Steward Health System has announced a health insurance program designed to be 15 to 30 percent less expensive than comparable plans in the market. Steward is the for-profit owner of what used to be the Caritas Christi hospital system and some other hospitals in Massachusetts. This is a limited network product, requiring that care be given at one of the Steward hospitals.
Of note is this exception: Patients requiring specialized care will be referred to Massachusetts General Hospital or Brigham & Women’s Hospital in Boston, the flagship hospitals of Partners Healthcare System.
That last part suggests two options, in that MGH and BWH are not close to being the low costs providers of tertiary care in the Boston metropolitan market.
Option #1 -- Steward has decided that the marquee value of these two hospitals is worth the differential in payments compared to their competitors. That such a reputational advantage might persist in the marketplace is the direct result of a lack of transparency with regard to clinical outcomes. That is, the public has no way of knowing whether the results achieved at these two hospitals are any better or worse than the other tertiary centers.
Option #2 -- MGH and BWH have decided to discount their rates substantially from those charged to other insurance companies to get this line of business from Steward.
Knowing that there is currently an intense negotiation going on between Partners and Blue Cross Blue Shield of Massachusetts, I am putting my money on Option #1. It would take an absolute reduction in payments to the PHS hospitals to make those hospitals competitive with the other tertiary centers. As this story notes, PHS may be willing to slow down the future rate of increase of its reimbursements, but I'd be hard-pressed to believe that it is willing to reduce its current payments to a level below that received by its competitors. This is not a good time to send a signal to insurers that the current premium payments received by the two flagship hospitals are subject to that degree of haggling.