Sunday, July 20, 2014

Professor Sager offers lessons in market power

Boston University Professor Alan Sager has filed comments with the Trial Court about the proposed settlement between the Attorney General and Partners Healthcare System.  They are cogent and powerful.  (I include them here even though the AG has recently asked for a delay in the court proceeding until after the primary election in September.)  If you have filed comments, please send them to me at goalplayleadership [at] gmail [dot] com.  Thanks!  Some excerpts from Alan's:

I’m concerned that the agreement is not in the public interest.

First, since 1993, Partners has claimed that its various mergers and affiliations (which, for convenience, I’ll call “combinations”) sought to save money, and that they would save money or have saved money. But Partners has adduced no credible evidence to support those claims. Therefore, no one should believe Partners’ assertions that still more combinations will save money.

Second, Partners has claimed that its combinations would improve quality of care. But it has provided neither credible evidence of past improvements in quality attributable to its combinations nor plausible arguments that its combinations are essential to future improvements in quality.

Third, Partners has generally argued that its various combinations would be good for the public. I contest this assertion and have long argued, with colleagues, that these combinations were designed mainly to benefit Partners by boosting the prices it is paid for care and thereby increasing its revenues, and thereby liberating it to spend and grow without fear of price competition.

The original Partners combination, with successive accretions, help to explain why the cost of Massachusetts hospital care specifically and Massachusetts health care generally has continued to rise. By reducing competition, Partners’ combinations have helped to deepen the financial anarchy that allows health costs to rise. When anarchy prevails, the strong hospitals profit, and insurance premiums rise.

Addressing the AG, he says:

You have negotiated and publicly trumpeted a set of apparent constraints on Partners’ behavior. But you offer no convincing evidence that these constraints on behavior are likely to be practical, effective, or even enforceable. Have they been tried elsewhere? Did they work? How often? Without this evidence, it is likely that the constraints you have negotiated will actually enable Partners to garner substantial revenue increases. Right now, the constraints look like feeble regulatory Lilliputians, unable to restrain Partners’ Gulliver.

Instead of providing evidence that the negotiated constraints on Partners’ behavior are likely to work, you have focused on the procedural superiority of negotiating settlements over going to trial. You thereby trumpet form over substance—negotiating a deal with Partners instead of providing evidence that those constraints are likely to be enforceable and effective in restraining growth either in the prices paid to Partners’ hospitals and doctors, or in the total revenue they garner.

Despite the absence of evidence to support Partners’ claims that its consolidations save money and improve quality, and despite the absence of evidence to support the enforceability and efficacy of your negotiated remedy that allows substantial new consolidations, you assert that your negotiated settlement will be financially and clinically beneficial to the people who need or pay for health care in the Commonwealth. Sadly, this assertion is not credible.

Attorney-General Coakley, I don’t doubt for a second that you mean well. I believe that you hope to get the best deal from Partners that you can, given its great political influence. But I think the time has come to recognize that your negotiated agreement is not in the public interest, and to instead confront Partners in court by suing to divide it into two halves.

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