Healey: “Stronger interventions” may be needed

ATTORNEY GENERAL MAURA HEALEY says big disparities in prices paid to health care providers continue to hamper efforts to control health care costs, a situation that might call for more muscular efforts on the part of regulators.

Healey made the comments as part of the keynote address at Tuesday’s second day of hearings on cost trends held by the state Health Policy Commission. She painted a grim picture of the success of efforts to date to rein in costs and to shift care to more efficient, lower-cost providers.

“Through rising premiums and other out-of-pockets costs, our families and our businesses will continue to be hurt by market dysfunction – and we’re not afraid to call it that — where payments are not well aligned with value,” Healey said.

Health providers continue to command widely varying prices for the same services, delivered at the same level of quality, Healey and her staff told the commission.

One approach to rising health care costs has been the turn away from traditional fee-for-service payment systems, which reimburse providers for each visit or procedure and carry no incentive to limit health care utilization. In its place, more insurers have turned to various forms of “global payments,” in which providers are paid a set amount to care for a patient over the course of a year. Although an increasing share of patients in the state are now covered under global payment arrangements, Healey’s staff said that has done little to narrow big disparities in prices paid to different providers.

Assistant Attorney General Courtney Aladro presented data indicating that some physician groups receive far more compensation in global payment contracts than their rivals for treating patients with comparable health backgrounds. The data indicate that, based on 2013 global payment contracts with a single unnamed insurer, the Partners HealthCare physician network, as well as Atrius and doctor networks affiliated with Tufts Medical Center and South Shore Hospital, would each receive $220 million for treating a population of 35,000 patients. By contrast, the RiverBend Medical Group, a physician network based in the Springfield area, would receive $161 million, or 27 percent less, to care for a similar patient group.

“Unwarranted price variation persists in Massachusetts,” said Aladro.

Not only are some hospitals and physician groups charging more for their services, they are also attracting a greater share of patients. Higher-priced providers accounted for 60.6 percent of all hospital discharges among privately-insured patients in 2014, up from 58.3 percent in 2009, according to the report prepared by the attorney general’s office.

Members of the commission seemed to struggle to reconcile the sobering message delivered by Healey and her aides with the commission’s limited ability to directly affect a market where high-cost academic medical centers continue to exert lots of leverage over prices.

“I’m all for seeing these differentials reduced, but of course we lack the power to do that,” said Stuart Altman, the commission chairman.

Wendy Everett, the vice chair of the commission, called the slide Aladro showed of the big payment disparities “a heartbreaking chart.”

Another member of the commission, David Cutler, a Harvard health care economist, said, “We’re just not going to be able to do very much in the short term on the price end.” He wondered whether the global payment structure, therefore, provided an opportunity for lower-cost providers to reduce their utilization of services in caring for patients “and then collect some of that savings as if it were a price increase.”

Aladro said that could be part of the equation, but added that there are limits in some of the global payment contracts on how much savings from reduced utilization providers can keep.

That idea also seems to be asking those providers who are already delivering comparable quality care at lower cost than high-cost hospitals to be even more efficient in their provision of care.

Healey has struck an aggressive posture against provider consolidation and other moves that she says are contributing to the problem of high health care costs.

Within days of taking office in January, she came out against Partners’ proposed acquisition of South Shore Hospital. A superior court judge then ruled against the proposed merger, which Healey’s predecessor, Martha Coakley, had negotiated. In February, Partners withdrew its bid. The Health Policy Commission had said the acquisition would increase health care costs, a finding that Partners disputed.

Healey said at today’s hearing that, going forward, policymakers should be “mindful of existing price variation” and consider that some providers are more efficient than others. “Shouldn’t more efficient providers be given more room to grow in certain instances than less efficient providers?” she asked.

She also raised the idea of intervening more directly in the market. In her list of recommendations, Healey said the state should “consider forms of directly regulating the level of variation in provider prices and/or medical spending.”

That variation contributes to “continuing cost and access challenges in health,” Healey told the commission. “We should ask whether stronger interventions are needed to correct these disparities.”