Sunday, September 19, 2010

Watching the disparity grow

It isn't often that you get to see an insurance company-hospital negotiation in progress, but here is a descriptive story from SouthCoastToday.com. The key quotes:

After seven months of talks, Southcoast Health System, the region's largest employer, and Blue Cross Blue Shield of Massachusetts, the state's largest private health insurance company, are deadlocked in negotiations over reimbursement rates for care rendered to Blue Cross policy holders at Southcoast facilities.

. . . Keith Hovan, president and CEO of Southcoast Hospitals Group . . . said Friday "We're tens of millions of dollars apart."

"It would be irresponsible for us to accept what's being offered," Hovan said.

. . . McQuaide said Blue Cross is trying to operate under state government-mandated insurance rate caps.

This is what happens when state regulatory authority is applied in an arbitrary fashion. (See previous posts on this matter, starting here and working backwards.) The effect of the state's action is to increase the disparity between the rates of the highest paid providers and those whose contracts happen to come up for renewal. Check this chart to see which hospital is being paid more in the Southcoast service area. Hint, it is not Southcoast's. (Those are the hospital rates: I am confident you would see a similar pattern on the physician side, too, were you to compare the rates paid to the Eastern MA dominant provider group.)

Questions: Why should Southcoast have to justify getting rates at parity with competing hospitals and physician groups? If the negotiations take over seven months, is the system broken even more than we thought?

4 comments:

Anonymous said...

Why on earth they didn't flip that chart 90 degrees to save people neck fusions is beyond me, but what exactly is the Y axis? And Partners' Nantucket and MV are up there with Dana Farber and Children's? Goodness.

Paul Levy said...

Rates paid relative to one another is the Y-axis.

Anonymous said...

Again, the state should break up the Partners and the Children's physician contracting organizations as they bring too many PCPs and too many covered lives to the table where they can demand what they want from Tufts, HPHC and BCBS. An unfair amount of money is flowing to Partners and Childrens to the point other provider networks are left with huge shortfalls and the insurers like BCBS can't make up the difference because of how much they pay to Partners and Children's. Also, the overall cost of care would be reduced if all of these PCPs and their patients were contracted under the much lower cost community hospital IPAs.

Anonymous said...

SouthCoast -Charlton also has a much higher casemix than most of the Caritas Hospitals and all of the Partner's Hospitals except Brigham and Womens; and Mass General.