What consumers deserve from Harvard Pilgrim-Tufts merger
Real cost savings and payment system innovation should be expected
WHEN I SPEAK with colleagues around the country about how expensive health care is in Eastern Massachusetts, I tend to place most of the blame on our large and prestigious health care provider systems that demand very high prices. More recently, I have also noted that pharma prices, fueled by patent protection for newer drugs and monopoly-like pricing of some generics through inappropriate practices, combined with continual lobbying efforts to check any national pricing policies, have made drug costs a key driver of increases in health care spending. I tend to let our nationally-ranked nonprofit health insurers off the hook. (An important exception is when, in a previous CommonWealth article, I noted the 2000 “understanding” between our biggest insurer, Blue Cross Blue Shield, and our largest provider system, Partners HealthCare, uncovered by the Boston Globe, that has lead to a good amount of the pricing dysfunction in our market that still exists today.)
But the announced merger of Harvard Pilgrim Health Care and Tufts Health Plan raises lots of questions related to health care costs and, more broadly, the role insurers can play in improving our health care system and making it more affordable.
While we await detailed analysis of this proposal by the Justice Department and Attorney General Maura Healey, at a basic level, this is what I think consumers really want to see from such a proposed transaction:
- Real net administrative savings that must result from taking two separate companies, with many of their staff doing the same things, into one. IT and vendor contracting for a number of services should also provide savings from improved economies of scale.
- Real savings as well on the medical spending side. I would assume that part of the argument for the merger will be that a combined insurance entity will be a better negotiator with providers, resulting in lower, annual price increases—especially with the group of providers who are currently overpaid. This is essential, but I would not stop there. I want this new entity and its main competitor, Blue Cross Blue Shield, to show us that they are doing all that they can to bring true innovation to payment redesign and go well beyond their initial efforts of creating accountable care organization-like arrangements that are still primarily built on a fee-for-service chassis. I would love to see much more use of full risk capitation – fixed payments to providers for all care for a patient, rather than the fee-for-service model that has prevailed for decades. (The model Blue Cross worked out earlier this year with the Atrius Health provider network is a good starting point for replication.) This new combined insurer should demonstrate that it, too, is working to advance new payment models that truly incentivize prudent use of resources and the achievement of high scores on measures of both patient reported and clinical outcomes.
- Evidence that both administrative savings and medical spending savings are flowing back to businesses and individuals who pay premiums. If Healey blesses this deal, premiums, net profits, administrative expenses, and provider pricing trends should be measured and tracked. She could require that there be some sort of comparison to Harvard Pilgrim’s and Tufts Health Plan’s own pre-merger trend lines, to those of their competitors going forward, and to national trends. This doesn’t mean that the new company can’t do some innovative investments with a portion of savings—but perhaps some benchmarks tied to three-year moving averages of premium prices, medical spending, company profits, and administrative expenses would show whether net savings are being generated and primarily returned to premium holders. The new company should somehow be at risk of paying financial penalties if they are not passing sufficient savings on to premium payers. These same expectations should be placed on Blue Cross Blue Shield of Massachusetts—and for that matter perhaps all insurers doing business in our state through legislative action.
These three things are the minimum, but I would hope that on their own accord, or with Healey’s oversight, an agreement could be reached that would result in some additional expectations on the new combined company. These could include:
- Efforts to help some struggling community providers. While of course the Commonwealth has a backstop role here, our state’s two large nonprofit insurers (Blue Cross and this new company) may need to help stabilize some essential community providers (hospitals, but possibly also some physician practices or other entities) by boosting their commercial payments or by offering consultative and other support to help with operations and planning efforts. We all could lose if some of these needed community providers go away, and I think our nonprofit insurers need to have a heightened role in trying to prevent that from happening.
- In a CommonWealth article earlier this month, I suggested that with government support, the possibility of doing some sort of demonstration project in Massachusetts to see if redistributing provider payments towards underpaid primary care and away from overpaid specialty and procedural services would generate both improved health and overall medical savings. There is no reason why this newly merged insurance entity couldn’t, on its own accord, advance some demonstration efforts in this regard.
- Helping take support of social determinants of health to a new level. While our insurers do provide, and file reports on, “community benefits,” like the state’s nonprofit hospitals, too often their money has not been strategically invested in areas that are at the root of determining health and well-being. For example, like nonprofit hospitals and universities, our insurers need to be more engaged in the affordable housing issue. Research increasingly shows links between adequate and affordable housing and good health.
Paul Hattis is an associate professor at Tufts University School of Medicine.