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Partners, Blue Cross tackle high premiums

By Robert Weisman
Globe Staff / October 6, 2011

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A new pact between the state’s largest health insurer and its biggest hospital and doctors network could boost efforts to contain health care costs, both sides said yesterday.

But for now, the three-year agreement between Blue Cross Blue Shield of Massachusetts and Partners HealthCare System Inc. - owner of Harvard-affiliated Massachusetts General and Brigham and Women’s hospitals in Boston - will only slow the rate of premium increases for about 200,000 patients of Partners physicians covered by the managed care insurance plan known as HMO Blue.

The two parties confirmed they had approved an understanding - reported last month by the Globe - that would pare anticipated Blue Cross reimbursements to Partners by nearly a quarter of a billion dollars between 2012 and 2014. The parties renegotiated the third year of an existing contract to reduce anticipated payments by $80 million next year and agreed to similar trims in payments during the second and third year of a new contract, for a total savings of $240 million.

The money represents about 3 percent of the insurance reimbursements Partners could have been expected to receive - more than $2.5 billion a year. Under the deal, annual rate increases that were projected at 5 to 6 percent for the next three years will be lowered to between 2 and 3 percent.

“We’re getting substantially less than we anticipated getting,’’ said Gary L. Gottlieb, Partners chief executive. “In a broader sense, this is a sign there’s a pretty dynamic market in health care right now, and the market is working. The effect will be to help slow the growth of health care costs for employers and their employees and their families.’’

Barbara Anthony, the state’s undersecretary of consumer affairs and business regulation, who had called on high-cost health care providers - such as Partners - to reopen contracts to reduce premiums, said Patrick administration officials want to examine the contract and make sure savings are passed on to individuals and employers. “What we want carriers and providers to wrap their minds around is no increases, or even decreases, in premiums,’’ she said.

Under the agreement, Partners agreed to participate in Blue Cross’s alternative quality contract, a so-called global payment that gives health care providers a budget for patient care and incentives for healthy outcomes rather than billing for each visit and procedure. Gottlieb said the new contract will give Partners hospitals the flexibility to experiment with different ways to provide medical care, such as more in-home care for older patients.

With the Partners contract in place, Andrew Dreyfus, chief executive of Blue Cross, said about 613,000 members - two-thirds of those in its HMO plan - are now treated by primary care physicians covered by the global payment plan.

Dreyfus acknowledged, however, that the new contract won’t end payment disparities between top-paid providers and struggling community hospitals, which also are being asked to accept smaller pay increases.

“These savings are substantial, but we still have a long way to go,’’ Dreyfus said. “There’s a real and appropriate impatience by our customers to moderate premium increases.’’

Amy Whitcomb Slemmer, executive director of Boston consumer group Health Care for All, said her organization would monitor the new contract to make sure the anticipated savings get passed on to individuals, families, and small businesses. While she applauded the Partners-Blue Cross deal as a step in the right direction, Whitcomb Slemmer said Health Care For All has called for a temporary freeze in insurance premiums.

“We appreciate that these rate increases are lower than they have been, which makes a difference,’’ she said. “But we know that people are struggling to pay for the coverage.’’

Partners, based in Boston, had been the largest hospital system in Massachusetts not using a global payment system. The new contract, while giving fresh momentum to efforts to overhaul how health care is paid for, covers only about 25 percent of the Partners patients insured by HMO Blue. While it applies to patients treated by Partners physicians or affiliated doctors, patients referred to Partners or those covered through Medicare and other contracts will still be part of the conventional fee-for-service system.

The contract also makes it more likely that Partners could reach agreements to accept smaller payments from two other Massachusetts insurers with which it has been negotiating: Harvard Pilgrim Health Care and Tufts Health Plan. And it could stem the rise of costs in the future through a provision that Partners’ current reimbursement rates with Blue Cross not be automatically extended to new doctors groups that join the Partners network.

Partners last year made a commitment to contribute $40 million to help reduce health care premiums for small employers and individuals. But by reopening its contract with Blue Cross and accepting lower payments than the contract with the insurer originally called for, Gottlieb said the commitment was fulfilled.

Robert Weisman can be reached at weisman@globe.com.