NH Public Policy
New Hampshire Center for Public Policy Studies

Hospital Community Benefit and Market Changes in New Hampshire

Executive Summary

Author: Steve Norton

Date: July 17th, 2017

New Hampshire hospitals have financial responsibility for almost $5.7 billion in total assets as of 2014, the most recent year for which complete audited financial data is available.  Of that $5.7 billion, almost 10% of those assets have been a part of hospital merger activities (Memorial, Upper Connecticut Valley, Weeks, Littleton, Androscoggin, Alice Peck Day, Lakes Region and Franklin hospitals). Catholic Medical Center, Huggins Hospital, and Monadnock Hospital (accounting for another $500 million in community assets) and Wentworth Douglass Hospital ($500 million) recently had merger requests before the Attorney General’s office. Other conversations – principally Mary Hitchcock and Elliot Hospital – represent more than $2 billion in additional assets potentially affected by merger activities. Together, these affiliation activities account for 2/3rds of the assets of New Hampshire’s 24 non-profit hospitals.    

The Charitable Trusts Unit in the New Hampshire Attorney General’s office has responsibility for monitoring these affiliation activities, and is required to ensure that:

“The assets of the health care charitable trust and any proceeds to be received on account of the transaction shall continue to be devoted to charitable purposes consistent with the charitable objects of the health care charitable trust and the needs of the community which it serves” - Section 7:19-b

To that end, the Attorney General’s office requested a review of existing data and information on the types and level of community benefit currently being provided in the state, and by the 4 hospitals currently engaged in merger discussions – Wentworth Douglass, Catholic Medical Center, Monadnock and Huggins.  In addition, this analysis provides information on what the academic literature suggests the impact of hospital consolidation could be on community benefit. 

Major Findings   

The NH Department of Justice and the Internal Revenue Service offer a rich – if relatively imprecise – body of data on community benefit that could be used to both increase the transparency of conversations regarding community benefit and provide a means for holding hospitals accountable for both the level and type of community benefit provided.   However, hospitals are given wide latitude in reporting community benefit, which makes comparison across hospitals and over time difficult.  Providing clearer instructions to hospitals on reporting requirements could result in data which the attorney general could use to track community benefit across merging hospitals.

The literature regarding hospital consolidation suggests policy makers should be cautious about claims that mergers would automatically increase value in the health care system (either through improvements in price, quality or both).   There is a robust – albeit dated - literature suggesting that reductions in competition and hospital consolidation result in increases in price. 

More recent research, however, suggests that not all mergers are the same and that more recent mergers may differ in key respects to those that have historically been evaluated.   Specifically, the nature of the markets, clinical service changes, and geography matter on the impact on price.   This emerging literature suggests that mergers involving hospitals in different markets and geographically far from one another have no impact on prices.  The literature on the impact of consolidation on quality and other community benefit provision is less robust, generally suggesting no relationship between consolidation and quality or the level of overall community benefit provision. 

Finally, specific to the mergers currently before the Attorney General’s office, the Charitable Trusts Unit will have a difficult time assessing the impact of mergers without additional information not currently provided.  As mentioned, the literature regarding hospital consolidation – and associated changes in market competition – suggests that the claims regarding such activities – reductions in prices and increases in quality, for example – are sensitive to definitions of markets and services that would be affected.  These are not currently defined in the documents provided to the Attorney General’s office. 

Policy makers and boards of directors will have a hard time understanding the potential impact of a merger without additional information on the actual plans for integration, including the degree of clinical integration that might occur.  The Attorney General’s office, likewise, would find it impossible to judge – as it is required to do – the impact of mergers without clearer information on how the merger will actually impact clinical services. 

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