Harvard-Affiliated Hospital Considers Merger

In an era of massive consolidation in the healthcare industry, two major teaching hospitals, including Harvard-affiliated Beth Israel Deaconess Medical Center, and several large physicians organizations expressed interest in merging, according to a memo obtained by The Boston Globe last week.

This alliance would create the third largest health care system in Eastern Massachusetts, rivaling Partners HealthCare System Inc. and Steward Health Care System.

The new merger would include Boston’s Beth Israel and Burlington’s Lahey Health coupled with the Newton-based Atrius Health, the largest physician organization in Massachusetts, and five smaller groups.

Howard R. Grant, the president and chief executive officer of Lahey, said in a statement to his staff, obtained by the Gloucester Times, that the merger has a “50-50” chance of success.

There has been a general trend toward consolidation in the Boston area healthcare system, beginning with the creation of the two conglomerates, Partners HealthCare System and Steward Health Care System.

The Partners HealthCare System, which runs Harvard-affiliated Massachusetts General and Brigham and Women’s Hospitals among others, is already under an antitrust investigation for controlling an unfair share of the highest caliber healthcare market.

Beth Israel Deaconess’s chief executive officer Kevin Tabb argued that hospitals need to team up with primary care providers in order to stay competitive and improve the quality of care.

“One of our objectives for the future is to expand and strengthen our network of partnerships and relationships,” he wrote in the memo obtained by the Globe. “It is part of our strategic imperative to rethink how we deliver care to patients in light of the rapid and fundamental change in health care.”

Already, five organizations in eastern Massachusetts, including Beth Israel and Atrius Health, care for 75 percent of Medicare beneficiaries, according to a report in the New England Journal of Medicine.

Though these conglomerates were created to reduce expenses, costs have gradually increased since they were formed, according to the report.

Beth Israel Deaconess and Lahey are considered expensive hospitals and further consolidation in the industry could give further monopoly power to the current players.

Others argue that an alliance between these hospitals and doctors groups could help increase quality, as there will be an increased network of expertise.

None of the parties involved in the potential merger have responded publicly to the leaked information.