News & Events

Call to cap medical payments is likely

Quick action vital, Senate leader says; Costs in Mass. rose 15% in two years

By Liz Kowalczyk, Globe Staff  |  March 17, 2010

Massachusetts Senate leaders indicated yesterday that they will push forward significant measures this year to control soaring health care costs in the state that probably will include caps on payments to hospitals and doctors.

Legislators made their comments during the first day of high-profile state hearings being held to investigate why health care costs are rising so rapidly.

Senate President Therese Murray, Democrat of Plymouth, told the audience at the University of Massachusetts Boston that state officials “must act quickly and decisively once the hearings are over’’ and that “failure to act is not an option.’’

Senator Richard Moore, an Uxbridge Democrat who is Senate chairman of the health care financing committee, said the Senate is committed to passing long-term solutions to control costs.

Last year, a state commission proposed radical changes to the way providers are paid, with the goal of slowing the rise in the use of medical services. It urged scrapping the current fee-for-service system and paying providers a per-patient annual fee, called a global payment, to cover all of a patient’s medical care.

The state secretary of Health and Human Services, Dr. JudyAnn Bigby, and other Patrick administration officials have completed a detailed plan for adopting global payments and are expected to brief legislators on it by next week, Moore said.

But given that global payments could take five years or more to implement, he said “a quick fix’’ is need ed “to stop the bleeding,’’ particularly for owners of small businesses, who are struggling to pay soaring health insurance premiums. He said provider rate limits could slow the growth in health care costs more quickly and are a likely component of any Senate measure.

House Speaker Robert DeLeo, Democrat of Revere, did not attend the first day of hearings, and it’s unclear whether the House’s leaders are as ready to advance cost-control measures as Senate leaders are.

DeLeo’s spokesman issued a statement saying the speaker “believes that both payment and delivery reform are crucial to stabilizing our cost increases and improving access,’’ and that he is reviewing all proposals.

Moore has filed a bill proposing to cap payments to hospitals and doctors at 110 percent of what the federal Medicare program pays for medical care. But, he said yesterday, insurers and the state could save money even with a higher cap.

Governor Deval Patrick filed a measure last month that would give state officials power to review and reject rates set by hospitals, physician groups, medical imaging centers, and insurers.

Yesterday, Patrick said the health care industry, which opposes his plan, “has been lacking’’ in developing immediate solutions to the problem. “After years of circular conversations with industry leaders,’’ he said, it’s time to attack soaring costs.

According to the Division of Health Care Finance and Policy, which is holding the hearings, medical spending on privately insured Massachusetts residents grew more than 15 percent from 2006 to 2008, fueled by outpatient care in expensive hospitals.

The division and a separate yearlong investigation by Attorney General Martha Coakley’s staff found that hospitals and doctors who set higher prices played a significant role in pushing up costs. Both concluded that Massachusetts insurance companies pay some providers who have market clout dramatically more money than others, for essentially the same care.

Yesterday, Coakley testified she found no evidence the higher pay was a reward for better quality work or for treating sicker patients. In January, her preliminary findings did not name providers.

But her final report, released yesterday, identified the highest-paid hospitals and physicians’ groups.

Blue Cross and Blue Shield paid some hospitals more than twice as much as others in 2008, she found.

Three Partners HealthCare hospitals — Nantucket Cottage, Massachusetts General, and Brigham and Women’s — were the best-paid hospitals in the insurer’s network, followed by Children’s Hospital Boston and Berkshire Medical Center. Tufts Health Plan paid Children’s Hospital the highest prices in 2008, followed by North Adams Regional Hospital, Cooley Dickinson Hospital in Northampton, Berkshire Medical Center, Fairview Hospital in Great Barrington, Cape Cod Hospital, Mass. General, and the Brigham.

Coakley found some hospitals have leverage because of their size or reputation, while others have geographical dominance.

Hospitals and insurers will testify tomorrow.

A report released this week by Alan Sager and Deborah Socolar, directors of the Health Reform Program at the Boston University School of Public Health, concluded per-person spending on hospital care in Massachusetts was $3,015 in 2007 — 54 percent above the US average. The reasons include heavy reliance on academic medical centers.

Sager and Socolar say Massachusetts hospitals are unusually influential politically: “They have become central members of business groups that once fought to restrain hospital costs; and some won vast financial leverage and power to obtain higher prices.’’

Liz Kowalczyk can be reached at