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Some hospitals back price curbs

Say temporary measures will correct market; Partners chief says changes could hurt care

By Liz Kowalczyk
Globe Staff / June 29, 2011

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Support is building among some Massachusetts hospitals for temporary government limits on health care prices, a remarkable development in an industry that has long favored letting the marketplace determine how much providers are paid for treating patients.

During a second day of hearings on health care costs yesterday, three of four hospital chiefs who testified said government controls on prices are needed to close the wide gap between what insurers pay hospitals and doctors’ groups with the market leverage to demand high prices and what they pay to those without it.

“Fundamentally, I believe in the market,’’ said Andrei Soran, chief executive of MetroWest Medical Center in Framingham. But “the market got out of hand,’’ he said. “Intervention will bring it back to the appropriate level.’’

Norman Deschene, president of Lowell General Hospital, said his hospital is losing doctors because they can see a patient and make “$100 today with Lowell General’’ and then sign on with a better-paid competitor and make “$150 tomorrow for the same work.’’

“Some government intervention needs to take place,’’ he said.

Ellen Zane, chief executive of Tufts Medical Center, and James Roosevelt — chief executive of Tufts Health Plan, the only insurance company executive on the panel — also said they favor temporary price controls. Lowell General, MetroWest, and Tufts Medical Center are lower-paid providers, or they fall in the middle, depending on the insurer paying them.

Only Dr. Gary Gottlieb — chief executive of Partners HealthCare, which includes the highly paid Brigham and Women’s and Massachusetts General hospitals — disagreed. He said patients are starting to switch to lower-cost providers, as more employers adopt limited and tiered provider networks, which charge consumers more for using high-cost hospitals and specialists.

The Partners chief took intense questioning about why his hospitals are paid better than many others, and whether he believes disparities in payments are a problem in the state.

The panel was responding to presentations from Governor Deval Patrick’s administration and Attorney General Martha Coakley’s staff showing that high prices paid to some providers are driving up health care costs. An investigation by the state Division of Health Care Finance and Policy found that for cesarean deliveries, for example, the highest-paid hospitals are given almost double ($8,000 to $10,500) what the lowest-paid hospitals receive ($5,000 to $6,500), without a discernible difference in quality. The prices come at the expense of employers and consumers who pay insurance premiums.

The agencies released similar data last year.

Hospital chiefs on the panel did not specify what types of price controls they favor, but said they support the attorney general’s recommendations to put “temporary statutory restrictions on how much prices may vary for similar services.’’

Zane proposed that the state set standard baseline fees, leaving hospitals to negotiate extra payments from insurers for added costs such as training new doctors and providing care to large numbers of Medicaid patients.

Lynn Nicholas, president of the Massachusetts Hospital Association, said her group will make recommendations next month on how to reduce price variation. She said she is especially concerned about helping the most vulnerable hospitals that are treating large numbers of poor patients and struggling with inadequate Medicaid payments.

Gottlieb agreed that hospitals should not be underpaid. But he warned that the data used in the reports is incomplete because it does not capture quality differences among hospitals that warrant higher or lower payments.

Last year, he said, 1 in 6 patients at the Brigham and Mass. General were transferred from other hospitals “in the hope that we can provide unique life-saving care.’’ Higher prices for services like cardiac surgery subsidize poorly reimbursed care like treatment for mental illness, he said.

“We should be careful not to overreact or overreach, especially based on incomplete data. We don’t want to jeopardize truly precious resources.’’

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