The State House News Service, writing about yesterday's hearings on health care and insurance cost trends, offers the following summary of one witness' comments:
Asked whether he agreed with Attorney General Martha Coakley's conclusion that costs charged by certain hospitals for the services they provide aren't linked to the quality and outcomes for patients, Partners HealthCare Chief Operating Officer Thomas Glynn said, “No.” Glynn, speaking at a state hearing on health care costs Thursday, said the most recent contracts signed between Partners and Blue Cross Blue Shield only provided for cost increases that matched medical inflation. Glynn said, “It's a little bit of a mystery to our physicians how our contract is driving up these increases.” Glynn suggested that the higher rates Partners hospitals charge to health insurers are driven, in part, by inadequate payments from the government for Medicare and Medicaid services.
It has been known for a long time that there are disparities in reimbursement rates in Masachusetts that are correlated mainly with market power. It has also been quite clear that these disparities are not related to differences in quality. Yet, the Attorney General's recent report and the testimony submitted by the state insurers under oath quantify this in manner not seen before. The kind of denial contained in the remarks reported above has no substantive support. For example, if we were to assume that all the BCBS contracts signed in the last three years had the same rate of inflation contained in the Partners' contract, the disparity between PHS and other providers would have grown simply because the base upon which that increase is applied at Partners started at a higher level. (To the extent other providers were not offered those same rates of inflation, the disparities grew even more.)
The State House News Service also said:
Andrew Dreyfus, executive vice president of health care service for Blue Cross Blue Shield of Massachusetts – the state's largest insurer – said he doesn't believe his company has the market power to eliminate disparities in the way doctors and hospitals are paid for their services.
As I note below, the Attorney General has rightly found that these disparities -- which exist in both the fee-for-service and capitated reimbursement worlds in Massachusetts -- have led to and will lead to greater market concentration by those dominant providers. As it has in the past several years and will in the future, this causes a continuing impetus for higher rates of medical cost inflation.
Several months ago, a senior executive at Blue Cross told me that the rapidly expanding utilization of services for patients in the Partners system, compounded by the higher rates being paid to that system, was "murdering" Blue Cross' bottom line. This person actually asked me what could be done about that problem. My answer was that a transparent presentation of the differential in rates was the only way I could see to create a sufficient moral imperative in the political and business environment to force a change in this pattern of behavior.
The Attorney General and the Division of Health Care Finance and Policy have now provided that moral framework. But those in the hearing yesterday made clear that a change in business practices is dependent on actions by the state government. As Andrew put it, even the dominant insurer (which has more subscribers than all other insurers combined), does not believe it has has the market power to eliminate disparities.
Thus far, though, there has not been proposed legislation or regulatory activity that addresses this problem. Who will step up in the body politic to propose and demand such change?