As Predicted

Paul Levy

First posted 10/06/11 on Not Running a Hospital

A propos of the story below, see this comment from a piece by Paul Ginsburg in the New England Journal of Medicine.

The unchecked market power of some providers promises to become increasingly problematic for private payers. And if market approaches prove insufficient to solve a problem of this magnitude, regulatory intervention becomes more likely.


Why is this is a big deal?

Here’s what I predicted last April, with regard to the negotiation between the state’s largest insurer and the state’s largest provider group:

Look for the following “victory” announcement in the coming months:

The parties agree to experiment with bundled payments for certain diseases and procedures, staying far away, though, from a full system of capitation. The parties agree to a general rate increase of just a few percent. Together, they will say, this will “bend the cost curve” for this large group of doctors and hospitals. There won’t be much talk about the fact that the base upon which the bundled payments and other fee-for-service payments is set remains far above market.

End result: Continued use of market power as the prime determinant in setting reimbursement rates.

So, here it is, as reported by Robert Weisman in the Boston Globe.  Excerpts:

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.

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. 

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.

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.

Th[at] new contract . . . covers only about 25 percent of the Partners patients insured by HMO Blue.

Big deal.

Paul Levy, a former large hospital CEO, is now an advocate for transparent, patient-driven care. He writes at Not Running a Hospital.

One thought on “As Predicted

  1. Large payers and large providers do not bring down nor contain healthcare costs. This is just collusion between the two powers to keep a lock on the present system.

    Both are too big, but not too big to fail.

    Break them both up!

    If you want regulation, make it so that no insurer can have more than 25% of any market share. Make it so no physician or hospital group can have greater than 25% market share as well.

    Then let the free market work.

    One thing is certain. Doctors like freedom to earn an income, but are very competitive. Give them the opportunity to truly compete, and you will see costs come down.

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