N.H. Hospital Deal Part of New Reality

Concord Monitor
Published: 1/26/2019 10:21:12 PM
Modified: 1/26/2019 10:36:56 PM

New Hampshire hospitals continue to join forces at a dizzying pace, with two huge transactions announced last week, adding fire to a long-running debate about whether more oversight of sweeping health care changes is needed.

“Some ask whether we are too late, whether there’s really no reason to do it now because we’ve missed the ball,” said Rep. David Luneau, D-Hopkinton, who is co-sponsoring a bill (House Bill 552) that would boost state law concerning oversight of health care mergers and affiliations. “If you’ve been in business you know that acquisitions and transactions and mergers don’t ever stop. It’s not like once you’ve merged, you’ll never merge again with any other organization. They’ll happen, and we need to get in front of it.”

As if to emphasize the matter, the first hearing on the bill was held on Thursday at almost exactly the same time that the parent organizations of Dartmouth-Hitchcock Medical Center and Catholic Medical Center announced their plans to join operations.

And it came one day after Frisbie Memorial Hospital in Rochester said it planned to be bought by giant for-profit conglomerate HCA Healthcare, which already owns Portsmouth Regional Hospital.

If these go through, 22 of New Hampshire’s 26 acute-care hospitals will have established some kind of organizational connection with other institutions, often mergers in all but name.

A notable exception is Concord Hospital, which remains independent, as is Valley Regional in Claremont. Lakes Region in Laconia and Franklin Regional are affiliated together, but are otherwise independent.

These combinations are usually depicted as a way to cut costs by ending duplicate services while expanding expertise and medical offerings, and as a necessary belt-tightening response to cutting America’s health care costs.

New Hampshire is not alone in this trend. The number of hospital-related mergers and acquisitions, sometimes involving corporations worth billions of dollars, has soared in recent years. In 2017, according to the consulting firm Kaufmann Hall, 115 different mergers and acquisitions were announced by hospital and health care companies, the most ever. It was the fourth year in a row that more than 100 deals were announced, making them the four most active years for such deals.

Final Negotiations Ahead

In New Hampshire, the combinations among hospitals are many and varied. They include last year’s joining of forces between Elliot Hospital in Manchester and Southern New Hampshire Medical Center in Nashua; the marriage-of-equals affiliation among four small North Country hospitals; the purchase of Wentworth-Douglass Hospital in Dover by Boston-area giant Massachusetts General Hospital, and ongoing plans by Conway’s Memorial Hospital to be further absorbed into MaineHealth, a hospital network in the Pine Tree State.

Thursday’s announcement would combine operations of Dartmouth-Hitchcock Health and GraniteOne Health, which controls Catholic Medical Center in Manchester plus Huggins Hospital in Wolfeboro and Monadnock Community Hospital in Peterborough. The two groups will keep their own boards of trustees but will be overseen by a joint board of what would be called Dartmouth-Hitchcock Health GraniteOne.

The merger still needs final negotiations and approval by each organization’s board of trustees as well as the Bishop of Manchester, whose diocese controls Catholic Medical Center.

Catholic Medical Center “will continue to adhere to its Catholic model of care” if the combination goes through, the statement said, in an apparent reference to policies on abortions, while Dartmouth-Hitchcock “will continue to serve its patients as it does today in all its existing health care facilities.”

No Certificate of Need

Most of the state’s hospital combinations have happened since 2016, when the New Hampshire Legislature ended what was known as the Certificate of Need Board that provided detailed oversight of mergers, affiliations and even many construction projects. Opponents of what was called the CON process said it had proved to be an obstacle to the necessary realignment of health care in the face of the Affordable Care Act, rising costs and changing demographics and was thus raising costs.

Lucy Hodder, a law professor who is director of health law and policy at the University of New Hampshire, said that other states such as Massachusetts and Vermont had much stronger state oversight of hospital mergers and acquisitions.

In most cases, the only state division that oversees proposed mergers now is the Division of Charitable Trusts because all but two of New Hampshire hospitals are non-profit — Parkland in Derry and Portsmouth are the exceptions. In some cases, the anti-trust division of the state Department of Justice may weigh in.

