Healey offers hospital pricing suggestion
Would adjust premiums based on provider efficiency
THE HEALTH POLICY COMMISSION convened a stakeholder group on Wednesday to brainstorm ways to address the pricing disparity between the state’s teaching hospitals, led by Massachusetts General and Brigham and Women’s, and every other provider.
The issue is a hot one, with various regulators saying the two teaching hospitals charge significantly more for some services even though their costs are no different and their quality is the same. The Health Policy Commission says the price differential is contributing to higher health care costs overall in Massachusetts because patients continue to flock to the more expensive teaching hospitals.
One possible answer to the problem is a ballot question being pushed by the Service Employees International Union that would compress the prices hospitals can charge, effectively taking hundreds of millions of dollars away from the teaching hospitals and parceling that money out to their competitors. Few in the health care industry favor the blunt ballot question approach, so the Health Policy Commission is exploring other possible solutions in a series of meetings.
As you might expect, when nearly 40 people from different health care backgrounds (including Partners HealthCare, the corporate parent of Mass General and the Brigham) are positioned around a table, policy options inevitably get picked apart. So it was with proposals to expand tiered and limited health care networks, and to adopt reference pricing, which would require patients to pay any amount in excess of an agreed-upon reference price. Some participants said the proposals would penalize poor people. Others said they were incompatible with capitated payment systems or difficult to implement.
A chart Tseng shared with the group identified pricing for eight different health care providers in eastern Massachusetts. The premiums varied from a low of $514 to a high of $620.80 a month, a difference of nearly $107, or roughly 20 percent.
Tseng said the approach held the potential to force health care providers to compete on price, something she said they aren’t doing currently. She also said the approach may motivate consumers to shop around for the best deal.
The members of the stakeholder group who commented on the attorney general’s proposal generally liked it but said it needed more study.
Stuart Altman, the chairman of the Health Policy Commission and a health care economist at Brandeis University in Waltham, raised the most serious concern. He said some of the price advantage enjoyed by teaching hospitals is legitimate. He said teaching hospitals generally get paid more because they use the higher payments to offset the cost of doing research, training new doctors, and offering money-losing but socially valuable services such as a 24-hour burn center.
Altman asked Tseng if the legitimate subsidies teaching hospitals receive could be isolated and then reflected in her pricing model.Tseng didn’t answer Altman’s question directly, but said the attorney general’s proposal is not designed to be a magic bullet eradicating the price differential between hospitals. She said the proposal should only be viewed as a partial solution to the hospital pricing differential.
The commission plans to host at least two more listening sessions with its stakeholder group before deciding whether to recommend a course of action to the Legislature. One of those sessions will deal with direct state regulation of the industry, focusing primarily on Maryland, where hospital rates are set by state regulators.