3 medical centers set $3m challenge

Three medical centers set $3m challenge

By Liz Kowalczyk, Globe Staff, 10/21/2003

Three of Boston's top academic medical centers, entering into an unusual pact, said they will donate $3 million to charity unless they achieve six goals to cut costs and improve care over the next year.

Massachusetts General Hospital, Brigham & Women's Hospital, and Dana-Farber Cancer Institute have put the money aside from their own funds and can earn it back only by meeting these goals, executives said. Otherwise, they will hand over the $3 million to an unrelated charity or charities.

US hospitals are under growing pressure to meet new federal antitrust rules, and the $3 million kitty is a surprising and innovative way of trying to do so, said Brent Henry, general counsel for Partners HealthCare, the parent organization of Mass. General and Brigham & Women's.

The federal rules work like this: Hospitals can enter into joint ventures; Dana-Farber and Partners entered into a venture in 1996 to treat adult cancer patients. Hospitals in these ventures often band together to negotiate fees from health insurers, thereby increasing their size and their bargaining clout.

But the Federal Trade Commission has issued guidelines over the past three years saying these hospitals must be authentic joint ventures, not just on paper but in operation. In other words, they must share clinical programs and financial incentives. Otherwise, they could violate antitrust rules that prohibit competing hospitals from negotiating prices together, a practice often referred to as price fixing. The idea, said Mike Cowie of the FTC, is that hospitals in joint ventures should not enjoy a gain in bargaining clout without benefiting consumers in return.

Since the mid-1990s, when hundreds of hospitals merged or entered into joint ventures, the FTC has grown concerned about the bargaining power of hospitals that dominate their markets.

"There's always a risk that something labeled a joint venture is illegal price fixing," said Cowie, an FTC assistant director. "We try to get behind the labels and ask, `Are these ventures doing something that will benefit consumers? Are they sharing costs, making real investments, and improving quality and efficiency?' "

Mass. General, Brigham & Women's, and Dana-Farber treat about 10,000 overnight cancer patients a year, or 25 percent of the oncology market in Eastern Massachusetts, according to Partners executives. Under the joint venture, Dana-Farber transferred 27 patient beds to Brigham & Women's and now does only outpatient care, while Brigham and Mass. General treat overnight patients as well as day patients. The three hospitals are themselves charitable corporations.

Physicians helped develop the specific goals -- which they are implementing now -- that the hospitals must achieve to earn back the $3 million. Among them is discharging at least 15 percent of patients by noon, rather than by 4 or 5 p.m. as is now often the case, freeing beds for patients waiting in the emergency room, and allowing the hospital to cut costs by using beds more efficiently.

Henry said he knows of no other hospitals in joint ventures that have set aside a kitty as a way to share financial risk. Stuart Altman, a health policy specialist at Brandeis University, also called the approach unusual. Cowie would not comment on Partners and Dana-Farber or whether the $3 million pool meets FTC guidelines requiring hospitals in ventures to be financially integrated.

"We wanted to have a financial model that was more clearly tied to our clinical goals and that's more in line with the antitrust environment," said Dorothy Puhy, Dana-Farber chief financial officer. "The lawyers wanted to create a significant risk; that included enough money to hold our feet to the fire."

During the past three years, some health plans and employers have expressed concern over Partners' market power. Partners treated 20.8 percent of all overnight hospital patients in Eastern Massachusetts in 2002, compared with 19.5 percent in 1998, according to Partners executives. In February 2001, an employer group took its concerns about the network's negotiating clout to Attorney General Thomas F. Reilly. A year later, Reilly began investigating possible anticompetitive activity in the Greater Boston health care market and sent demands to numerous hospitals for a wide range of information on their relationships with referring physicians, according to lawyers for the hospitals. Reilly said he was not targeting a specific network.

Reilly's staff would not comment on whether he is pursuing this investigation of anticompetitive activity.

In March, during an FTC hearing, former Tufts Health Plan chief executive Dr. Harris Berman accused Partners of enjoying a near-monopoly in Boston's western and northern suburbs and of using its clout to force up health insurance premiums.

The FTC is investigating hospital mergers and joint ventures across the country, but Cowie would not comment on specific investigations. The FTC also investigates mergers and joint ventures that are so large they dominate the market and have the power to push up prices. Partners executives said they are not aware of any FTC investigation into their joint venture with Dana-Farber or any other aspect of the organization.

Partners has long maintained that it does not enjoy excessive market power, and, in fact, that health care is far more concentrated in other US cities. For example, according to the Center for Studying Health System Change, a nonpartisan, nonprofit research group in Washington D.C., Boston's HMOs have more market power than Boston's hospitals. And, according to Partners' figures, some of its national competitors have more market share.

Dr. Thomas Lynch, a Mass. General oncologist and a director of Partners' oncology service line, said doctors designed the goals to improve care for patients -- as well as prove the hospitals share financial incentives. To help get patients out of the hospital before noon on their discharge day, Mass. General will hire a nurse practitioner devoted to this task. "A patient can sit on the floor three to five hours waiting for a doctor to finish in clinic and complete their paperwork and send them home," he said. Other goals include following national guidelines for giving chemotherapy patients with anemia the expensive and energy-boosting drugs Epogen and Procrit. Lynch said doctors are not prescribing the drugs to some patients who qualify for them, while giving the costly drugs to other patients who have asked for the drugs after seeing television advertisements.

The hospitals also must give cancer patients with back pain MRIs and neurology exams more quickly. Back pain in patients with breast and prostate cancer can be a sign that the cancer is pressing on the spinal cord. Likewise, the hospitals are developing a plan to have beds immediately available for chemotherapy patients who develop fevers, so they won't have to wait in the emergency room.

"There's no question that taking these top three places and putting them together has the potential to reduce competition in the market," Altman said. "But it also has the potential to improve quality."

Liz Kowalczyk can be reached at kowalczyk@globe.com.