Competition or consolidation?

It’s a proposal with enormous implications for the future of Rhode Island’s health care landscape – and those high stakes have been made clear during an ongoing public relations battle between the major players.

Care New England’s planned acquisition by Massachusetts-based Partners HealthCare – which is subject to state approval – has drawn sharp opposition from Lifespan Health System. Arguments on both sides have centered on the proposed deal’s consequences in terms of quality – and cost – of care for Rhode Islanders, as well as the potential economic impact.

Supporters of the acquisition say the deal will allow for better care, provide for needed investments in medical facilities and strengthen CNE’s financial position. Opponents say the acquisition would increase patient costs and reduce local access to vital services. Each side suggests its preferred outcome would boost the state’s economy.

In an effort to gain additional perspective, Beacon editor and publisher John Howell – in response to an op-ed written by Dr. Michael J. Dacey in support of the acquisition that was published in these pages – sought a response from Lifespan. A call was arranged with Dr. David E. Wazer.

The following is an unrehearsed interview, which was then shared with Dacey. The transcript of the interview and Dacey’s responses were then shared with Lifespan, resulting in the editor’s note that follows this discourse.

Dacey is the executive vice president and COO of Riverside Health System in Newport News, Virginia. He is the former president of COO of Kent Hospital, where he spent 17 years before leaving in January 2018.

Wazer, who opposes the Partners-CNE deal, is director of the Lifespan Cancer Institute, oncologist-in-chief at Rhode Island Hospital and chairman of the radiation oncology departments at The Warren Alpert Medical School of Brown University and Tufts University School of Medicine.

The following is a lightly edited and consolidated transcript of separate interviews.

HOWELL: As you know, this has been an issue that’s been batted around for a long time, whether it’s with South Coast in terms of Care New England merger, or even with Lifespan, but it seems like … a bride waiting for a groom, or vice versa, over all this time. And the question to sort of lead off, do you think it makes sense for whatever the group is to consolidate here? Do we need to consolidate?

WAZER: Yes, I think there is a need to consolidate … what’s happening in health care across the United States requires that health care systems get bigger in order to be able to manage the expenses associated with managing a system and to be able to have the critical mass of expertise and resources to be able to deliver care effectively to their communities. So, yes, I do think a consolidation here is necessary, but I think the right consolidation clearly is Care New England and Lifespan coming together with Brown as a participant in that process so that we have, finally, a complete academic, integrated health care system in Rhode Island, which we do not currently.

DACEY: [A Lifespan-Care New England merger] will eliminate hundreds of well-paying jobs, limit access to care and drive up costs as it severely damages the state’s economy, particularly outside of metro Providence.

HOWELL: Attorney General Peter Neronha, when he visited us and chatted about this, had some concerns about antitrust [issues] in this sort of a situation, because clearly while there are some other providers within Rhode Island, such a combination would make this, no question, the big gorilla.

WAZER: Well, you know, I think the world has changed in that Rhode Island is a very small state, but we live in a region that is rich with complete health care systems. So in Massachusetts, for instance, there are five complete health care systems, and by complete health care systems I mean they do everything from cradle to grave. In Connecticut, there are at least two that I’m aware of, and what we’re seeing in Rhode Island is increasing efforts on the part of the health care systems in Massachusetts and the two health care systems in Connecticut to move into Rhode Island. So this is not just about what exists within the state of Rhode Island, but really we’re in a competitive region and that region is very rich with competition, to say the least.

DACEY: Rhode Island is not a town of 5,000 or 10,000 people. It has a million people, and Rhode Island patients should not be subjected to a near monopoly in health care. I think what Lifespan wants to eliminate is competition within the state, as they know that people not only want to, but in fact do, remain within the state for the vast majority of their care.

HOWELL: So you don’t see Rhode Islanders sort of getting a short end of the stick because they wouldn’t have that competition?

