Spotlight follow-up

State urged to review fees to elite hospitals

By Jeffrey Krasner
Globe Staff / November 20, 2008
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Leaders of some large academic medical centers and community hospitals called for Governor Deval Patrick to examine how Massachusetts General Hospital, Brigham and Women's Hospital, Children's Hospital, and a few other institutions are able to obtain higher prices from health insurers even though there is, especially for the most common procedures, often no demonstrated difference in the quality of the care delivered by those hospitals.

Hospital executives and state officials say the practice of insurers paying substantially higher fees to a handful of powerful Boston medical centers is imperiling some rival hospitals and distorting the greater Boston healthcare market.

Marshall Carter, chairman of Boston Medical Center, in a letter to Patrick said that a Globe Spotlight Team report Sunday "shone a very important light on the widening inequities in our healthcare system."

"The disparities in payments from private insurers to certain favored providers without a clear connection to quality or greater cost efficiency should trouble us all," wrote Carter. "The Globe Spotlight article demonstrated that so-called 'supplemental' payments do, in fact, come in different forms. For large and powerful hospitals that care for patients with higher incomes and the best insurance plans, those subsidies come in the form of higher payments from private insurers."

The Globe, citing private insurance data, reported that the favored institutions get payments from 15 percent to 60 percent higher than their competitors.

The higher payments have, in turn, contributed to the rapid rise in insurance rates paid by many of the state's residents, according to some health insurers. The greatest beneficiary of the higher payments is Partners HealthCare Inc., the parent of Mass. General and the Brigham, which has, by far, the highest revenues of any healthcare organization in the state.

The higher payment rates also apply to Partners' physicians, who earn 15 percent to 40 percent more than most other doctors in the state, and community hospitals that are affiliated with Partners, which receive at least 10 percent more than their peers, based on Blue Cross and Blue Shield of Massachusetts rates obtained by the Globe.

Ellen Zane, president and chief executive of Tufts Medical Center, a major teaching hospital, said: "Clout, over anything else, has driven insurers to disproportionately and inappropriately pay some providers more than others. There are huge imbalances in this market - not just between teaching hospitals and community hospitals, but among the various teaching hospitals.

"Tufts Medical Center offers the same [advanced] services as Children's and Partners, but is paid at unsustainably low reimbursement rates - well below our real costs."

Paul Levy, chief executive officer of Beth Israel Deaconess Medical Center, said the Spotlight report confirmed problems he had long suspected.

"We had heard talk about these payment differentials before, but to see them in black and white is startling and discouraging for those of us who are pursuing a quality and safety agenda."

Attorney General Martha Coakley, who's stepped up oversight of the state's nonprofit hospitals since coming into office in 2007, said government must do more to ensure a more level playing field among healthcare providers. "It would be folly to say [healthcare] is an area where you can just say market forces" will solve all the problems, she said.

A Partners spokesman, Rich Copp, said in a statement: "We agree that there is a healthcare cost crisis, but it is not unique to Massachusetts. While we take exception to a number of points that were made [in the Globe report], including the use of outdated data to compare the quality of patient care, we welcome a dialogue on these issues, and believe the community will benefit from an honest and open discussion of all sides."

Payment rates to hospitals have long been shrouded in secrecy because they are contained in private contracts between insurance companies, such as Blue Cross-Blue Shield, and individual hospitals. The Globe obtained private insurance data compiled by the state Health Care Quality and Cost Council, and analyzed hundreds of payments for individual procedures - from simple X-rays to childbirth - to determine how much Partners and the other hospitals are paid compared with others in the state.

The data have been vetted for accuracy by the council and hospitals across the state, though Partners last week said it had raised concerns "about the data and methodology" with the council.

Yesterday the council approved the launch of a website designed to help consumers make informed decisions about their care. The website, slated to go live in early December, will show what insurers pay individual hospitals, and how the hospitals rank on quality measures, for dozens of inpatient and outpatient procedures.

Dr. JudyAnn Bigby, Secretary of Health and Human Services, said after the council's meeting that the data show that unlike many other industries, market forces will not automatically drive down costs for healthcare.

Asked whether she was concerned about the role of market power in driving payment disparities between hospitals, Bigby said, "I don't have any basis to suggest that the reasons why you see the differences has to do with market power. . . . I think what it represents is people want to go to the Brigham, they want to go to Mass. General, they want to go to Children's Hospital, they want to go to the BI."

In an e-mail to employees earlier this week, Dr. James Mandell, chief executive of Children's Hospital, said, "While the high cost of our care is a direct reflection of the intensity of care that sick and vulnerable children require, this article reflects the kind of intense pressure and magnifying glass we will be under when it comes to our costs."

Dolores Mitchell, executive director of the Group Insurance Commission, which provides health insurance for state employees and some cities and towns, said an open discussion of hospital payments is crucial as the state tries to extend coverage to all residents.

"This is an issue that's been crying out for public discussion," said Mitchell, who is also a member of the quality and cost council. "I can assure you that those of us who are purchasers of healthcare have been discussing it and anguishing how to pay the bills."

Partners was formed in 1994 by the merger between Mass. General and the Brigham. It has grown to include other hospitals and facilities, affiliated institutions, and a physicians' group with 6,000 doctors, the largest in the state. It says it provides about 22 percent of the inpatient care in Eastern Massachusetts.

Peter Holden, chief executive of Jordan Hospital in Plymouth, said the article on Partners illustrates a problem that has confounded many community hospitals: Patients choose large academic medical centers, which cost more, despite data that suggest smaller institutions can provide the same service with the same or better medical outcomes.

"People default to academic medical centers because there's this presumed level of quality that's not available locally, and that's just not true," said Holden. "The perception has no basis in fact."

A Globe examination of the available hospital quality data showed that Mass. General and the Brigham often score well on quality measures, but also sometimes rank lower than competing hospitals.

Marcella Bombardieri and Scott Allen of the Globe Spotlight Team contributed to this report.

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