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State plan may place limits on patients’ hospital options

State plan may place limits on patients’ hospital options

Globe Staff / October 11, 2009

The state’s ambitious plan to shake up how providers are paid could have a hidden price for patients: Controlling Massachusetts’ soaring medical costs, many health care leaders believe, may require residents to give up their nearly unlimited freedom to go to any hospital and specialist they want.

Efforts to keep patients in a defined provider network, or direct them to lower-cost hospitals could be unpopular, especially in a state where more than 40 percent of hospital care is provided in expensive academic medical centers and where many insurance policies allow patients access to large numbers of providers.

But a growing number of hospital officials and physician lead ers warn that the new payment system proposed by a state commission would not work without restrictions on where patients receive care – an issue some providers say the commission and the Patrick administration have glossed over.

“You can’t reap these savings without limiting patients’ choices in some way,’’ said Paul Levy, chief executive of Beth Israel Deaconess Medical Center. “It’s a huge issue, it’s huge.’’ Dr. James Mongan, president of Partners HealthCare, a Beth Israel Deaconess competitor, agreed that it wouldn’t “work without some restriction on choice.’’

A state commission recommended in July that insurers largely scrap the current fee-for-service sys tem – in which insurers pay doctors, hospitals, and other providers a negotiated fee for each procedure and visit – and instead pay providers a per-patient annual fee to cover all of the patient’s medical care.

This new system of “global payments’’ would discourage overuse of expensive medical services, force providers to live within a budget, and improve coordination of care for patients, supporters argue.

There is little doubt that the state’s current system of broad choice and sometimes uncoordinated care has helped push Massachusetts health care costs above the national average. It can lead to unnecessary duplication of medical tests, when patients see multiple providers, each often unaware of what the others have done. And thousands of residents get knee replacement surgery, have babies at teaching hospitals, or other care, when often a less-expensive hospital would be more economical and provide good-quality care.

In 1990, 36 percent of Massachusetts hospital patients were treated at teaching hospitals, but by 2007 the percentage climbed to 44 percent – more than twice the national average of 19 percent. The percentage of Massachusetts births at teaching hospitals also has increased. Some of this expanded use of teaching hospitals is understandable, because for many Boston re sidents academic medical centers in their neighborhoods are their community hospitals. In other cases, residents bypass less-expensive community hospitals, but this is a freedom many patients desire.

The Massachusetts proposal would involve a more ambitious restructuring of health care than any of the cost-cutting ideas being discussed in Washington. Under a global payment system, doctors, hospitals, nursing homes, and other providers would form large networks, called accountable care organizations, that would provide most of the care for individual patients and divvy up the payments. Doctors would try to coordinate patients’ care within these networks, which would share electronic medical records and treatment plans. And to manage costs, they would try to direct patients to the hospital within the network that could provide good-quality care at the lowest cost, while generally using teaching hospitals for advanced care.

The release of the report sparked a lobbying campaign by Massachusetts health care executives, who are urging Governor Deval Patrick’s administration and state legislators to move cautiously because they fear a new payment system could bankrupt some providers and compromise patient care. Many changes recommended by the commission would have to be approved by the Legislature before being put in place.

In its report, the commission, which includes high-ranking Patrick administration officials and legislators, said patients wouldn’t necessarily be restricted to providers within their primary care doctor’s accountable care organization. And, during a hearing at the State House Thursday, Dr. JudyAnn Bigby, secretary of Health and Human Services, said “the people benefiting from the new system should not even notice it.’’

Writing in the New England Journal of Medicine last month, staff writer Dr. Robert Steinbrook said the state commission failed to address the choice issue head-on. Global payments would save money only if networks “limited the volume of services, and denied certain requests from patients and providers,’’ among other measures, he wrote. “Since patient choice is such a sensitive issue, the commission waffled.’’

But Sarah Iselin, head of the state Division of Health Care Finance and Policy and cochair of the payment commission, said the panel understood the importance of addressing the effect of its recommendations on patient choice, but “felt these issues could be figured out’’ later by a board that would be created to oversee the transition to a new payment system.

The commission recommended that all residents choose a prima ry care doctor, because many patients will listen to their doctor’s recommendations about where to get care, she said. Under global payments, those doctors would have an incentive to refer patients within their organization. And, she said, educating patients about low-cost, high-quality providers also will play a major role, and may preclude the need for forced restrictions on choice. “Over time, patients may very well be inclined to go there all by themselves,’’ Iselin said.

Even if patients continue to seek basic care at teaching hospitals and go outside their doctors’ networks, she said, global payments have the potential to save money in other ways. The state estimates, for example, that reducing preventable hospital stays and emergency room visits would save $1 billion a year.

But Lynn Nicholas, president of the Massachusetts Hospital Association, pointed out that even saving money in these areas requires more coordinated care. One way to address the issue and still give people choices, she said, is for insurers to offer plans that charge higher premiums for unlimited access to providers, and lower premiums for members willing to stay within a defined network.

Many insurers offer these types of limited networks now – premiums are about 15 percent lower than in plans with unlimited access – but they haven’t been popular among employers and employees.

Nicholas said that may be because the financial incentives to join plans with limited networks aren’t strong enough. She wants providers, insurers, and employers to work together to develop benefit programs that will encourage patients to stay within limited networks.
Another way to cut the cost of academic medical centers is to reduce the prices they are paid. In an analysis done for the state this summer, the RAND Corporation estimated Massachusetts could save $1.3 billion to as much as $18 billion over 10 years if teaching hospital payments for certain conditions were set at average community hospital rates, depending on how many conditions are included.

It’s unclear whether the Legislature or the board that would oversee the new payment system would embrace such a controversial change. But the payment commission recommended that the board address in some way the issue of hospitals being paid vastly different amounts for similar care.
During her testimony, Bigby, the state Health and Human Services secretary, said that in the transition to global payments, “we must be careful . . . not to enshrine the inequities that exist in the current system.’’ Liz Kowalczyk can be reached at

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