What he reads about AG-Partners deal is not good

The deal will kill competition

Many of you know from my comments in previous letters that I have been a fan of Will Rogers for as long as I can remember. As I read the reports in the Boston Globe about Attorney General Martha Coakley’s acquiescence to Partners HealthCare’s desire to acquire South Shore Hospital and Hallmark Health, I wondered what sort of humor Rogers would have used if he were to make the event the subject of one of his radio monologues or newspaper columns. My guess is that if the event had occurred back when he was doing his routine in the Midnight Frolics shows of Flo Ziegfeld, he would probably have begun the monologue as he always did with: “Well, what shall I talk about? I ain’t got anything funny to say. All I know is what I read in the papers.”

That same thought crossed my mind when I read Rob Weisman’s front-page headlining article in the May 17 Globe. I am not a media type, but I once hung out with a few, and rule number one of managing potentially controversial stories is to get them out late Friday because not as many people will read about it and with luck your news will go largely unnoticed. Folks tend to relax on the weekend or go away, and of those who are home there is too much to do to pay close attention to the Saturday paper. On Monday, I had to go back to my iPad version of the Globe to find the article when I heard about the event. I was too busy enjoying the weekend to notice the story on Saturday.

As I read Weisman’s article and the ones that followed it later in the week I kept wishing that I had the skill of Rogers because he would have said more than “All I know is what I read in the papers.” He would have continued spinning his rope and chatting. After that usual intro he would have used his humor to dissect the interface between personal ambition and politics with a large and powerful institution. His humor would have manifestly revealed the failure of principle that the decision represents and how in a very complex situation you can dress up a disaster to make it look like a gift. I wish I had that skill.

Since we can only speculate about the combination of ambition and error, let’s do what Rogers says he did and just look at what was in the paper and combine that information with our own knowledge and experience. Since all I know, and perhaps all you know, is what we read in the newspaper, what did we read? We read what appears to be an impressive list of extracted concessions that a tough AG had demanded of a large and powerful system that added up to nothing or perhaps were even advantageous gift-wrapping. Let me explain.

There was a lot of focus on pricing. It sounds like the AG was tough to hold down price but in the new world of value-based reimbursement, price is yesterday’s concept.“Total cost of care” and population served or controlled are the current concern. It is actually possible to have high unit costs for individual acts of care in a fee for service environment but also have a lower cost of care if the care does not include over-processing, overproduction, or defects of care that constitute waste and add no value to the patient. Conversely, at any price you can have a high “total cost of care” if you have a huge population that seeks care in your facilities and you can churn every admission or visit for every possible nuance of concern. In that environment the revenue possibilities go through the roof.

Given all of the attention that her office has given to health care costs over the last seven or eight years, I would have really expected the AG to look at the deal in the context of competition and market share and not through a focus on price. I would have expected her to realize that it is competition that motivates many organizations to try to lower their cost of care. Her resolution will go a long way toward killing a reasonable possibility for the emergence of any coalition that will have a chance to create effective, cost-lowering competition. What a deal! To steal a concept from Joel Chandler Harris and the tale of “Br’er Rabbit”, Partners has been thrown into a pretty comfortable “briar patch” with this deal.

In 2011, I spent much of the summer serving on the Special Commission on Provider Price Reform. The AG was represented on that commission by members of her staff. They presented much of the data to us. What we discovered in that summer of presentations was that there was amazing variation, as much as 600 percent, in the price paid for the same medical test, procedure, or diagnostic code across Massachusetts hospitals. We also discovered that you could hold the most expensive hospitals to no increase in price for several years and allow the lesser-paid hospitals to increase at a rate equal to the state GDP and the better-paid hospitals would still be paid more, more than a decade later. That is a staggering fact. One must conclude that holding the Partners rate increases to the rate of inflation and their total increase in revenue to the state GDP pretty much guarantees financial comfort in perpetuity. In real terms this deal represents little or no real financial restraint at the same time that Democratic gubernatorial candidate Don Berwick is busy telling the world that many in healthcare should be giving money back to the community and not sucking more out.

Perhaps there was hope that people would perceive that the real restraint in the agreement was that, rather than negotiating a uniform rate for all of its hospitals, Partners would need to negotiate rates for each hospital independently. So without this concession the payers were going to pay the same for a room or a procedure at the Mass General or the Brigham as they do at a community hospital on the North Shore? That variation in payment already happens. By the way, don’t forget that South Shore Hospital and the hospitals of Hallmark Health already get superior rates to other community hospitals anywhere on the planet, let alone Massachusetts, and by this agreement that advantage is assured, I guess, forever.

Let me expand my thought working only with what I know, what I read in the papers, and what I can extrapolate from my own experience projected into the future. How will the deal kill the competition? While the AG’s office is monitoring price and preventing the acquisition of other hospitals or large medical groups, what will be really happening? What will be happening is that money will be flowing from the vast resources that already exist within Partners, from their previous price and contract advantages, to build and populate ambulatory care centers and practices in the communities of these new acquisitions. The paper talks about an additional 550 physicians. That is more than enough to take care of more than an additional 500,000 patients. Take the South Shore as an example. It is rumored that a new magnificent ambulatory facility will be built for 80 new PCPs. That would translate into at least 180,000 patients, if not more. The South Shore is growing, but the population of the 16 towns that constitute its whole area from Quincy to Plymouth is less than 500,000.

