How will the LVHN-Jefferson merger affect the health care industry? We asked a Lehigh Valley health economist

Tuesday’s announcement that Lehigh Valley Health Network and Philadelphia-based Jefferson Health plan to merge is likely to be a blow to health care throughout the region.

Should the merger go through, it would result in the creation of the second largest health network in the state, behind UPMC in Western Pennsylvania. It will include a national research university, an expanded nonprofit health plan, 30 hospitals, more than 700 outpatient sites and more than 62,000 employed faculty, physicians and staff in eastern Pennsylvania and southern New Jersey. Annual revenues would be estimated at $12 billion to $14 billion.

But what impact will the merger actually have? To find out, The Morning Call spoke to Chad Mayerhoffer, an economics professor at Lehigh University and an expert on the business of health care.

The Mayerhofers said the merger is likely to happen without major opposition from regulators because LVHN and Jefferson do not compete in the same geographic areas of the health care market.

Should everything go smoothly, LVHN and Jefferson expect it will take no more than a year to obtain regulatory approval.

But that doesn’t mean changes will be visible immediately, Mayerhofer said.

These health systems are huge. It’s like piloting an aircraft carrier; “If you want to change direction, it should be gradual,” he said. It will take a while for this merger to be approved and then a lot longer for those health systems to actually integrate into the two entities.

Insurance is the area of ​​health care where a merger could shake things up the most for the Lehigh Valley.

Both LVHN and Jefferson touted the benefits of integrating Jefferson Health Plan, Jefferson’s non-commercial insurance marketplace, which offers Medicaid, Medicare Advantage, Affordable Care Act Marketplace and CHIP plans, into LVHN’s existing health care operations. The CEOs of both networks said the program would improve care for underserved populations and lower the cost of care.

There is no program equivalent or comparable to Jefferson Health Plan in the Lehigh Valley, although it is not the only program of its kind in Pennsylvania. It is a well-established program, existing for more than 30 years as a Health Partners plan before Jefferson took sole ownership of it in November 2021. Jefferson Health Plan covers more than 340,000 people, the majority of whom are on Medicaid.

Mayerhofer said the hospitals do not benefit from Medicaid or Medicare. Much of the country’s large baby boomer population is transitioning or has already moved to Medicare, and with many people needing serious health care and having chronic conditions, hospitals are actually losing money on care.

But Mayerhofer said hospitals can offset those losses by becoming more efficient at servicing and treating larger numbers of Medicaid and Medicare patients.

Larger volume at a lower payment rate is better for revenue if you can be very efficient in providing services to those patients, and it’s also good for patients, because they get better access, Mayerhofer said.

He said patients on Medicaid, as well as particularly underinsured and underserved patients, will benefit greatly from receiving plans from Jefferson Health Plan in terms of continuity of care and better access to outpatient care services. In particular, for people on Medicaid, it may be difficult to find outpatient providers that accept their insurance. But if the company that provides Medicaid insurance also owns the outpatient care providers, this problem does not exist.

They can take advantage of their size and their administrative sophistication to begin offering these plans to Medicaid patients, Mayerhofer said, and to integrate the plans into the health insurance exchanges to offer comprehensive coverage to patients who often cannot afford insurance. are closed and who have a more limited ability to provide care. ,

This reduces uncompensated care, thereby improving continuity of care. And if they’re big enough, they can leverage the number of patients they’re seeing to maintain revenue.

However, people with private plans may have to pay more. Mayerhofer said consolidation reduces competition and larger networks can put more pressure on insurance companies for better compensation and rates, ultimately driving up premiums for private insurance plans.

This is borne out by some studies, including a report by the Kaiser Family Foundation, which found that some mergers, particularly those that bring together health systems operating in different markets, led to price increases of 6 percent to 17 percent. There has been an increase of up to 100 percent.

The Federal Trade Commission has challenged hospital mergers on price gouging grounds, finding that they reduce competition and can lead to higher prices.

The union representing nurses across the region, including LVH-Pocono, also expressed concerns.

“Research shows that mergers could increase health care costs for patients by 12% without increasing the level of care they receive,” Matt Yarnell, president of SEIU Healthcare PA, said in an email. “Furthermore, highly concentrated health care markets can lead to lower wages and staffing for front-line workers. … We want to make sure that patients and frontline workers remain at the center of this conversation. While the increasing trend of consolidation and acquisitions raises many questions and concerns, we look forward to working with Lehigh Valley and Jefferson University if this transaction occurs.

In an interview Tuesday, LVHN CEO Dr. Brian Nestor said the merger will make better care more available, ultimately reducing the cost of care for patients.

If you give better care you make it more available, [if] As you care for patients, they will have better outcomes and will not require hospital services or unnecessary treatments, ultimately reducing the cost of care, he said.

A spokesperson for LVHN said it was too early to comment on “hypotheses” based on other states and territories.

A lot must be decided before any merger. The final agreement is still being negotiated, and the deal will require state approval. Current hospital leadership will remain in place.

It is unknown what impact the merger will have on staffing at the health network, particularly administrative, and what, if any, rebranding will occur.

However, the merger is sure to change the dynamics of the existing rivalry between St. Luke’s University Health Network and LVHN, although Mayerhofer said in the short term he does not expect much will change as the two entities will still compete in the region.

Following the announcement, St. Luke’s President and CEO Rick Anderson issued a statement saying that the network has “always respected” LVHN as a “vibrant local competitor”, and further added that “St. Luke will continue to focus on remaining the lowest cost provider with the highest quality care.

Mayerhofer said integrating Jefferson Health Plans into LVHN operations will power the new health network on Medicaid and Medicare dollars in and around the Lehigh Valley.

But Mayerhofer said he sees the most change in the short term in branding and public perception. He said St. Luke’s has made Temple St. Luke’s School of Medicine a prominent part of its branding in recent years as a way 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 quite respected.

I’m sure there will be some branding that will promote those academic credentials and change perceptions among consumers, Mayerhofer said.

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