STEWARD HEALTH CARE on Tuesday signaled its support for a blockbuster ballot question that would regulate and make more uniform the rates hospitals are paid for providing care.
Kim Bassett, president of Steward’s Norwood Hospital, submitted testimony to the Legislature’s Health Care Finance Committee in which she said the ballot question may not be the ideal way to address the widening pricing disparities between community hospitals and Boston teaching hospitals, but it represents a start.
“The current situation is unsustainable,” she said in her letter. “We believe in a free market economy, but without government oversight, segments of the free market devolve into monopolies and oligarchies. Unless action is taken swiftly, community hospitals will be forced to continue to close services and ultimately close hospitals throughout our state.”
Bassett’s testimony on behalf of Steward was an outlier in the hospital community, which closed ranks behind the Massachusetts Hospital Association in opposition to the ballot question. Steward, owned by the private equity fund Cerberus Capital Management, is not a member of the hospital association.
The ballot question, which is being pushed by the health care workers union 1199SEIU, is an attempt to address what many regulators have called unwarranted price disparities between hospitals that cannot be explained by traditional measures of consumer value. The ballot question would bar licensed commercial insurance companies from paying any hospital more than 20 percent above or 10 percent below the “carrier-specific average relative price” for a service.
According to union estimates, the ballot question would cost Massachusetts General Hospital $254 million and Brigham and Women’s Hospital $184 million. Both hospitals are owned by Partners HealthCare. The money taken from those two hospitals would be redistributed to other hospitals around the state. Steward’s Norwood Hospital would receive an estimated $3.7 million under the measure, and Steward overall would pocket $21.4 million.
At Tuesday’s State House hearing, Rep. Jeffrey Sanchez, the House chair of the committee, seemed to be searching for some sort of common ground to see if an expensive ballot fight could be avoided. But he wasn’t having much luck.
“This is a serious problem that we can’t put any more Band-Aids on,” said Tyrek Lee Sr., the executive vice president of 1199SEIU, which has close ties to Steward. “If we can’t figure it out, we’re 100 percent prepared to go to the ballot in November.”
Sanchez asked Lee if he would characterize the ballot question as a “blunt instrument” that could have negative consequences for the health care industry.
“It is not worse than the situation we are in now,” Lee responded.
Sanchez asked Lee if health care reforms passed by the Legislature in 2012 in an attempt to deal with rising health care costs need more time to work.
“I think we’re running out of time,” Lee said.
Officials from the Massachusetts Hospital Association said the group’s board unanimously opposes the ballot question because the caps are arbitrary and won’t address some of the fundamental inequities in the health care system. They noted, for example, that the ballot question only applies to commercial insurance payments and doesn’t address underpayments to hospitals by Medicare and Medicaid.
“The numbers don’t add up,” said Tim Gens, executive vice president and general counsel of the hospital association. “We tried rate regulation in the past in Massachusetts and it failed.”
Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans, said her 17 member companies believe the disparity in what hospitals are paid is a reflection of brand names and market size rather than quality of care. “Right now we’re paying based on market power,” she said.
Pellegrini said the pricing disparity contributes to rising health care costs in Massachusetts because a growing percentage of health care is being delivered in high-cost settings.
“We believe actions may be necessary at the legislative level to address market dysfunction,” Pellegrini said. “I’m a market-oriented person, but there comes a time when the market ceases to work.”
Pellegrini suggested the state’s Health Policy Commission might be the vehicle for addressing the problem. She said a short-term market intervention, not a long-term one, is needed. She also said two very high-cost hospitals – Dana-Farber Cancer Institute and Boston Children’s Hospital – should be included in any market intervention. The wording of the ballot question exempts the two hospitals.
A handful of lawmakers testified, urging the committee to craft legislation to address the problem so a ballot fight can be avoided. Lawrence Mayor Daniel Rivera also testified in support of addressing the price disparity between hospitals. He said it’s unfair that Lawrence General Hospital, the largest employer in his community, gets paid less than Boston teaching hospitals “because of their size and influence.”