I have been reading and listening to media reports about recent deals between Partners Healthcare System and insurers in Massachusetts and experiencing a case of cognitive dissonance. From the reports, you would think that PHS is reducing the rates it gets from the payers.
Well, that just shows the power of PR spinmeisters. Let's start by recalling that PHS has used its market power for well over a decade to extract payments from insurers that are dramatically above those received by other hospitals and physicians. Those out-of-market rates were built into the contracts that were to extend a year or two into the future, and the annual increases included in those contracts were likewise out-of-market.
So, what has happened is that PHS has agreed to lower the rate increase for the last year or two of those contracts and for the succeeding years to something in the 2-3 percent range. It then claims to produce "savings" of $45 million over two years for Tufts Health Plan and $80 million annually for Blue Cross Blue Shield.
These "savings" mask two phenomena. First, the base upon which those 2-3% rate increases will occur remains substantially above the rates paid to other hospitals and doctors. Second, the rate increases that PHS has received are no lower, and sometimes higher, than those granted to other systems whose base rates were already lower.
In short, the disparity between the PHS rates and those of other providers will not drop an iota as a result of these deals, and is likely to increase.
The only good thing about these announcements is that they provide, for the first time, a sense of the tax imposed by PHS on the region's health care budget. We now see that it can forgo what it has characterized as $345 million in future revenues and still maintain its financial health. Looking back over the past decade, it is not unreasonable to posit that this system has added in the range of two billion dollars to the health care costs paid by the state's businesses and individuals. The newly announced deals change little in that regard, extending that hidden tax for years to come.
Thanks for nothing.