Tuesday’s announcement of a merger between Lehigh Valley Health Network and Philadelphia-based Jefferson Health could affect health care across the region.
If successful, the merger would make it the second largest health network in the state, behind UPMC in western Pennsylvania. It would include a national research university, an expanded not-for-profit health plan, 30 hospitals, more than 700 outpatient sites and more than 62,000 employees, clinicians and staff in eastern Pennsylvania and southern New Jersey. Annual revenues are estimated at $12-14 billion.
But what effect does unification really have? To find out, The Morning Call spoke with Lehigh University economics professor and health care expert Chad Meyerhoefer.
Meyerhoefer said the merger is likely to happen without much opposition from regulators because LVHN and Jefferson do not compete in the same geographic areas of the health care market.
If all goes well, LVHN and Jefferson expect it to take no more than a year to obtain regulatory approvals.
But that doesn’t mean the changes will be seen immediately, Meyerhoefer said.
These healthcare systems are huge. It’s like piloting an aircraft carrier; If you want to change direction, it has to happen slowly, he said. It will take some time for this merger to be approved, and then much more time for these health systems to actually begin to integrate in the two entities.
Insurance is the area of health care where a merger could upset the Lehigh Valley the most.
LVHN and Jefferson touted the benefits of integrating Jefferson Health Plans, Jefferson’s non-commercial insurance marketplace offering Medicaid, Medicare Advantage, Affordable Care Act Marketplace and CHIP plans, into LVHN’s existing healthcare operations. The CEOs of both networks said the program will improve care for underserved populations and reduce the cost of care.
The Lehigh Valley does not have a similar or comparable program to Jefferson Health Plans, although it is not the only one of its kind in Pennsylvania. It’s a well-established program that existed for more than 30 years as Health Partners Plans before Jefferson took sole ownership in November 2021. More than 340,000 people are covered by Jefferson Health Plans, the majority on Medicaid.
Meyerhoefer said the hospitals do not benefit from Medicaid or Medicare. Most of the countries’ baby boomers are transitioning or have already transitioned to Medicare, and many have serious health care needs and chronic illnesses, so hospitals are losing money on care.
But Meyerhoefer said hospitals can offset those losses by being highly efficient in service and treating large numbers of Medicaid and Medicare patients.
High volume with a low payment rate, it’s better for revenue if you can become very efficient in providing services to these patients, and it’s also good for patients because they get better access, Meyerhoefer said.
He said Medicaid patients, and especially underinsured and underserved patients, benefit greatly from having plans from Jefferson Health Plans in terms of continuity of care and better access to outpatient services. Medicaid in particular can have a hard time finding outpatient providers who accept their insurance. But if the company that provides the Medicaid insurance also owns the outpatient providers, this problem does not exist.
They can leverage their size and administrative sophistication to start offering those plans to Medicaid patients and plans on the health insurance exchanges to offer comprehensive coverage to patients who are often underinsured and uninsured and have more limited access to care, Meyerhoefer said. .
It reduces uncompensated care, which improves continuity of care. And if they’re big enough, they can leverage the volume of patients they see to sustain revenue.
However, those with private plans may end up paying more. Meyerhoefer said consolidation reduces competition, and larger networks can put more pressure on insurers to get better claims and rates, ultimately leading to higher premiums for private insurance plans.
That’s borne out in some studies, including a Kaiser Family Foundation report that found some mergers, particularly those that combine health systems in different markets, have led to price increases of 6 percent to 17 percent.
The Federal Trade Commission has challenged price-goal hospital mergers because they reduce competition and can lead to price gouging.
The union that represents nurses throughout the region, including LVH-Pocono nurses, also expressed concern.
“Studies show that mergers can increase patient healthcare costs by as much as 12 percent without a corresponding increase in patient care,” Matt Yarnell, president of SEIU Healthcare PA, said in an email. “Furthermore, a highly concentrated healthcare market can lead to lower wages and staffing for frontline workers. … We want to make sure that patients and frontline workers remain at the center of this conversation. While the growing trend of consolidation and acquisition raises many questions and concerns, we look forward to working with Lehigh Valley and Jefferson University if this transaction is successful.
In an interview Tuesday, LVHN CEO Dr. Brian Nester said the merger would make for better access to care, ultimately lowering the cost of patient care.
If you give better care, you make it more available, [if] You get patients to commit, they have better outcomes, and they don’t require hospital care or unnecessary treatments, which ultimately lowers the cost of care, he said.
A spokesman for LVHN added that it was too early to comment on a “hypothetical” based on other states and territories.
There is a lot to decide before the merger. The final agreement is still being negotiated, and the deal requires state approval. The hospital’s current management will remain.
It is not known how the merger would affect staffing, particularly administrative, at the health networks, and what will happen if there are any rebranding.
Still, the merger will certainly change the dimensions of the competition between St. Lukes University Health Network and LVHN, although Meyerhoefer said he doesn’t expect much to change in the short term, since the two entities are still competing in the region.
Following the announcement, Rick Anderson, president and CEO of St. Lukes, issued a statement saying the network has “always respected” LVHN as a “vibrant local competitor” and said, “St. Lukes will continue to focus on being the most affordable provider providing the highest quality care .”
Meyerhoefer said integrating Jefferson Health Plans into LVHN’s operations would give the new health care network power over Medicaid and Medicare dollars in and around the Lehigh Valley.
But Meyerhoefer said where he sees the most change in the short term is branding and public perception. He said St. Lukes has made Temple St. Lukes School of Medicine a significant part of its brand in recent years to differentiate itself from LVHN, which has a medical school program with the University of South Florida. But Thomas Jefferson University is owned by Jefferson, and Sidney Kimmel Medical College is well regarded.
“I’m sure there’s some branding that will promote these academic credentials and change perceptions among consumers,” Meyerhoefer said.
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