, is one way to say it, while having the bigger health organization offering perhaps the financial stability that the local hospital is looking for,” she said. “I think that’s the best of both worlds.”
Officials from YNHH and Prospect Medical Holdings said they hope to complete the deal later this year.