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N.H. Legislature considers giving attorney general FTC’s power to review hospital collaborations

Legislators are considering a bill to give the attorney general the power to review hospital collaborations, which hospitals say could help them survive in today’s tumultuous health care market.

Supporters say the bill could prevent the state from facing a sudden bankruptcy at a small community hospital, like the one that blindsided North Adams, Mass., last week.

“The notion that we can all do all things and compete and serve our communities is probably not the model that will be successful for everyone going forward,” said Steve Ahnen, executive director of the New Hampshire Hospital Association.

North Adams is one example Henry Lipman, chief financial officer of LRGHealthcare in Laconia, brings up when he talks about this bill. The other is much closer to home.

Four years ago, Concord Hospital and LRGHealthcare launched REACT – the Regional Early Activation Care Team. Lakes Region patients having a serious heart attack are now taken directly to Concord Hospital’s cardiac catheterization lab for a life-saving stent or other surgery.

Before, the patients were first evaluated at Lakes Region General Hospital or Franklin Hospital, and if they needed surgery, transferred to Concord.

The change is saving lives and hundreds of thousands of dollars because patients are getting to surgery faster, and their insurance companies are no longer paying for two emergency room visits.

But Concord Hospital is getting all of the remaining revenue, and the insurance companies are getting all of the savings. LRGH, meanwhile, is left trying to pay for other necessary services, such as mental health care, with less revenue, Lipman said.

“Certain things produce positive margins and certain things don’t,” Lipman said. “We gave up a positive-margin service because it was the right thing to do for our community. . . . But how many times can we do that and still support other things?”

Sponsored by Sen. Bob Odell, a Republican from New London, the bill would give the state attorney general authority to review cooperative partnerships between hospitals and other health care providers.

The Senate passed the bill on a voice vote, and it’s scheduled for a hearing at the House Finance Committee on April 15.

‘Lots of ramifications’

Odell and hospital officials say the program would bring the review to an authority more familiar with New Hampshire’s rural landscape, and give the public more opportunities for input than the Federal Trade Commission’s current process, based in Washington, D.C.

Opponents say the proposed process undermines competition and could drive prices up.

Sen. Andy Sanborn, a Bedford Republican, said he’s worried the bill is moving too quickly.

“We need to recognize this is a large decision with lots of ramifications, and we need to make sure we do this carefully. I’m concerned we’re rushing into something the ramifications are impossible to unwind if we make a mistake,” he said.

New Hampshire’s health insurance companies are also worried that allowing hospitals to collaborate could tip negotiations over payments too far in the providers’ favor. And they point to multiple mergers, partnerships and affiliations that hospitals, mainly Dartmouth-Hitchcock Medical Center, are pursing without the law.

Currently, there are two options for hospitals looking to coordinate: buy, or be bought.

“For a state that’s based so much on local control and local decision making, those aren’t two really good options,” Lipman said. “We’re not looking to take over the world. We are looking to try and provide for our community the best we can.”

That will be the test, for the bill if it becomes law and for the hospitals going before the attorney general for approval.

Minnesota, Colorado, Kansas and Oregon have adopted similar laws, called “state action immunity.”

State money not required

Like those four states, Odell’s bill requires annual reporting by hospitals approved to collaborate. His bill also calls for $300,000 from each acute care hospital to start the review program, and $5,000 per application for review, so the program doesn’t require state money.

The FTC doesn’t cede its power in cases of state action immunity laws; federal regulators can seek a judge’s permission to review any merger or collaboration. But if the state creates regulations to compensate for the loss of competition and actively supervises the resulting collaborations, the state review can substitute for the federal one.

“They want to make sure that it’s being judged ahead of time, and that you’re following up, always looking out that you’re decreasing costs and increasing or maintaining access,” Odell said.

Sanborn said he’s concerned if the bill complies with the state action doctrine by creating an initial review and requiring annual reports that there’s no recourse if a consolidation or collaboration decreases access or increases costs.

“Knowing how many other challenges are facing our federal government today, if a state has established a process by which to review collaborations and consolidations, and the Legislature weighed in, the feds would say, ‘We should respect that unless there was a gross overstep,’ ” he said.

Waiting for such an overstep to happen, then trying to unwind the collaboration, could be impossible, he said.

But the distribution of services might continue to become even more irrational under the current competitive model, Lipman said.

In the 30 years he’s worked at the Laconia hospital, the number of babies delivered there has fallen by half, he said. Franklin Regional Hospital and Huggins Hospital in Wolfeboro closed their obstetrics wings.

In 30 more years, with the state’s aging population, will there be enough births to support an obstetrics wing in Laconia and at Speare Memorial Hospital, just 30 minutes away in Plymouth?

If one hospital took over, as with the cardiac surgeries, would the other lose revenue that supports other necessary but unprofitable departments?

“Having a conversation with Speare saying, ‘You do this and we’ll do that,’ would be better for the region, but we can’t do that, it’s illegal under the regulations that only consider pro-competition as the best regulation,” he said.

Monopoly in mind

Those pro-competition regulations are designed with the goal of preventing monopolies. As long as both Laconia and Plymouth offer obstetrics, theoretically both hospitals are spurred to improve their services to draw more customers.

If there are savings to be had in consolidating, the hospitals will need to prove they’re sharing the rewards of the anti-competitive laws, said Steve Norton, executive director of the New Hampshire Center for Public Policy Studies.

“There’s nothing innately wrong with a monopoly unless an organization is using its monopoly power to take more value out of the system than a normal market might create – to price gouge or provide lower quality care,” Norton said.

“When you make moves toward concentration, like this legislation is contemplating, you want to make sure you increase the incentives to give some of the value back, to share the benefits with the broader community. . . . It will be the boards and hospital CEOs who set those policies and move forward, and that’s what we’ll need to watch for.”

This article has been updated to more fully reflect the views of New Hampshire insurance companies and others who are opposed to the proposed bill, and to clarify how the Federal Trade Commission would review cases in states with state action immunity laws.

(Sarah Palermo can be reached at 369-3322 or or on Twitter @SPalermoNews.)

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