WAZER: I think they’re getting the short end of the stick right now because they don’t have a complete health care system in the state. And I’m all for choice. Patients should be able to go wherever they want to go, but as they go to markets like Massachusetts or Connecticut, they go from a low-cost state to very high-cost providers in Massachusetts and Connecticut. Massachusetts has among the most expensive health care in the United States, if not the most expensive, and Rhode Islanders and Rhode Island employers are going to have to bear the price of that.

DACEY: That’s not accurate. What the Rhode Island employers will have to bear if Lifespan succeeds in acquiring CNE is an increased fee schedule and rates for care for the vast majority of medical-surgical patients as in-state competition is nearly eliminated. Lifespan knows that almost all Rhode Island patients receive their care within the state. What they really want to eliminate is intrastate competition, as that produces real economic gains for them as it limits patients’ choice and drives up costs. They know that the interstate flow of patients is already very small.

HOWELL: And one of the concerns also being voiced by Lifespan … is if [Partners] were to acquire CNE, you would see the degradation of some of the services now provided because they would have those services in Massachusetts – no need to sort of duplicate them, and patients would be leaving here to go there. Have I characterized that correctly?

WAZER: The way I see it – and I’m going to speak on behalf of the cancer program, but I think it applies to other high-end services that Lifespan provides in neurosciences and cardiac services and others – is for us to maintain a top-level, academic-quality, first-rate health care experience in Providence, in Rhode Island, we need to have a critical mass of providers and cases to support those programs. We’re not able to recruit talent, we’re not able to invest in technology if we don’t have a sufficient caseload to be able to do that. So as Partners comes in to Rhode Island and refers all those complex cases up to Boston, it undermines our ability to create a first-class health care system in Rhode Island and a cost-efficient first-class healthcare system in Rhode Island.

DACEY: That was not my experience when I was helping to build and facilitate the relationship with Partners. In fact, that relationship allowed CNE and its network to do more specialty work at Kent, at very high levels of quality, at the hospital where those patients have the majority of their medical relationships. What Lifespan objects to is that they lost market share to Kent in key areas like cardiology and surgery.

HOWELL: One of the arguments that I’ve heard is that Lifespan, as well as Care New England, don’t have the resources that Partners has, and that if you were to combine the two of them, you’re combining two so-to-speak weak sisters as opposed to linking with somebody stronger that could address some of the capital needs – in the case of Care New England, the facilities here as well as some of the programs that they’ve got. And you wouldn’t be able to do that if you combined Care New England and Lifespan.

WAZER: I can’t speak to that in great detail because I’m not a finance expert. My understanding, from what [Lifespan president and CEO Dr. Timothy] Babineau has said, is that Lifespan is in solid financial condition and has capacity to be able to invest in this integrated health care system in the state of Rhode Island, but I would refer you to Dr. Babineau for a lot more detail related to the finances of all of that. I think from my perspective, what I see on the Lifespan side is, we have an enormously deep bench of medical expertise and talent. And it always gnaws at me a little bit that New Haven is very proud of having a world-class academic health system, yet Providence feels like this has to be offloaded to Boston. I think we have all the elements to build exactly what other cities of our size have in terms of a top-flight academic health system, and we should do that. I think it's important not only for the health of the state of Rhode Island, but also for the economic development of the state of Rhode Island.

DACEY: Partners acquiring CNE would bring hundreds of millions of dollars into the state. That money would accrue to the state’s bottom line, allowing Lifespan to invest in its own clinical programs, enhancing their ability to compete successfully against the health systems to the north and west, all while preserving hundreds of jobs and tens of millions in income here in Rhode Island.

HOWELL: When I’ve talked to Dr. Dacey … his argument is that, by combining the systems, you’ve lost that competition … competition, he feels would yield improvements, innovation, and would end up with better service for Rhode Islanders.