So where will the patients come from that will fill these new offices? My guess is that the patients will come from the existing practices of physicians on the South Shore. The deal prevents them from joining Partners as a group but it does not prevent them from individually relocating their employment and having their practices follow them. The future of finance in healthcare is not your price; it is the population that you serve. It will be very hard for existing practices on the South Shore to compete with the resources that will flow into the South Shore from Partners. About the time this transition is completed, the prohibition on price increase will expire. By that time there will be little or no residual competition to balance the market. A five to 10-year deal in healthcare is no deal at all. Resource creation and regulation in healthcare should have a “generational” perspective.

The original article on the AG’s decision polled a few “experts” on their reaction. I think Alan Sagar at Boston University responded with great restraint when he said, “This strikes me as more of a political deal than a healthcare deal. If we’re relying on competition to hold down health care costs, the more competitors the better. The harm to the public will accrue more slowly under this deal, but the harm will occur.”

As the week rolled on and the Red Sox were losing seven in a row, there were follow-up articles in the Globe. On Wednesday we learned that John McDonough at the Harvard School of Public Health was also looking at the decision from the AG’s political point of view. “It’s a deal that gives her the best of both worlds, as much as that is possible to attain.” Michael Levenson, the writer of the article that quoted McDonough, also wrote that McDonough’s conclusion was based on the fact that Partners has 60,000 employees who vote plus family members. He continued by pointing out that the “acquisition is popular on the vote-rich South Shore and [the AG’s] suing to stop it could have provoked a backlash from business leaders and voters there, according to healthcare analysts.”

Alan Sager was quoted again on Wednesday and seemed to be picking up steam, “There’s no political gumption anywhere in the state to take concrete actions that would slow cost increases.” Notice that Professor Sager does know the difference between price and cost. Don Berwick was finally given some print on Wednesday and responded effectively, “It essentially makes permanent Partners’ already unacceptably high costs without requiring the reductions in price that is needed, tying the state to a fundamentally flawed pricing structure for the future. The reforms the state needs are much more fundamental.”

Charlie Baker had a very politically balanced statement, calling the agreement “a good start”, adding that, “…to truly lower costs, ‘Massachusetts must insist on full price transparency from all providers for all services from all payers’”. Charlie is getting in shape for the fall election season. He may expect that he is likely to be up against the AG in his reach for the governorship. “Price transparency” is a great political phrase, but in this situation the concern is a monopoly and we already know that both price and cost are through the roof and it will take competition or legislation to bring them down, and the likelihood of competition doing the job just took a big hit that will probably be fatal. No one wants to do it by legislation that has its own special downside, as we love to perpetuate the idea that a well-regulated market can fix anything. The problem is with the deal is that we just gave up a big chance to regulate the market. I was disappointed in the meekness of Charlie’s response and prefer to think that the reporter just did not get it right or that he is saving something for later but then again he is also caught in the same political trap that has limited the AG from doing her current job while looking toward a new job.

I have gone through the last week of the Globe with a fine tooth comb and used the search function on the ePaper application. There are no editorials, no irate letters to the editor. Perhaps it takes a while. What do I know? All I know is what I read in the paper.

I do not know what Will Rogers would say today about the role of government and the regulatory bureaucracy in the resolution of the many dilemmas that face our healthcare regulators across the expanse of state government. It is obvious from what has happened that those in public office who have the responsibility to maintain a competitive market must constantly contend with the power that resides in some of our very famous hospital organizations. I am sure that Will Rogers would be sensitive to the tensions that public servants, looking to continue their careers, must feel when they must make decisions balancing the interests of all, with the desires of the powerful. Perhaps Rogers would use humor and irony as he did when he said: “Be thankful we’re not getting all the government we are paying for.”

Quite frankly, I was hoping for more.

If you now want to read the best of the several Globe articles, it is the one by Liz Kowalczyk. Her story includes a comment by Gary Gottlieb describing how hard the deal will be on Partners. Martha Coakley is quoted cataloging all the objectives that she achieved, and Stuart Altman, who seems to have reversed his position from when the Health Policy Commission advised her to say no, gives his current assessment that the acquisitions may be good for the market. Kowalczyk’s article is worth reading for the comments of Nancy Turnbull and Nancy Kane from the Harvard School of Public Health. In the end their comments seem to exonerate the AG because, face it, the AG really does not have much clout in the battle with the big concerns in the world of the status quo.

Turnbull and Kane said, however, that Coakley is limited in the actions she can take to control Partners’ growth. Suing the company over the South Shore merger and “blocking that one transaction doesn’t change the status quo that much,” Kane said.

Meet the Author
Perhaps they are right and in the end the chance to prevent Partners from eventually being the healthcare system for all of us living in Massachusetts has passed. Comcast controls the price of our media and as a result we are forced to buy access to things that we don’t want to get what we do want. Partners will set the price for healthcare and provide more and more of the services upon which we all will depend. There was once a chance to develop a balanced market but that effort died because of a combination of internal issues in the organizations that could have created a market preserving balance. All I know about that is what I read in the papers.

Gene Lindsey is the retired CEO of Atrius Health. His comments are excerpted from a letter he writes weekly to interested readers.