First published on Not Running a Hospital
Back in 2008, Charlie Baker, then CEO of Harvard Pilgrim Health Care, and I, then head of a hospital, claimed that the market power displayed by the dominant provider system in the state and supported by the state’s largest insurer resulted in a large disparity in health care payments. We argued that this disparity contributed to unnecessarily high health care costs in the state. We both did this publicly, willing to put our assertions to the test. The quotes in response to this in a Boston Globe story were notable, but they did little to undercut our premises.
About a year later, the Attorney General of the Commonwealth published an investigation of this situation, which had the effect of validating our assertions.
Then, the largest insurer in the state said that the solution to the problem was to move towards a capitated, or global, payment regime. This would control the cost trend.
Again, knowledgeable observers, like the Inspector General, raised concerns. What if the global payment regime also created disparities and locked in higher rates? He noted, “[M]oving to an ACO global payment system, if not done properly, also has the potential to inflate health care costs dramatically.”
I pointed out that, while a global payment plan might have certain theoretical advantages, without a transparent exposition of its effects, how could we know if it had been successful?
Well, the latest chapter has just been written. The Attorney General has issued a follow-up report saying, “Our examination found that paying providers on a global basis has not resulted in lower total medical expenses.” Further, “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.”
The whole country is watching the Massachusetts experiment of providing universal health care coverage and is wondering how we will deal with the cost issues inherent in providing that coverage. The Attorney General has now offered, twice, a cogent and thoughtful review of the situation. The Inspector General has done likewise. How will the other parts of the government respond? When will the business community get engaged? What about the patient advocacy organizations?
Paul Levy is the former CEO of a large Boston hospital. He writes at Not Running A Hospital.