Hodder noted that there is no real state oversight of the construction of new facilities or expansion of existing hospitals, which can raise costs.

“Who has been building what? We have no idea what kind of expenditures go on in our health care system since the Certificate of Need board went out, and we pay for it,” she said.

“We have fantastic providers in New Hampshire and they’re making decisions based on their sustainability. But how do we know that is consistent with our sustainability? Because we’re the purchasers, the customers. We’re the taxpayers,” she said.

In statements on Thursday opposing HB 552, the head of the New Hampshire Hospital Association said that the proposed bill would be a step toward a Certificate of Need-type procedure. “It would seem that the legislation is seeking to create a health planning function,” said Steve Ahnen, president of the NHHA.

Ahnen expressed concern that it would lengthen and raise the cost of mergers and could expose “proprietary and confidential information” — in particular, billing agreements made between hospitals and vendors for services, which can be different from the charges that are made public under federal law.

“The Charitable Trusts Unit already possesses the ability to review an acquisition,” he wrote.

But others expressed concern that more oversight might be necessary to ensure that nonprofit hospitals continue to serve what is known as their “triple function” of helping patients and the community while controlling costs.

“The problem is they join forces and subsequently separate certain portions of care … they still have it, but they’re creating it so far away that you’re denying access,” said Rep. Debra Altschiller, D-Stratham.

Combining hospitals can affect costs in unexpected ways. For example, when hospitals merge, their defined coverage areas can change, which may mean that they can charge higher hospital rates for services in sites such as free-standing doctors’ offices, where previously they could charge only office rates.

Beyond the Scope?

Supporters of the bill pointed to the response from attorneys for Elliot Hospital when the director of Charitable Trusts asked for information about their joining forces with Southern New Hampshire Medical Center.

The Dec. 29, 2017, letter included 68 questions on a variety of financial and organizational matters. In 30 of them, lawyers declined to answer saying that they went “beyond the scope of the review” allowed in state law, although Charitable Trusts Director Thomas Donovan said that they eventually were answered.

“We need more authority, need to increase the public’s opportunity to weigh in,” Luneau told the Judiciary Committee at Thursday’s hearing, pointing to that pushback from Elliot’s attorneys.

Luneau also pointed to a 2017 study from now-defunct New Hampshire Center for Public Policy Studies that was commissioned by the Department of Charitable Trusts, titled “Hospital Community Benefit and Market Changes in New Hampshire.”

“Policymakers should be cautious about claims that mergers would automatically increase value in the health care system either through improvements in price, quality or both. There is a robust — albeit dated — literature suggesting that reductions in competition and hospital consolidation result in increases in price,” the study says. “The Charitable Trusts Unit will have a difficult time assessing the impact of mergers without additional information not currently provided.”

Details of the Bill

The proposed bill is similar to one that was passed by the state Senate but killed by the House last year.

It would add statements to an existing law, RSA 7:19-b, that describes standards for the Director of Charitable Trusts to review “acquisition transactions” involving health care charitable trusts.

Proposed additions include adding the phrase “the community’s and the state of New Hampshire’s need to access quality and affordable physical and mental health care services” in several places. Luneau said this was necessary to ensure that these consolidations take into account the need to deal with the often unprofitable business of serving mental health needs, including those caused by the addiction epidemic.

Ahnen, of the Hospital Association, expressed concern about the addition of “state of New Hampshire” in the list of places whose needs should be considered, saying that hospitals in one part of the state might have to react to problems that don’t affect them but exist elsewhere.

“Under current law, charitable assets must remain in the community, and this would seem to suggest that those resources could be directed outside of the community,” he wrote in a prepared statement.

The bill also would require more than one “well-noticed” public hearing about any merger plans, and it says that the commissioner “may share and seek confidential health care data and information with executive branch agencies” including the Department of Health and Human Services and the Insurance Commission.

The Justice Committee will hold a work session on the bill on Wednesday, Feb. 6.

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