, Gloucester, MA

April 4, 2013

Lahey in early merger talks with Beth Israel

Discussions 'very preliminary'

By Richard Gaines
Staff Writer

---- — Lahey Health, the $1.5 billion hospital and medical system that includes Beverly and Addison Gilbert Hospitals, is in preliminary merger talks with Beth Israel Deaconess Medical Center, one of Boston’s pre-eminent hospital systems, according to sources close to the talks and internal documents made public Wednesday to the Times.

A third party to the negotiations is Atrius Health, an organization of physician groups representing an estimated 1,200 to 1,500 doctors and approximately 1 million patients widespread across the region.

Beth Israel Deaconess is roughly the same size financially as Lahey, but together as a $3 million city-suburban system, the two combined would still be no more than half the size of Partners Health Care — whose epicenters, Massachusetts General Hospital and Brigham and Women’s Medical Center, emanate across Greater Boston, and which features North Shore Medical Center, an outpatient hospital in Danvers.

Howard Grant, president and chief operating officer of Lahey released a statement to the staff Wednesday, identifying the principals in the negotiations that, while preliminary, were characterized to the Times by a source close to the talks as having a “50-50” chance of succeeding — a figure seen as strong, the source said, considering the complexities of the groups in conversation.

“We talk often about the dynamically changing landscape of health care in our region, and I am writing to share with you that Atrius Health, Lahey Health, Beth Israel Deaconess Medical Center, and Harvard Medical Faculty Physicians at BIDMC have begun an active exploration of ways we can broaden and enhance our existing relationships,” Grant wrote, addressing his message to “Lahey Health Colleagues.”

“Today, (Beth Israel Deaconess Medical Center) is the primary tertiary hospital for Atrius Health patients, and Atrius Health also partners with Lahey Health in the northern suburbs,” he continued. “We are all pleased to be participating in these discussions because we believe that partnerships with other high-quality health care providers are fundamental to meeting the needs of our patients and controlling costs in today’s complex health care environment.”

Grant added that “our organizations share the same vision of providing outstanding care in the right place at the right time.”

“In our exploration together, we are seeking to further enhance the quality and safety of care we provide our patients, improve the health of the communities we serve, and manage the cost of care at sustainable levels,” Grant continued. “We believe that, by working together there are opportunities to improve the experience of patient care in the ambulatory, hospital, and other environments while effectively facilitating transitions of care to improve the health and wellness of the community.

“Our conversations are very preliminary. We have made a commitment to spend a few months exploring new possibilities to benefit our patients and the communities we serve.”

Beth Israel Deaconess was first to release its statement.

Its president and CEO, Kevin Tabb, and Stuart Rosenberg, President and CEO of Harvard Medical Faculty Physicians, the physicians group of BIDMC, said in a joint internal email released to the Times after an inquiry that, “over the past year, we have entered into several of these new partnerships – an important track record for us – and I wanted to tell you about another potential new relationship we are beginning to discuss with some key participants in the delivery of health care in eastern Massachusetts.”

Tabb and Rosenberg identified them as Atrius Health, Lahey Health (the system created by the merger last summer of Lahey Clinic and Northeast Health System) and Lahey Clinic Physicians Group.

Atrius Health, Lahey Health, Lahey Clinic Physicians Group, Beth Israel Deaconess Medical Center, and Harvard Medical Faculty Physicians at BIDMC have begun an active exploration of ways we can broaden and enhance our existing relationships, they said. Harvard Medical Faculty Physicians is not related to Harvard Medical School.

Physicians associated with Harvard Vanguard, a leading health maintenance organization, were in the forefront of the idea of creating Atrius, as an umbrella organization. It came into being in 2004, and now includes Dedham Medical Associates, Granite Medical Group, Harvard Vanguard Medical Associates, Reliant Medical Group (the former Fallon Clinic) South Shore Medical Center, and Southboro Medical Group.

The patients served by the members of Atrius live in a much larger geographical region than the suburban lineup assembled by Lahey and the urban-center occupied by Beth Israel Deaconess, which merged two of Boston’s most prestigious hospitals in 1996.

A highly placed source told the Times that the need for scale was a driver in the decision of the three groups to enter into negotiations, and mentioned the need for a large catchment area of patients as the foundation of “tertiary” medical care — transplants, for example, and other cutting edge surgical and treatment regimens.

The advantages held by Partners, the largest health and medical organization in the Boston area in negotiating insurance payments was also cited as driving the three parties into talks.

Northeast Health System, organized around Beverly Hospital, acquired Addison Gilbert Hospital 1994, and then went through the next decade in the shadow of Partners, anchored on Cape Ann the North Shore by a physicians group, Cape Ann Medical Center, in Gloucester’s Blackburn Industrial Park, by Salem Hospital and by other facilities in central Essex County even before the opening of Mass. General North/North Shore Medical Center, in Danvers in 2009.

Richard Gaines can be reached at 978-283-7000, x3464, or at