Premium column

As a public service to those Bostonians who were away for the holiday week, I link to and recommend the column entitled "Influence Premiums," by Yvonne Abraham, published in the Boston Globe on July 3. Her lede:

It’s as American as the Fourth of July. Legislators grapple with a huge issue that affects everyone, but a small group of politically wired people determine the outcome.

. . . Plenty of wired types are massing as Beacon Hill prepares to tackle the skyrocketing health costs that hurt all of us.

The Attorney General recently concluded: "Wide price disparities unrelated to the quality of care still persist from one Massachusetts hospital to another, largely dependent on the providers’ clout in the marketplace." Yet, what is striking is the degree to which non sequiturs are used to justify this pricing differential. Here's a quote, for example, from one CEO:

[H]e warned that the data used in the reports is incomplete because it does not capture quality differences among hospitals that warrant higher or lower payments.

Last year, he said, 1 in 6 patients at [his hospitals] were transferred from other hospitals "in the hope that we can provide unique life-saving care. Higher prices for services like cardiac surgery subsidize poorly reimbursed care like treatment for mental illness," he said.

"We should be careful not to overreact or overreach, especially based on incomplete data. We don't want to jeopardize truly precious resources."

None of that is the point of course. The exact same thing can be said for all of the tertiary hospitals in Boston. Tertiary hospitals exist, in great measure, to receive referrals from community hospitals when the patients' conditions are more complex. They also tend to be training centers for young doctors and nurses. They all subsidize underpaid services by using revenues from services that are paid a bit better. In other words, the policy question remains: Why should some tertiary hospitals get paid more than others?

Also, these remarks do not address the fact that the community hospitals owned by this CEO's holding company, and the company's network of community-based doctors, also get paid more than their counterparts. How are those resources more "truly precious" than their neighbors?

All of this is about market power, not clinical quality.

For more on this subject, see here. The issue is joined. Ms. Abraham is correct to focus, now, on the political process through which it will be addressed.

Jon Kingsdale understands this political dynamic well:

By comparison with global payment and care coordination, there are simpler interventions to right the balance of market power in the short-run: a “Public Option” for Massachusetts; hospital rate-setting, a la Maryland; the anti-trust enforcement that Martha Coakley’s predecessor ignored; and/or caps on payments to providers with out-sized market leverage. (In full disclosure, I recently helped the Mass. Association of Health Plans craft a bill along the latter lines.) But capping prices means capping resources for those who save lives. It is far more PC to talk of re-organizing care and payment reform.

Building on Jon's remarks, here are some questions for the Administration that it has yet to answer as part of the current Massachusetts discussions:

If global payments are instituted with the current differential in payments between the “have” and “have not” provider groups, that differential will be locked in for the future. How would you propose to avoid this result?

Instituting global payments shifts risks from insurance companies to providers. Insurance companies have maintained balance sheets to protect them from such actuarial risks. What should be done to ensure that the risk-related savings accruing to insurance companies from the transition to global payments are passed through to business subscribers and individual consumers?

Global payments and the required management of care implicit in global payments suggest that consumers will have a limitation on the choice of specialists and hospitals when they need to seek care beyond primary care. You seem to have been reluctant to talk about that aspect of “payment reform.” Do you think the public is ready for that change? Do you think the advocates for this form of care have an obligation to explain more about its ramifications to the public?

When will your Division of Health Care Finance and Policy make available to the public the all-payer claims data base that it has been collecting so that independent observers, researchers, patient groups, and business groups will be able to review the transactions underlying the state's health care industry? That transparency would allow others to test the global payment hypothesis in a rigorous way, even if some in the government are reluctant to do so.