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

Tuesday’s announcement that Lehigh Valley Health Network and Philadelphia-based Jefferson Health plan to merge has the potential to disrupt health care throughout the region.

If the merger goes through, it would result in the second largest health network in the state, after UPMC in western Pennsylvania. It includes a national research university, an expanded non-profit health plan, 30 hospitals, more than 700 outpatient locations, and more than 62,000 employed faculty, clinicians and staff throughout eastern and southern Pennsylvania. New Jersey. Annual revenue is estimated at $12 billion to $14 billion.

But what exactly will be the effect of the merger? To find out, The Morning Call spoke with Chad Meyerhoefer, a professor of economics at Lehigh University and expert on the business of health care.

Meyerhoefers said the merger is likely to go through without significant opposition from regulators because LVHN and Jefferson do not compete within 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 visible right away, Meyerhoefer said.

These health systems are huge. It’s like steering an aircraft carrier; if you want to change direction it should happen slowly, he said. It will take some time before this merger is approved and then it will take more time for those health systems to actually begin to integrate the two units.

Insurance is one area of ​​health care where consolidation could slow things down for the Lehigh Valley.

Both LVHN and Jefferson touted the benefits of integrating Jefferson Health Plans, Jeffersons noncommercial insurance marketplace, which offers Medicaid, Medicare Advantage, Affordable Care Act Marketplace and CHIP plans, into LVHN’s existing health care operations. CEOs of both networks say the program will improve care for underserved populations and reduce the cost of care.

There is no equivalent or comparable program to Jefferson Health Plans in the Lehigh Valley, although it is not the only one of its kind in Pennsylvania. It is a well-established program, having 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 under Jefferson Health Plans, which most are on Medicaid.

Meyerhoefer said the hospitals do not make money from Medicaid or Medicare. With much of the country’s large baby boomer population switching or already switching to Medicare, and many with serious health care needs and chronic conditions, hospitals have actually lost money on care.

But Meyerhoefer said hospitals can make up for those losses by being more efficient, and by treating a large volume of Medicaid and Medicare patients.

Big volume at a low reimbursement rate, that’s better for revenue if you can be very good at providing services to those patients, and it’s also good for the patients, because they get better access, Meyerhoefer said. .

He said Medicaid patients as well as the underinsured and underserved in particular would benefit greatly by getting plans from Jefferson Health Plans, in terms of continuity of care and better outcomes. -access to outpatient care services. In particular, for those on Medicaid, it can be difficult to find outpatient providers who accept their insurance. But if the company providing the Medicaid insurance also owns the outpatient care providers, this problem does not exist.

They can use their size and their administrative sophistication to begin offering these plans to Medicaid patients and plans on the health insurance exchanges to provide comprehensive insurance to patients who are often on and off on insurance and have a more limited ability to pay, Meyerhoefer said.

This reduces unpaid care, which improves continuity of care. And if they are big enough, they can take advantage of the volume of patients they see to maintain revenue.

However, those with private plans may pay more. Meyerhoefer said consolidation reduces competition and larger networks can put more pressure on insurance companies for better compensation and rates, ultimately leading to higher premiums for in private insurance plans.

That’s borne out by several studies, including a report by the Kaiser Family Foundation that found that some mergers, especially those that bring together health systems operating in different markets, have led to price increase from 6 percent to 17 percent.

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

The union representing nurses across the region, including those at LVH-Pocono, also expressed concern.

“Research shows that mergers can increase healthcare costs for patients by as much as 12% without a corresponding increase in the level of patient care,” said Matt Yarnell, president of SEIU Healthcare PA, in an email. “In addition, highly concentrated health care markets can lead to lower salaries and staffing for front-line workers. … We want to ensure that patients and front-line workers remain at the center of -this conversation. While the growing trend of mergers and acquisitions raises many questions and concerns, we look forward to working with Lehigh Valley and Jefferson University if this transaction moves forward.”

In an interview on Tuesday, LVHN CEO Dr. Brian Nester that the merger will make better care more available, ultimately lowering the cost of care for patients.

If you provide better care, you will make it more available, [if] you’ll be engaging patients who will have better outcomes and won’t need hospital services or unnecessary therapies which will ultimately lower the cost of care, he said.

An LVHN spokeswoman added that it was too early in the process to comment on a “hypothetical” based on other states and regions.

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

It is not known how the merger will affect staffing, particularly administrative, at the health networks, and what if a rebranding occurs.

The merger, however, will certainly change the dimensions of the existing rivalry between St. Lukes University Health Network and LVHN, although Meyerhoefer said in the short term he doesn’t expect much to change because there are still two competing entities in the region.

After the announcement, Rick Anderson, president and CEO of St. Lukes, released a statement saying the network has “always respected” LVHN as a “vigorous local competitor,” going on to say “St. Lukes will continue to focus on continuing to be the lowest cost provider with highest quality of care.”

Meyerhoefer said the integration of Jefferson Health Plans into LVHN’s operations will empower the new health network with 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 that St. Lukes the Temple St. Lukes School of Medicine as a major 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 Southern Florida. But Thomas Jefferson University belongs to Jefferson, and Sidney Kimmel Medical College is revered.

“I’m sure there will be some branding that promotes academic credentials and changes consumer perceptions,” Meyerhoefer said.

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