Sunday, September 18, 2011

Two options for the Steward insurance plan

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.


Anonymous said...

It's option 1. Let the public choose, that's what an open market is, this isn't socialism.

Paul Levy said...

Huh? What do you mean?

Susannah said...

Paul, what do you think about the report in the Globe last week (sorry, we New Yorkers are slow to catch up with Boston papers) that the Partners/Blue Cross deal will involve lower rates of premium increase? Does that, if accurate, lend more weight to your option #2?

Paul Levy said...

Only in Boston could a hospital system with rates far in excess of all others declare a public relations victory by saying that its rates will go up at 3% instead of 6%. Other hospitals that signed their contracts in the last year with BCBS, whose rates were already lower than Partners, received rates below that 3% figure.

So, no, option #1 remains more likely.

Anonymous said...

I find it peculiar that a health organization built around community care, which is offering an insurance plan meant to save money, should pick the most expensive tertiary hospital, by an order of magnitude, as its referral center. This makes absolutely no sense to someone outside Boston. Why didn't they just put it out for bid?
This seems like an example of why health care will never heal itself without grownup supervision - wherever on this earth that may be found.

nonlocal MD

Anonymous said...

Talk about someone else making your healthcare decisions for you! If you buy Steward's health insurance you absolutely cannot go out of network unless they decide to refer you to a specialist at MGH or the Brigham. It doesn't sound like the patient will have any say in his or her own diagnosis or treatment.