Saturday, May 17, 2014

If this newspaper story by Robert Weisman at the Boston Globe is correct, the Attorney General is about to sign an agreement with Partners Healthcare System that will lock in the system's dominance for years to come.

The main provision:

Under the deal, which has yet to be formally signed, Partners’ prices would be tied to the rate of inflation, currently about 1 to 1.5 percent. That is significantly less than the recent trend of health care cost increases.

Here's why. We are talking about a system that has used its market power to build up its rates levels to be substantially above the rest of the market, say 15%.  Then our remedy is to limit its increase to inflation?

Big deal. All other hospital systems are also limited in their rate increases by recent state legislation.  Sure, they might get to go up a bit faster than Partners, but if you look at the starting point, it will be decades--if ever--before PHS rates are equivalent to the rest of the market.

Here's the accurate comment:

Boston University professor of health policy Alan Sager called the settlement a “functional compromise” by Coakley, who is a Democratic candidate for governor.

“This strikes me as more of a political deal than a health care deal,” Sager said. “If we’re relying on competition to hold down health care costs, the more competitors the better. The harm to the public will accrue more slowly under this deal, but the harm will occur.”

The agreement is simply another way of codifying what PHS already won in the most recent state legislation, when it used its political influence to obtain a figment of cost control. As I pointed out then:

The bill would allow health spending to grow no faster than the state economy overall through 2017. For the five years after that, spending would slow further, to half a percentage point below the growth of the state’s economy, although leaders would have the power under certain circumstances to soften that target.

Providers and insurers that do not meet the spending targets would have to submit “performance improvement plans’’ to a new state commission. Failure to implement their plans could lead to a fine of up to $500,000.

The problem, of course, is that a provider network like Partners with costs well above the state average will find it easier to meet the governmental targets than those with lower costs.  Why?  Because each hospital or network will be judged on its percentage increases.  If you have a higher base, you can increase the absolute number of dollars being spent to a much greater extent than those with a lower base and still meet the percentage target.  Ironically, again, the state is acting to increase the disparity in costs between the have's and the have-not's.  It is enhancing Partners' market power.

You also need to understand that virtually every hospital system in the country has set an internal rate growth target equal to the expected rate of inflation. Partners is giving up nothing by codifying that.

By the way, here's the the comment in the Globe story given by a person who makes money by selling consulting services to hospitals.  How the newspaper could include this with no indication of his client list is beyond me.

“It strikes me as a very fair approach and a very smart approach. The AG’s office is saying they want to limit the risks around cost and forming a monopoly but recognize the benefits of a very high quality hospital system bringing services to a community that could benefit from it.” 

We have to admit that none of the Democratic candidates for Governor (including one I have supported) has shown any spine with regard to taking on this behemoth.  Not one.  But this is the first of the candidates who seems to be explicit about selling out.  Let's see if any of the others are willing to take on the issue.


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