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Insurer in deal to curb its rates

Increase would slow in Partners, Blue Cross accord

HOPING FOR A PRECEDENT 'I hope other providers will follow suit to help provide relief for families and small businesses,' said Governor Deval Patrick. HOPING FOR A PRECEDENT
"I hope other providers will follow suit to help provide relief for families and small businesses," said Governor Deval Patrick.
By Robert Weisman
Globe Staff / September 14, 2011

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Partners HealthCare System Inc. is close to reaching an agreement with Blue Cross Blue Shield of Massachusetts that could provide relief to tens of thousands of insurance customers by slowing the rate of their premium increases, potentially by nearly a quarter of a billion dollars.

A preliminary understanding calls for Partners hospitals to accept $80 million less in reimbursements annually for the next three years under a new contract, according to business and government officials briefed on their plans. The officials spoke on condition of anonymity because they weren’t authorized to discuss the plans.

Employers and individuals who buy Blue Cross insurance covering Partners hospitals would still pay more under the proposed contract, but the increases would not be as much as they would have been otherwise. Annual premium increases that were projected at 5 to 6 percent for 2012 through 2014 would be pared to between 2 and 3 percent, for a total savings of about $240 million during that period.

The contract would also shift the way Partners hospitals are reimbursed, giving them budgets for patient care rather than paying them for each visit and procedure.

Blue Cross has been moving health care providers to such “global payment’’ systems under the so-called alternative quality contract it rolled out in 2009. Now, the nine area hospitals run by Boston-based Partners - including Harvard-affiliated Massachusetts General and Brigham and Women’s in Boston- will join that plan. They are among the state’s highest-paid hospitals.

A cost-savings agreement between the state’s largest hospital network and its biggest health insurer is sure to reverberate across the Massachusetts health care industry at a time when Governor Deval Patrick and state lawmakers have introduced legislation aimed at reining in premium increases and changing the way hospitals are paid by insurance companies. Partners is also negotiating new contracts with two other insurers, Harvard Pilgrim Health Care and Tufts Health Plan.

At all three companies, Partners has agreed to reopen existing contracts that were scheduled to expire next year, in effect tearing up the last year of those contracts and negotiating new ones. Partners last year said its goal was to free up $40 million in cost savings that would be used to reduce premiums for small businesses and individuals insured by all three health plans. While a $240 million savings agreement would far exceed that target, the savings would come in the form of lower rate increases rather than refunds.

Spokesmen for Partners and Blue Cross would not confirm yesterday that the two companies had reached an understanding on moderating premium rate increases, stressing that no deal has been signed.

Partners vice president Rich Copp cited a statement last month by its chief financial officer, Peter K. Markell, who said Partners was “making good progress’’ in its talks with the state’s major health insurers. Copp declined to provide additional details about those discussions.

“We have been talking to Partners for a number of months since the existing contract between the two organizations was reopened,’’ said Jay McQuaide, senior vice president at Boston-based Blue Cross. “We have had productive conversations and we remain hopeful that we will be able to reach an agreement that will allow us to provide rate relief to our customers.’’

Patrick, who imposed premium rate caps on health insurers last year, has called on hospitals and doctors to reopen their insurance contracts and accept smaller reimbursement payments.

“We’ve been on an aggressive path in the Commonwealth to lower health care costs, and if this agreement is finalized, it will be another step in that direction,’’ he said in a statement last night. “I hope other providers will follow suit to help provide relief for families and small businesses.’’

House majority leader Ronald Mariano, who has filed a bill that would compel health plans to cut payments to the most expensive providers and increase them for those that receive the lowest reimbursements, said he hoped any arrangement between Partners and Blue Cross would extend beyond three years.

“While this sends all the right signals, I’m concerned about what’s going to happen long term and the sustainability of this kind of agreement,’’ said Mariano, Democrat of Quincy.

That view was echoed by Jon B. Hurst, president of the Retailers Association of Massachusetts, who said the anticipated $240 million savings would come off a cost base that already is unaffordable for many merchants and restaurant owners.

“I appreciate the effort, and everyone is working to bring down costs,’’ Hurst said. “But small businesses, which are the most at-risk insurance consumers out there, are looking for premium reductions. And I don’t know if big health care understands that.’’

Robert Weisman can be reached at weisman@globe.com.