Sunday, April 20, 2014

The Butterworth and Blodgett merger - was it good for West Michigan health care consumers?

In the late 1990s the two largest Grand Rapids hospitals, Blodgett and Butterworth, merged to form Spectrum Health. Prior to the merger, both hospitals had been profitable, efficient, and reputable care centers strongly competitive for the West Michigan healthcare market. When the planned merger became public knowledge, there was significant concern that this would create a near monopoly of services  and the cost to the public for healthcare services would rise significantly. The Federal Trade Commission became involved, and "had alleged in an administrative complaint that the merger of Butterworth Hospital and Blodgett Memorial Medical Center would violate antitrust laws by substantially reducing competition in the market for acute-care inpatient hospital services in the Grand Rapids area."

In September of 1997, the FTC its administrative challenge, and the Spectrum merger of Grand Rapids hospitals proceeded. Since then Spectrum Health has only grown larger with the addition of the Fred and Lena Meijer Heart Center, Helen DeVos Children's Hospital, and the Lemmen-Holton Cancer Pavilion. Other health related education and research centers such as the MSU College of Human Medicine Secchia Center, the GVSU Cook-DeVos Center for Health Sciences, and the Van Andel Institute have since been built, inspiring the nickname "the Medical Mile" for this area of downtown Grand Rapids.

It's clear that for patients needing "acute-care inpatient hospital services" in West Michigan the resources are available and substantially better than they were twenty years ago. Spectrum Health consistently earns high ratings for its clinical care from healthcare ratings organizations like HealthGrades. I have toured Spectrum's laboratories with my cub scouts, and they are quite impressive. The limited experience I've had with Spectrum's inpatient and outpatient care has been consistently high quality as well.

From the real estate standpoint, the Medical Mile has been a godsend as well, especially after the 2008 economic crisis and the subsequent collapse in real estate values. A great deal of housing downtown has been built, renovated, or is planned in order to accommodate healthcare workers seeking homes, apartments, or condos near to work. All of this construction has been a job creator as well, and the Grand Rapids economy is one of the most vibrant in the state.

The question of Spectrum's provision of affordable healthcare is more complicated, however. As Americans as we've seen healthcare become more impressible and more capable of intervention and healing, we've also seen its cost spiral out of control and our own ability to pay for it - either directly or through insurance, decrease significantly over time. Separating that general trend from any increase in the price of services resulting from the merger is, of course, complex.

Before the merger, the Blodgett and Butterworth agreed to abide by a "Community Commitment" and not to raise prices, and the federal court overseeing the merger uncharacteristically allowed it based on these promises. An assessment of costs by FTC officials only three years after the merger found that, though Spectrum had followed the community commitment they agreed to, the resultant savings the hospital achieved as a result of the merger was less than expected and not entirely attributable to the merger. The conclusion they reached was that the federal court had erred in their decision and that "self-regulation is an inadequate substitute for competition."

Further complicating matters is the fact that Spectrum has not only become the area's largest healthcare provider, but also one of the largest insurance payers through it's 95% ownership of Priority Health. When the same large business entity gives with one hand and takes with another, the price lowering protection healthy competition offers is bypassed. Additionally Spectrum has acquired numerous other hospitals in small cities across West Michigan as well as several physicians and practitioner groups including MMPC.

In 2011 the Grand Rapids Business Journal accused Spectrum of violating its merger compact and of participating only with insurance networks that were in their own self-interest, sidelining senior citizens with medicare plans and patients with other small insurance carriers. Spectrum has also raised prices numerous times. It's difficult for the average user to determine whether these price raises were in line with increased costs, inflation, price raises at similar sized hospitals nation-wide because healthcare prices in general are so opaque and have become utterly unaffordable for the average person, with or without insurance, government subsidized or not.

Overall, the jobs that Spectrum Health created in this area and the revitalization it brought to the Medical Mile have been a good change. From a healthcare perspective, it's more of a mixed bag. It's wonderful to have access to life saving medical care in our community and a reputable facility with significantly lower mortality rates serving the people of West Michigan. But if it bankrupts us to take advantage of that healthcare, are we overall better off?