Einstein, Jefferson cleared to merge and create giant Philadelphia health system

Jefferson Health CEO Stephen Klasko said he expects the merger to close within the next six months. The combined system would have 17 hospitals.

The exterior of Einstein Medical Center in North Philadelphia

Einstein Medical Center in North Philadelphia. (Kimberly Paynter/WHYY)

Einstein Healthcare Network and Jefferson Health are clear to merge and create a giant system serving the Philadelphia region.

Combined, the new health system would have more acute-care hospitals in the city proper than Penn Medicine, and almost as many employees. Jefferson Health started planning for this merger in 2018. Both Einstein and Jefferson had argued that a merger was necessary to save Einstein Medical Center Philadelphia, which was “a financial drain on the entire Einstein system.”

Research shows that hospital mergers lead to higher prices for patients. The Federal Trade Commission had challenged the merger, saying it would lead to too little competition for health care services in the city.

A federal judge rejected that argument late last year, saying that health insurers would still have other hospitals in the area to choose from, so insurers would not be forced to accept higher prices for patients. The ruling did not take into account what it would be like for patients.

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“The patient often gets forgotten in these economic analyses,” Erin Fuse Brown said in December. Fuse Brown, an associate professor of law and director of the Center for Law Health and Society at Georgia State University, specializes in health law and competition in health care markets.

On March 1, the FTC announced it would no longer challenge the judge’s ruling, clearing the way for the merger.

The Pennsylvania Attorney General’s Office, which had also challenged the merger, released a statement saying, “Jefferson and Einstein have committed to making investments in North Philadelphia that will go beyond what was initially proposed and are especially crucial while we face a global health pandemic.”

Stephen Klasko, CEO of Jefferson Health, said in a statement that he expects the merger to officially close within the next six months.

Both health networks told the Philadelphia Business Journal that they do not expect to lay people off or close locations. Together, they would have more than 38,000 employees and 17 hospitals in the region. By comparison, Penn Medicine has more than 43,000 employees and six hospitals.

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Einstein and Jefferson argued that Einstein Medical Center Philadelphia had been unprofitable for years, and that a merger would save it from closing as Hahnemann University Hospital did, which sparked large protests. U.S. Rep Dwight Evans made this argument as well.

Klasko, Jefferson’s CEO, said a merger would “do the right thing by the residents of Philadelphia.” The move comes after a series of mergers by Jefferson Health in recent years, including those with Abington Health and Aria Health.

However, research consistently shows that mergers lead to higher health care prices, worse patient experiences, and inconclusive effects on health care quality.

“It doesn’t paint a very pretty picture,” Martin Gaynor, professor of economics and health policy at Carnegie Mellon University and a specialist in competition in health care, said in September.

Gaynor said higher health care prices are, of course, bad for people without health insurance. But even for people with health insurance, the higher prices mean insurance companies charge more for premiums, employers pay more, and workers get paid less, according to research.

“Like everything else in health care … there’s this roundabout path that’s really not visible directly to us, but nonetheless, it does come back and end up coming out of the wallets of people who have the health insurance,” Gaynor said.

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