Back to the '80s

A report by The Boston Globe's Liz Kowalczyk today points out that recently released data by Harvard Pilgrim shows the disparities paid to area hospitals and physician groups.  According to the article:

Harvard Pilgrim’s testimony mirrors the results of a yearlong investigation by Attorney General Martha Coakley’s office, which found that the highest pay goes to the providers with the most clout and not as a reward to those hospitals and medical practices that provide the highest-quality care. The attorney general’s report looked at payment rates from all large insurers. Unlike Harvard Pilgrim’s testimony, Coakley’s preliminary report did not identify providers by name.

Repeat: "... the highest pay goes to the providers with the most clout..."

Health care is a 'tweener industry here in Massachusetts.  Back when I was just getting started, we had the Massachusetts Rate Setting Commission that would review and approve hospital prices and the Determination of Need program was a real factor in controlling expansion.  At that time, we were more regulated.  Free market advocates helped to dismantle rate setting controls and the certificate of need policies have since been watered down greatly.  Today, we are less regulated.

In the early days of this new free market reality, some hospitals set out as pioneers and attempted to gain clout through increasing market presence.  Brigham and Women's and Mass General and others formed Partners, Beth Israel and New England Deaconess and others started CareGroup, New England Medical Center connected with Rhode Island Hospital and the Catholic hospitals united as Caritas.  The payers responded, most notably Harvard Community and Pilgrim.

Some of those unions worked well.  Really well.  Others failed and either faded away or disbanded completely.  Some of the systems that formed did exactly what they set out to do - create marketing clout.  What better measure of marketing clout than being able to charge more for your services than other comparable brands?  In short, we got what we wanted.

This is most assuredly not an anti-free market rant.  I wouldn't be so inclined.  But policymakers now need to resist the urge to completely swing the pendulum back toward a rate setting and "more regulated" state without understanding the answers to these questions:

• What did not work before such that we were all eager to abandon the regulated approach?
• How can we not destroy the benefits that a competitive approach has gained?

On the second point, such benefits include large scale investments in electronic medical record systems, clinical innovations, investment in research and expansions of capacity in some areas where access was limited or lacking previously.

The Patrick Administration is looking at ways of modifying the payment system.  According to the Globe:

Dr. JudyAnn Bigby, secretary of the Executive Office of Health and Human Services, is leading the effort to develop a new payment system for providers and said while hospitals have legitimate explanations for some of the inequalities, the differences probably should not be so large.

It's time for some changes.  But let's not step back completely to the 1980s, hoping that rate setting and expansion regulation alone will be the answer.