WAZER: As director of the Lifespan Cancer Institute, I can already tell you I’m competing with those five health care systems in Massachusetts and the two health care systems in Connecticut. That’s who I view as my competition, because patients, if they don’t come to Lifespan, they either go to Boston or they go to New Haven. So, I think that's a false argument. As I said, we’re in a pretty compact region in which we have pretty substantial competition already. And I would also submit competition in health care is not like competition in the car business. The normal rules of economics don’t apply. Again, in Massachusetts, you have five complete health care systems competing with each other and it’s the highest-cost state in the United States when it comes to health care. So I’m not quite sure where competition has driven down cost. There’s no evidence to support that.

DACEY: Market forces and the basic rules of economics most certainly do apply to health care, and it’s sophistry to suggest otherwise. Years ago, almost all surgery was done in hospitals, but today much of it is done in competing, free-standing ambulatory centers that have dramatically lowered costs and improved patient experience. Competition in radiology has likewise lowered costs tremendously over the past 10 years.

In terms of hospitals, wherever one hospital system has dominated, costs have risen. The very cost argument Lifespan uses against Partners is proof of that and is the reason that Massachusetts has taken steps to encourage competition within their own state. Good examples are allowing the recent merger of Beth Israel and Lahey Clinic to go forward and the decision not allow South Shore Hospital in Boston to merge with Partners several years ago. Massachusetts knows in-state competition is important and has taken steps to encourage it for the benefit of its citizens. Rhode Island patients should have the same in-state advantage.

What Lifespan really wants to do is to eliminate intrastate competition, as they know most patients in Rhode Island stay within the state.

HOWELL: Anything else you care to add?

WAZER: I think what bothers me about this whole argument, back and forth, is that Rhode Islanders don’t seem to have a sense of pride in what’s been built within Rhode Island with respect to their health care system. And I’m very proud of what has been done at Lifespan, and I think the doctors and the quality of care in Care New England is also first-rate. We should come together, and we should build a Rhode Island-specific health care system that we can be proud of and that can be a national model of how to do it cost efficiently at the highest quality. And I’m also confident that this will be an economic engine for the state, not just with the jobs provided within the health care system, but the spin-off industries in biotechnology and medical device manufacturing, like what is seen in Massachusetts. That really can be an economic engine if we do it right in the state of Rhode Island.

DACEY: I agree with Dr. Wazer completely that Rhode Island should be very proud of its health care institutions and especially all the hard-working people who help patients at them. Where we differ is in the role of competition vs. consolidation, and that’s an honest and hopefully thoughtful disagreement that will eventfully be decided by state leaders.

Editor’s note: Following the interviews with Wazer and Dacey, Richard Salit, senior public relations officer for Lifespan, challenged some of Dacey's assertions related to the cost of care through Lifespan and the proposed CNE-Partners merger's economic effects.In an email, he wrote: "[Dacey] says that if Lifespan succeeds in acquiring CNE it will lead to an increased fee schedule. This is false because Lifespan no longer negotiates for rates with commercial insurers, OHIC sets the rates from commercial insurers. RI is the only state in the country that has an OHIC."Salit additionally highlighted a 2012 comparative study funded by the Rhode Island Officer of the Health Insurance Commissioner and the Executive Office of Health and Human Services focused on multi-payer hospital rates in Rhode Island. He said the report found that Kent's commercial insurer rates are higher than most Rhode Island hospitals for inpatient care but lower for outpatient care, and that Care New England's commercial insurer rates are high relative to the rest of the state's hospital market.He provided a chart from the study, titled "Selected Commercial Market Findings from Variation in Payment for Hospital Care in Rhode Island (2012)." According to the chart, the average payment per inpatient stay at Care New England's Kent and Women & Infants hospitals in 2012 was $16,666 and $23,367, respectively. Lifespan's Rhode Island and Miriam hospitals had average payments per inpatient stay of $14,416 and $12,889, respectively, for the same year. The statewide commercial average was $14,975.Dacey responded, in part: “They are correct in that the OHIC does regulate commercial rate changes, although that's off whatever the baseline rates are already and the data they present are 5 years old. Very importantly, outpatient charges make up more and more of a hospital's or health system’s income, even for services actually provided within a hospital, in many health systems exceeding 50 percent.”