Press Release  Statement on Cost and Market Impact Review (CMIR) of Proposed CareGroup, Lahey Health System, Seacoast Regional Health Systems, Beth Israel Deaconess Care Organization, and Mount Auburn Cambridge Independent Practice Association Transaction

Boston — Thursday, December 14, 2017

Statement from Dr. Stuart H. Altman, Chair, Massachusetts Health Policy Commission:

“This proposed transaction involves the merger of two of the biggest and most well-established health systems in the Commonwealth, as well as the corporate consolidation of three previously independent hospitals. It represents the most significant change in the structure of the Massachusetts health care market in more than 20 years and will reshape the delivery of care for millions of patients. As a result, the HPC voted today to authorize a full cost and market impact review to examine the potential impact of the proposed merger on health care costs, as well as the future functioning of the health care system in Massachusetts. We anticipate the review will be completed and made public in summer 2018. Depending on its results, the HPC could recommend that the Attorney General and/or other state agencies take appropriate actions.”

About the Transaction:

In November 2017, the HPC received completed notices of the proposed merger between CareGroup, Lahey Health System (Lahey), and Seacoast Regional Health Systems (SRHS), as well as the related acquisition of the Beth Israel Deaconess Care Organization (BIDCO) by the merged entity, and the proposed contracting affiliation between the merged entity and Mount Auburn Cambridge Independent Practice Association (MACIPA). CareGroup consists of the Beth Israel Deaconess system, New England Baptist Hospital, and Mount Auburn Hospital and Seacoast Regional Health Systems consists of Anna Jaques Hospital and affiliated physicians.

HPC staff conducted an initial review and identified the potential for the transaction to result in meaningful impacts on health care costs and the competitive market, including significant increases in market concentration and potential increases to market leverage that could allow the parties to increase hospital and physician prices.

At today’s HPC Board meeting (December 12, 2017), commissioners voted to authorize the initiation of a comprehensive CMIR, which will objectively examine all aspects of the proposed transaction in order to better understand the potential impacts on health care costs, market functioning, quality, care delivery, and access. The findings from this review will be detailed in a public report that is anticipated to be completed in summer 2018.

Background on the HPC’s Market Oversight Authority:

The HPC is an independent state agency governed by an 11-member board with diverse experience in health care. The HPC's mission is to advance a more transparent, accountable, and innovative health care system. As part of its work to achieve this mission, the HPC is tasked with monitoring and reviewing material changes within the health care marketplace, including mergers, acquisitions, and new affiliations. The HPC may also engage in a more comprehensive review of particular transactions anticipated to have a significant impact on health care costs or market functioning. The result of such “cost and market impact reviews” (CMIRs) is a public report detailing the HPC’s findings. These robust, data-driven reviews detail the impact of proposed changes on costs and market functioning, on the Commonwealth’s ability to meet the benchmark, and on quality and access to care for consumers. Through this process, the HPC seeks to encourage providers and payers alike to evaluate and take steps to minimize negative impacts and enhance positive outcomes of any proposed change. While the HPC does not have the authority to block proposed transactions, in order to allow for public assessment of the findings, the transactions may not be finalized until the HPC issues its Final Report. Where appropriate, reports may identify areas for further review or monitoring, or be referred to other state agencies in support of their work on behalf of health care consumers.

In total, the HPC has completed cost and market impact reviews of seven transactions since its inception in November 2012. The HPC has also received notices for an additional 72 transactions that did not proceed to a full cost and market impact review and is reviewing seven transactions for which there has not yet been a decision on whether to conduct a cost and market impact review. The HPC is currently conducting a cost and market impact review of two additional transactions, including the review authorized today. All cost and market impact reviews and material change notices are posted on the HPC’s website here and here, respectively.

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