Will a merger save struggling Einstein Hospital or increase costs for patients?

Updated 11:57 a.m.

Einstein Healthcare Network, with hospitals in Philadelphia, Elkins Park and East Norriton, says it risks cutting critical services or even closing, leaving vulnerable patients without care, unless it merges with Thomas Jefferson University.

The Federal Trade Commission and Pennsylvania’s attorney general counter that a merger would lead to less competition with a smaller number of more powerful players, and want a federal judge to put the merger on hold until there is a trial.

Both sides will present their lists of witnesses in federal court this week and next week.

Einstein Medical Center Philadelphia, the Einstein network’s flagship in North Philadelphia, serves many low-income patients and patients without health insurance. In a pretrial memo filed earlier this month, Einstein said that more than 86% of the patients at the hospital rely on Medicare, Medicaid, or other government programs, and that patient mix threatens its survival. It argues that’s why this merger is needed.

Einstein argues that the hospital “is unprofitable, has been for years, and is a financial drain on the entire Einstein system,” and that blocking the merger would be to “ignore the clear risk to the health and welfare of North Philadelphia residents without commercial health insurance.”

The hospital got $118 million in federal relief money under the coronavirus rescue package. Einstein says that the network has been losing money since 2017, with annual losses up to the millions of dollars, and that it does not have enough money to maintain its facilities.

Einstein and Jefferson declined to comment for this article, saying they do not comment on pending litigation. The Pennsylvania Attorney General’s Office did not respond to a request for comment by deadline.

Since 2015, Jefferson has merged with Abington Health and Aria Health, and acquired a controlling interest in Rothman Orthopaedic Specialty Hospital. Jefferson and Einstein each own 25% of the insurer Health Partners Plans; earlier this year, the Philadelphia Inquirer reported that Jefferson was trying to take control of the insurer.

The COVID-19 pandemic has hit hospitals hard. In Pennsylvania, they had $5 billion less than expected from March to July, according to the Hospital and Healthsystem Association of Pennsylvania. Federal relief funding added up to around $2.8 billion, so it did not cover all the losses, the organization says. Earlier this year, Einstein Healthcare Network had to furlough workers.

When Hahnemann University Hospital shut down last year after its owner declared bankruptcy, Philadelphians got an up-close view of what the end of a major health care facility means: loss of a large trauma center and emergency services; hundreds of doctors-in-training scrambling to find new jobs. In July 2019, then-Democratic presidential candidate Bernie Sanders rallied in Philadelphia and used the hospital’s closing as an example of why there should be a single, national, Medicare-for-all system.

Back in late February, Democratic U.S. Rep. Dwight Evans, whose district includes parts of North Philadelphia as well as Center City and West Philadelphia, called Hahnemann “a canary in a coal mine” for more hospitals closing, and said it is outrageous and ill-considered for the FTC and the Pennsylvania attorney general to try and block the merger between the Einstein and Jefferson health systems.

“Hahnemann was in my district too. Hahnemann is gone, so what I’m trying to do is prevent another Hahnemann, and [the FTC] can’t assure you that this will not occur,” Evans said. “The FTC … are disconnected from the immediacy of the community … don’t take that lightly.”

Evans added that 10 hospitals in Philadelphia have closed over the past 20 years, and that he does not want more closures, especially during a pandemic.

A part of the community now, but post-merger?

When he was a teenager, Evans said, he worked at the cafeteria at Einstein Medical Center. People in his district know and trust the hospital. Earlier this year, Einstein patients launched a crowdfunding campaign to support the hospital.

Tarik Khan, a family nurse practitioner, also thinks of Einstein Philadelphia as a community institution.

His brother was born there, and his mother worked there as a nurse. Khan, who does not work for Einstein, said he could see how a merger could lead to patients getting better care with more communication between primary care providers and specialists, but he also has a lot of questions:

• Will Einstein stay a community hospital, where everyone knows each other, after a merger?
• Nurses at Einstein are part of a union, so what will happen to the union protections they fought for?
• What would happen if the merged hospital network controls 60% of short-term care beds in North Philadelphia and 70% of inpatient rehab beds in the Philadelphia area, as the FTC and Pennsylvania attorney general maintain?

“I don’t want my patients to lose access to care that they have,” Khan said. “As a health care provider, I don’t have a lot of experiences where my patients, they can’t see this specialist or they can’t see that specialist because they don’t take their health care … but if you have one hospital network that’s controlling the majority — 60% of inpatient beds, and 70% of rehab beds — things can change.”

Einstein and Jefferson dispute those figures in their pretrial memo, saying the FTC analysis relies on “gerrymandered” views of the health care market and does not account for other hospitals in the region that would serve as competitors.

More hospitals have merged in the past couple of years, so there is quite a bit of research on what happens afterward, said Martin Gaynor, professor of economics and health policy at Carnegie Mellon University and a specialist in competition in health care.

“Unfortunately, it doesn’t paint a very pretty picture,” Gaynor said.

Hospitals merging leads to higher health care prices, according to research from Gaynor in 2012 and a 2018 analysis from researchers at the University of California Berkeley.

Of course, Gaynor said, that’s bad news for anyone who does not have health insurance and doesn’t have an insurer negotiating prices on their behalf, but it also affects people whose employers and health insurance providers pay for care. He said the evidence shows that when health insurance companies have to pay more, their premiums go up, employers pay more for those premiums, and workers get paid less than they would have otherwise.

“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.

Hospital mergers and acquisitions also lead to worse patient experiences, with no significant changes in the rates at which patients get sent back to the hospital or die, and inconclusive effects on health care quality, according to research published at the start of the year by the New England Journal of Medicine.

One of the co-authors, health economist Leemore Dafny, testified before a House subcommittee in 2018, saying that although each case should be evaluated on its own merits, “in a nutshell, research to date suggests that consolidation in the health care industry, on average, has not yielded benefits to consumers.”

Gaynor said you can look to the dysfunctional health care industry in Pittsburgh a few years back as “a poster child for the rest of the country on what you don’t have to have happen.”

In 2012, Highmark, a health insurance company, bought a health network so it could provide health services and insurance coverage. That also made Highmark a competitor to UPMC, which also provides health services and insurance coverage. It started a bitter feud between the two giants that would have led to patients with Highmark insurance losing access to UPMC providers if not for a deal reached a few days before a deadline, after the Pennsylvania attorney general took the matter to court.

“If there had been multiple players instead of a market dominated by a single large entity on both sides, this would have been far less likely,” Gaynor said.

As hospitals continue to merge, regulators say they will be more critical of them. Last month, the California attorney general proposed a bill that would allow that office to review health facility transactions before they happen.

Earlier this year, the FTC said it will monitor mergers more closely. In 2017, two hospital systems in Chicago lost a court fight with the commission and called off a merger.

Claire O’Hanlon, an adjunct policy researcher at the Rand Corporation who specializes in health care systems, said the FTC is a law enforcement agency with limited resources, so it has to use those resources for whatever will have the biggest impact.

“Sometimes, the biggest impact is by blocking something that they think is going to truly be harmful to a community, or that they can use as precedent to stop other potential things elsewhere.”

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Editors note: This article was updated to provide more current figures for federal relief aid to Einstein Medical Center Philadelphia.

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