News & Events

A necessary probe into prices charged by hospitals with clout

NOW THAT the nation has embarked on a course toward universal health care, it is more important than ever that the government go after cost drivers in the system. In Massachusetts, that means addressing the power some hospitals have to demand rates much higher than others get for identical procedures. So it is encouraging that the US Department of Justice is investigating possible antitrust violations by Partners HealthCare, the parent of Massachusetts General Hospital and Brigham and Women’s Hospital.

The market clout of Partners — and that of hospitals with geographic monopolies, like Berkshire Medical Center in Pittsfield — pushes rates up and contributes to annual increases in insurance premiums that greatly exceed the cost-of-living index. That was one conclusion of a report earlier this year by Massachusetts Attorney General Martha Coakley. She is also reportedly investigating possibly illegal collusion between Partners and the state’s largest insurer, Blue Cross Blue Shield. A 2008 Globe Spotlight series reported on a previously undisclosed agreement between Partners and the insurer that led to higher rates.

Coakley’s report found that higher hospital rates did not reflect greater quality of care or complexity of cases. Yet costs to the system rose as consumers flocked to high-prestige settings with higher costs but not necessarily higher quality.

That makes the need for government action all the more crucial. The playing field for providers, insurers, and consumers must be level and transparent. There are other areas of the country where dominant hospitals have much the same pricing power as Partners does. And while the Justice Department would not say yesterday whether a broader inquiry is under way, an official of the American Hospital Association said the department’s antitrust division has recently increased its focus on health care. That’s good news. Under the health reform law, the government requires consumers to buy insurance. The government must therefore do all in its power to keep that coverage as affordable as possible by riding herd on the hospital and doctors’ fees driving up costs.

Partners’ hospitals are in every sense world-class institutions. They bring great distinction and cachet to Boston. They help drive the regional economy. But by relying on excessively high payments for basic procedures — as opposed to the cutting-edge treatments for which they are justly famous — the hospitals have created an economic model at odds with the state’s interest in ensuring that basic care is provided at affordable rates.

The continued vitality of Mass. General, Brigham and Women’s, and other Partners hospitals is crucial for Massachusetts. But it should come from a payment structure that rewards their excellence, without driving up the cost of procedures that could just as easily be done elsewhere.