As you read or listen to this story, you might think that the firm is attempting to take on Partners Healthcare System. That is highly unlikely, for several reasons.
First, the Caritas community hospitals are not in areas served by PHS community hospitals. Their targets of opportunity, as I have noted here, are the physician practices and the independent community hospitals in those regions.
Second, the Cerberus system will need access to high level tertiary and quaternary care for those patients who need more advanced treatment than that available in the community. While St. Elizabeth's Hospital can handle some of those patients, it lacks a number of the really high-end clinical services (e.g., solid organ transplant.) It would be too expensive to create these services at St. E's.
What factors will come into play in seeking the affiliation for high acuity cases? Reputation and price. Inclusion of one or both of the two flagship PHS hospitals would have marketing value to the Cerberus accountable care organization. But what to do about the fact that the PHS hospitals and doctors have the highest rates in the region? Answer: Because of its overall financial position, PHS has the ability to shift costs to offer discounts to secure these referrals.
That misdirection may be in the works is prompted by two parts of the story:
First, a quote from the Caritas CEO:
Hospitals that compete with Caritas say that with an infusion of cash the chain could buy up local physician practices and refer all their patients to the nearest Caritas hospital. There is also speculation about which failing hospitals Caritas may buy to expand its network and market power. De la Torre shrugs at the suggestions. “We’re not looking to do it; obviously if a hospital in need is there and it works out, fine. . .
“The more competition in the marketplace, it’s better for the patients and better for the consumers, so that has been our general philosophy over the last few years,” says Partners Chief Operating Officer Tom Glynn.
Both of these are so obviously at variance with prior behavior that the only question remaining is whether the quotes have been coordinated.
If so, this hopeful thought by an insurance company executive may be wishful thinking:
“If there’s real competition between two high-quality systems, there’s a better chance of holding down the costs.”
Go back to the chart in Attorney's General's report on payment disparities. You will note that the Caritas hospitals get paid more than their community-based competitors. And, of course, likewise for the PHS doctors and hospitals.
Are we instead witnessing the creation of a new duopoly, where the chance of holding down costs over time is illusory?