Dartmouth Health, GraniteOne Health merger nixed after New Hampshire AG objects
New Hampshire Attorney General John Formella says the merger would reduce market competition and lead to higher prices.
Dartmouth-Hitchcock Medical Center in New Hampshire (Courtesy of Dartmouth Health)
Dartmouth Health and GraniteOne Health, both based in New Hampshire, are ditching their plans to merge into a single entity after objections from the state's attorney general, who said the consolidation would result in higher healthcare prices.
A report issued late last week from New Hampshire Attorney General John Formella said the merger, if it had gone through, would have turned two competitors into a single health system controlled by Dartmouth, effectively eliminating market competition and incentives to keep healthcare costs low for consumers.
"Free, fair and robust competition is critical to providing employers and patients with options for lower cost and high quality healthcare services," said Formella. "Our state has experienced significant consolidation in healthcare over the past several years, and this transaction seeking to combine two of our top four largest systems is unacceptable without appropriate protections for consumers in place."
WHAT'S THE IMPACT?
Formella said the transaction as it was proposed would have been in violation of the state's Constitution.
New Hampshire law requires the Charitable Trusts Unit to review proposals of this nature and determine whether, among other requirements, the transaction is permitted by applicable law. Formella said the proposal failed that primary requirement.
Part 2, Article 83 of the New Hampshire Constitution requires "free and fair competition in the trades and industries." In addition, RSA 356, the State's Antitrust law, and RSA 358-A, the Consumer Protection Act, all protect free and fair competition. After a fact-intensive review by the Consumer Protection and Antitrust Bureau, Formella concluded the completion of the merger would have violated the law based on those grounds.
Dartmouth CEO Joanne Conroy told VTDigger that she was disappointed by the findings of the regulatory review, but that she respected the process. She also said the changing dynamics of the healthcare landscape meant the merger made less sense than when it was first proposed about three years ago.
When the plan was first announced in January 2019, the COVID-19 pandemic had yet to occur. Now that the pandemic has re-shuffled priorities for much of the U.S. healthcare system, Conroy acknowledged that the benefits and promises envisioned at the start of the merger process "are no longer practical and realistic in the current environment."
Originally, Dartmouth and GraniteOne had planned to expand on their existing collaborations in obstetrics, oncology, rheumatology, prenatal and postnatal care, endocrinology and critical care. They also proposed reducing costs by integrating back-end services and data sharing, and by expanding specialty services.
THE LARGER TREND
Healthcare mergers and acquisitions data shows only 12 transactions recorded during the first quarter of the year, continuing a downward trend: To date, it's the lowest number of consolidations since Kaufman Hall first started tracking these statistics in 2016.
What's more, most of the 12 deals were smaller transactions, according to the firm's newest data, published in April. This trend is a departure from previous quarters, when high-priced "mega" mergers offset the declining number of deals in terms of the sheer dollars being transacted. In four of the 12 mergers and acquisitions so far this year, the smaller party's average revenues were below $100 million.
An executive order issued by President Joe Biden last summer sought to crack down on hospital and health insurance consolidations and other actions it said decreases competition and drives up prices.
Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service, the order said. It encouraged the Department of Justice and the Federal Trade Commission to enforce antitrust laws vigorously. It also said it "recognizes that the law allows them to challenge prior bad mergers that past Administrations did not previously challenge."
In the order, Biden encouraged the DOJ and FTC to review and revise their merger guidelines to ensure patients are not harmed by such mergers.
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
