Friday, March 19, 2010

What more do you need to know?

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?


Michael Pahre said...

You didn't use the word, but it sure sounds like you are suggesting that Glynn lied at the hearing. Or at least is deliberately misleading the lawmakers.

Is that a fair reading of your remarks?

Anonymous said...

In all fairness, the Globe also quotes Partner’s COO: "{Dr/Mr. Glynn}said yesterday the organization realizes it’s too costly and is working to become less expensive. …..he said Partners is working to trim expenses by better managing the care of very sick patients to reduce hospital stays and by freezing salaries for some employees.“Do we have a cost problem? Yes. Are we working on it? Yes. Are we working on it hard enough? No.’’ he said.

Quotes aside, it appears Mass has 2 problems:
a)the payment disparity and lack of gazongas of the insurers;
b)the overall unsustainable rise in health care costs, which the Globe attributes at least partially to MassHealth. A may contribute to b, but apparently does not account for all of it.

Perhaps the state would benefit from a Maryland-type system. Clearly, any price controls must be part of a comprehensive rate control system such as Md’s, not just slapped-on caps on certain parts of the system. However, be warned that game-playing even goes on in Md. – with the dominance of Johns Hopkins as exhibit A. There are other disadvantages to Md’s system also. Massachusetts, be careful what you wish for.


Dianne J. Anderson, President & CEO Lawrence General Hospital said...

Thursday, March 18, 2010
In a value-based health care marketplace, the winners might not be obvious

As President and CEO of Lawrence General Hospital for only the past seven months, I was very happy to be invited to participate in the Health Care Finance and Policy Cost Containment Hearings as a panelist today at 2pm. The Hospital has a great story to tell about providing high quality care and outcomes, in a cost effective manner. Unfortunately, in our current health care marketplace, high value takes a back seat to market clout, in every instance.
If you are unfamiliar with the Hospital, Lawrence General is a 189 bed hospital with a nationally- recognized family practice residency in partnership with the local community health center that has vastly improved access to primary care in the City of Lawrence. The Hospital provides a consistently high standard of care, has a Level III Trauma Center accredited by the American College of Surgeons and has the 3rd busiest emergency center in the State, with 78,000 visits. Lawrence General is a disproportionate share provider and serves the largest Medicaid and underinsured population per thousand in the State. The Hospital also collaborates with one of the best organized health centers delivering comprehensive primary care to thousands of patients annually.
Unfortunately, when it comes to rates of payment for the care the Hospital provides, the rate disparities between Lawrence General and other providers, as depicted in graphs in the Attorney General’s report on the Division of Health Care Finance and Policy website, are stark.
The disparities in pricing, which threaten efficient, high quality, disproportionate share providers like Lawrence General desperately need to be addressed by any new policy making under consideration - before it is too late. Now that we have pricing transparency it is imperative that policy makers act on this information and make certain we have a value-based health care marketplace.

There is no reason why physicians with the same credentials and experience, providing care at hospitals with no differences in quality or outcomes, should be paid such vastly different prices.
The Attorney General’s examination of health care cost trends has proved that there is NO correlation between price and quality of care.

We now know that better rates are not determined by quality of care or outcomes. Our health care pricing is biased in favor of those with market clout rather than those who are cost effective and high quality.

If we had a value-based health care marketplace today that rewarded efficient providers, Lawrence General would be among the most successful hospitals in the State, because we are cost effective and high quality. Lawrence General Hospital is a model for how we contain rising heaIth care costs. It is inexcusable that our hospital and physicians would be paid significantly lower rates for the same services.

Anonymous said...

Exactly what is the solution recommended by the hospital CEO's? (excluding Partners' of course)

nonlocal MD

Keith said...

I ask simply, do you feel that BIDMC is underpaid by insurers? Partners is overpaid? or both?
Your blog comments point to both, but I'd like to know how you feel today.

Gary Gibbons, MD, President and CEO, Quincy Medical Center said...


These cost hearings are helpful in shining a light on the inequities of reimbursement in the private sector, but don't you find it ironic that the state hasn't acknowledged its own role in this?

State-set reimbursement rates for Medicare and Medicaid are also significantly inequitable across DSH hospitals which serve disproportionately large percentages of Medicaid, Medicare, and other government-paid patients.

Why is health care delivered to the poor outside of Boston reimbursed at such lower rates by the state? Why does the state feel that hospitals with significant reserves need so much more in reimbursement than community DSH hospitals?

Whether prompted by market share or political clout, these inequitable payments by both private and government insurers severely weaken our overall health care network. If the goal of these hearings is transparency, let's hear it all.