PROVIDENCE, R.I. (WPRI) – Partners HealthCare’s proposed takeover of Care New England could raise health insurance premiums in Rhode Island, but the local hospital group likely needs to make a major move to shore up its finances no matter what, according to a new study commissioned by the state.
The R.I. Office of the Health Insurance Commissioner, which regulates premiums for Rhode Island insurers, ordered the study by consulting firm Bailit Health late last year. It was presented this week to the office’s Health Insurance Advisory Committee, making it the first look by a regulator at the proposed sale of the state’s No. 2 hospital group.
“If only because of CNE’s financial distress, we find it likely that if Partners acquired CNE it would take actions to increase revenue to CNE, which, if successful, would adversely impact the affordability of Rhode Island commercial health insurance premiums in the immediate term,” the study concluded. “The financial realities imply that another acquiring entity would be likely to attempt the same, albeit perhaps with less insurer leverage than Partners.”
Partners’ flagship hospitals are Massachusetts General and Brigham and Women’s, both of which have reputations for high prices compared with community hospitals, partly because of their strong brands. Care New England owns Women & Infants, Kent and Butler, controlling about one in four of Rhode Island’s licensed hospital beds, and is also the state’s second-largest private employer.
Bailit’s research included interviews with insurance executives who have dealt with Partners. One told the consultants, “Our experience with Partners tells us they like to solve problems with revenue solutions. They will say, ‘hit this price point or we are out of your network – including the whole Massachusetts network.'” Another said Partners had “been on good behavior” recently, which Bailit speculated is because Massachusetts has stepped up scrutiny of the powerful company.
Health Insurance Commissioner Marie Ganim said the Partners-CNE report is the first time her office had ordered a study on a specific transaction. “This is big,” she said. “We’re probably at a turning point for our state in terms of these decisions.”
While Ganim’s office does not have a final say on the transaction – that power lies with the attorney general and the Department of Health – it has an obligation to examine all policy changes that could significantly affect premiums, she said.
Care New England spokesman Jim Beardsworth downplayed the Bailit study, saying in an email it “was done in a vacuum without input from CNE or Partners.” (Ganim said that was due to the review’s limited scope.)
“As this merger works through the regulatory process and we are able to share all of the data and the financial turnaround which is underway at CNE, we are confident that the positive outcomes for Rhode Island health care will be apparent,” Beardsworth said.
Ganim noted that Rhode Island does not have a government entity akin to the Massachusetts Health Policy Commission, an independent agency created by Bay State lawmakers in 2012 to help guide state leaders on health care. “It occurred to us that we have a bit of a vacuum for Rhode Island decision-making,” she said.
Ganim said one of her major takeaways from the research was that hospitals have multiple ways to raise costs if they want to do so, not only by increasing how much they charge for medical services but also by buying physicians groups that refer patients or adding facility fees for outpatient services.
Another key finding for Ganim: “The review of national literature show it’s not likely that mergers and acquisitions lead to efficiencies that actually translate into premium savings for consumers.”
Still, she said it would be premature to make a recommendation on whether the merger should be approved because the companies have yet to file a formal application laying out details. “Until there is an application and you can see what it is that’s being proposed, it’s really difficult to comment,” she said.
Bailit’s findings were cheered by Bill Fischer, a spokesman for Prospect CharterCARE, the California-based owner of Roger Williams Medical Center and Fatima Hospital. Prospect has partnered with Brown University on an alternative takeover bid for Care New England.
Fischer said the study “raises real concerns about motivations and outcomes if this ill-advised merger were to come to fruition.” He also criticized the lack of details offered so far by the two companies, which have been in negotiations since last April and which brought top Rhode Island hospital group Lifespan into the talks last month.
“For the most part, since the announcement that Partners and CNE had signed a letter of intent, this proposed merger has flown under the radar screen,” Fischer said. “They have released no details or specifics.”
The health insurance commissioner’s office said the study cost about $17,000.
Separately on Thursday, state Rep. Kenneth Marshall introduced a bill to create a 14-member legislative study commission “to study the impact on the state of Rhode Island from the acquisition of hospitals.” Marshall is also the co-sponsor of a bill that would require Partners to clear more regulatory hurdles to buy Care New England.
“I intend to create a commission to protect our health care industry, which is extremely important to the citizens of Rhode Island, the economic stability of our state, and our investment in health care education,” Marshall, D-Bristol, said in a statement. “If there is a possible conversion, we have to make sure the people of the state are protected.”Ted Nesi (firstname.lastname@example.org) covers politics and the economy for WPRI.com. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook