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Partners, Harvard Pilgrim reach new four-year contract that limits annual payment increases

Partners HealthCare System has struck a new four-year contract with insurer Harvard Pilgrim Health Care that both sides said will help control Massachusetts health care costs by putting Partners’ large hospitals and doctors practices on budgets and limiting future reimbursement increases to between 2 and 3 percent annually, roughly the rate of inflation.

The contract is retroactive to Jan. 1 and will run through 2015. While the new “global payment” arrangement takes effect immediately, Partners doctors and hospitals this year will still receive payment increases allowed under the old contract—about 5 to 6 percent.

If necessary, Partners will refund to Harvard Pilgrim any fee-for-service payments it received that result in total reimbursements for 2012 exceeding the budget established under the global payment set-up. That system—which applies to the 60 percent of Harvard Pilgrim Massachusetts members who are in its health maintenance organization --gives medical care providers a set amount of money to cover all of a patient’s care annually, rather than reimbursing them for every visit, test, and procedure.

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Responding to pressure to rein in rising medical prices, Boston-based Partners—the state’s largest hospital and physicians organization—has also torn up the last years of its previous contracts with two other large commercial health insurers: Blue Cross Blue Shield of Massachusetts and Tufts Health Plan. The renegotiated deals with Tufts and Blue Cross similarly called for annual payment increases of about 2 to 3 percent—and shifted Partners hospitals into alternative payment models for some members.

Contract negotiations between Partners and Harvard Pilgrim, based in Wellesley, took about nine months, according to Partners spokesman Rich Copp.

“This provides value to consumers and value to the market equivalent to what we did with the other contracts with Blue Cross and Tufts,” Copp said. He noted that slowing the growth of health expenses was a goal of the payment overhaul passed by the state legislature this year.

Partners, which owns Harvard-affiliated Massachusetts General and Brigham and Women’s hospitals as well as community hospitals across eastern Massachusetts, is viewed by other health care systems as the most influential player in setting the tone for how insurance payments are made.

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