Dive Brief:
- Ongoing merger talks between Massachusetts-based Lahey Health and Beth Israel Deaconess Medical Center are part of a continuing trend of mergers across the nation as hospitals face pressure from federal and state laws to reduce costs and improve care.
- Both organizations are expanding their networks: Lahey added Winchester Hospital last year and Beth Israel added Jordan Hospital in Plymouth.
- If the merger happens, says the Boston Globe, it will create a system of eight hospitals across Eastern Massachusetts and, according to Modern Healthcare, will generate a combined revenue of $3.2 billion with an operating income of $61.8 million based on the year ending September 2014.
Dive Insight:
Many industry analysts agree large networks offer a wide range of services that better manage patient care and costs.
Massachusetts has seen a flurry of large health system mergers over the past several years. Partners, the largest network of hospitals, tried to add three additional hospitals, but dropped its plans for one hospital due to a lost court battle with state regulators and suspended plans for the other two. Tufts Medical Center and Lowell General Hospital created a new parent company last year to attract new providers to their network.
Researchers at PricewaterhouseCoopers said mergers and acquisitions in the healthcare sector increased more than 16% from 2013 to 2014. Joint ventures and clinical partnerships are also rising. Although most experts agree these mergers benefit hospitals, some, like Robert J. Town, a Wharton School professor, question whether patients will see similar rewards. He told The Boston Globe mergers provide a route to increase market clout to negotiate higher insurer payments. "If that's the case," he added, "then these mergers are going to be bad for consumers."