The MA experiment

The Boston Globe has uncovered data showing that the amount insurance companies reimburse hospitals in Massachusetts can vary dramatically from hospital to hospital.

Private insurance data obtained by the Globe’s Spotlight Team show that the Brigham [& Women’s Hospital], Mass[achsetts] General, Children’s Hospital[, all in Boston,] and a few others are, on average, paid about 15 percent to 60 percent more than their rivals by insurance companies such as Blue Cross Blue Shield of Massachusetts and Harvard Pilgrim Health Care. The gap is even more striking for many individual procedures, which can be two or three times more expensive in one hospital than in another.

A driving (but not the only) force behind this, the Globe reports, is Partners Health Care, originally formed as an alliance between Brigham and Mass General – both among the nation’s top 10 hospitals according the US News & World Report’s annual listing – to combat what the founders saw as the stinginess of insurance companies. Their prominence allowed them to tell the insurance companies, in effect, “pay us what we say or else” – the “or else” being that if a company balked, the hospitals would refuse to accept their insurance, which could cost the company thousands of subscribers panicking at the thought of being denied access to those top-drawer facilities. One company that tried to resist – Tufts Health Plan – caved within days.

The result is that Partners Health Care hospitals, overall and on average, get paid 30% more for the same services as non-affiliated hospitals.

It’s important to note that these differences in no way correlate with quality of care and they persist even in cases not only of identical procedures using identical equipment but treatment by identical physicians – the only difference being what hospital their patient is in. In fact, sometimes the correlation is negative:

Massachusetts General Hospital, for example, earns 15 percent more than Beth Israel Deaconess Medical Center for treating heart-failure patients even though government figures show that Beth Israel has for years reported lower patient death rates.

Simply put, price does not equal quality. What it does equal is profit: Partners has netted $1.7 billion over the past few years.

Ultimately, this has done two things: shift the center of power in the health care industry in Massachusetts somewhat from the insurance companies toward the hospitals and drive up the cost of health insurance in the state. What it decidedly has not done is improve the quality of health care.

Nor has it improved access to health care; indeed, it may well have damaged it: Massachusetts requires that everyone in the state have health insurance and offers subsidized insurance to those who can’t otherwise afford it. Rising premiums in the private market means more people who can’t afford the cost, throwing them back on the state system, raising its cost and inhibiting the goal of universal coverage.