News & Events

Hospitals attack state pay proposal

Call cost-curbing plan unrealistic; Say changes should be gradual

By Liz Kowalczyk, Globe Staff  |  October 4, 2009

Massachusetts health care executives are lobbying the Patrick administration and legislators to move cautiously before embracing a proposal to transform the way hospitals and doctors are paid – a plan one hospital CEO bluntly said is “irresponsible’’ and “sophomoric’’ in its initial form.

Three months after a state commission proposed the bold plan to control exploding health care costs within five years, many hospital executives and doctors call it unrealistic, and say it could bankrupt some providers and compromise patient care if implemented too quickly and without major changes.

Hospital chiefs and physicians have made a flurry of requests for closed-door meetings with legislators, administration officials, and Governor Deval Patrick in recent weeks to lay out their concerns before final legislation is written.

Public hearings on the first-in-the-nation proposal, which would essentially put providers on a budget rather than pay them for each procedure, begin this week.

Ellen Zane, chief executive of Tufts Medical Center and chairwoman of the board of the Massachusetts Hospital Association, said in an interview that the state “does not understand the ramifications of the proposal.

“There are major significant questions that have to be answered,’’ she added, or “it could kill the industry.’’ Zane, who met with Patrick to make clear her concerns, is the executive who called the initial plan irresponsible.

Both hospital and physician leaders say they favor changing the way providers are paid, to control costs and improve care. But they feel the changes should unfold gradually, and on a voluntary basis at first, starting with pilot programs that provide incentives for providers to adopt the new payment system.

A 10-member commission, which included key legislators and members of Patrick’s administration, recommended in July that private and public insurers largely scrap the current fee-for-service system in which insurers pay doctors and hospitals a negotiated fee for each procedure or visit – a system that is widely viewed as encouraging unnecessary and uncoordinated care.

Instead, the commission recommended that insurers pay providers predetermined, per-patient annual fees, called global payments, which would cover all of a patient’s medical care during the year. Doctors and hospitals would have to form larger groups, called accountable care organizations, that would provide most of the care for individual patients and divvy up the payments.

The change would mean that hospitals and doctors are at greater financial risk if their patients need a lot of expensive medical care – a risk now borne mostly by insurers. There’s also greater risk that patients would be denied necessary but very costly care, as some patients experienced during the early 1990s under a similar payment method called capitation.

So such a system would need close monitoring, the commission said, as well as ways to reward doctors and hospitals who provide high-quality care. Many health care executives are skeptical, however, whether extra payments for providing superior care will be enough to ensure patients get all needed treatment.

The commission wants to make this dramatic change statewide within five years, but it did not agree on the details, leaving legislators to decide key issues this fall, such as whether a transition to global payments would be voluntary or mandatory and whether the state would provide significant financial incentives to doctors to form larger groups.

Lawmakers and the administration will need support from providers to make any new system work well.

“It can’t be forced on everyone,’’ said Dr. Mario Motta, a cardiologist in Salem and president of the Massachusetts Medical Society, a lobbying organization for the state’s physicians. “You’ll force [doctors] out of business.’’

“This plan will never happen for everyone in five years; that’s an unrealistic dream,’’ he added.

A number of commission members, however, including state Senator Richard Moore, Democrat of Uxbridge, and state Representative Harriett Stanley, Democrat of West Newbury, initially had pushed for quick action, saying that the need to rein in health care costs is urgent, with medical spending growing by more than 8 percent annually. Moore said through a spokesman that he did not want to comment on providers’ concerns until after the public hearing on Thursday. Stanley would only say that “it’s still a work in progress.’’

Dr. JudyAnn Bigby, secretary of health and human services, said she couldn’t comment on the feasibility of the initial timetable. “There’s no example to point to [that says] this is how long it takes to do this,’’ she said. “I would be foolish to place a bet on whether we can do this in five years.’’

Lynn Nicholas, executive director of the Massachusetts Hospital Association, and her staff are developing a detailed analysis of the commission’s proposal, including five “make or break issues’’ that hospital leaders want legislators to address. Nicholas was a member of the commission and voted in favor of the plan, but with the caveat that hospitals’ concerns are addressed.

The hospital association wants legislators to include health care providers on the oversight board; shield providers from financial risks they can’t control and don’t have reserves to cover, such as a swine flu outbreak; change insurance plans so that patients are encouraged to stay within their accountable care organizations for all of their medical needs; provide extra compensation for providers who treat low-income patients and for teaching hospitals that have extra costs associated with training residents, research, and 24-hour trauma services; and offer incentives for providers to jump in and test the global payment system.

Given the complexity of moving to a new system, Nicholas said, making the change “across the state within five years is not feasible. . . . But let’s get the pilot programs rolling.’’

Another complicating factor for legislators is that there is also disagreement among providers on key issues.

Some hospitals, particularly those that belong to the Partners HealthCare system, have been able to negotiate fees that are significantly higher than those paid to their competitors. Paul Levy, head of Beth Israel Deaconess Medical Center, is worried that those higher fees will merely be transferred to a new system, cementing current inequities.

Levy is advocating a return to government-set rates to solve the problem – a solution the hospital association opposes.

“Everyone should have the same global payment,’’ Levy said. “Otherwise you’ll still have the Partners hospitals making 30 percent more and they’ll be embedded forever.’’

Liz Kowalczyk can be reached at

Correction: Because of a reporting error, a Page One story yesterday about proposed changes in the way medical providers are paid gave an incorrect title for Ellen Zane. She is chairwoman of the board of the Massachusetts Hospital Association.