Health plans set care surcharges

Rising medical costs will force many Massachusetts residents starting in July to pay steep surcharges for choosing treatment at expensive teaching hospitals or high-priced doctors' offices.

Much the way health plans now charge consumers extra for brand-name medicines, insurers are adopting "tiered" hospital and doctor networks. These new plans judge hospitals and doctors not only on their costs but on the quality of care they provide. Consumers will pay the least to go to hospitals that are the so-called best value -- ones that provide good care at a reasonable cost. Now most consumers pay the same amount no matter where they get care.

Employers nationally are pushing insurers to rank providers and give consumers financial incentives to choose the highest-quality, least-expensive doctors and hospitals. Many insurers have set up Internet sites that allow consumers to search for the best-rated hospitals for dozens of specific surgeries or illnesses -- programs that have raised the ire of hospital executives. The next step is to create financial incentives for patients to use these highly ranked providers.

The most dramatic change begins July 1 for Massachusetts state employees. Most of the state's 265,000 workers, retirees, and family members will have to choose from among several tiered provider plans from various insurers.

Like other employers, the state is struggling to control insurance premiums, which, although slowing somewhat this year, have been soaring 15 to 20 percent annually.

"Here we are in the third year of double-digit health insurance premium increases," said Dolores Mitchell, executive director of the Group Insurance Commission, which manages benefits for state employees. "There's no sense in blaming anyone. The population is aging. New technologies are coming out every day. The cost pressures are huge, and we have to do something to control them."

State employees who enroll in Tufts Health Plan, for example, will pay a $200 insurance copayment for each overnight stay at 15 hospitals Tufts identified as a better value for adult care. Employees will pay double that if they choose treatment at any of 51 hospitals across the state that the plan considers either more expensive, or lower in quality, or both. They pay the same monthly insurance premium no matter which hospital they use.

Hospitals in this category include some of Boston's most prestigious academic medical centers, such as Massachusetts General Hospital, Brigham and Women's Hospital, Beth Israel Deaconess Medical Center, Tufts-New England Medical Center, and Dana-Farber Cancer Institute. The only teaching hospitals that made it into the top tier of better-value hospitals were Boston Medical Center and Baystate Medical Center in Springfield. Tufts also is dividing hospitals into tiers for pediatric care and obstetrics.

Tufts executives would not say why specific hospitals ended up in the lower tier. But Dr. Thomas Lee, network president for Partners HealthCare, the parent organization of Mass. General and Brigham and Women's, said "it's an economic issue. We know we look very good on all the quality measures, particularly the ones that are based on real clinical data. The teaching hospitals are not cheap."

Hospital executives yesterday said they're not satisfied with how Tufts ranked hospitals. "We remain concerned that the [tiers] may not yet be fair to hospitals or reliable for consumers," according to a Massachusetts Hospital Association statement. "Going forward, what we need from the health plans is collaboration, openness regarding the rating methods employed, and a uniform methodology that will prevent different plans from issuing different scores for the same facility."

One particular concern, Lee said, is that health plans look at data extracted from hospital bills, rather than reviewing patient charts and medical records, to determine how many hospital patients experience life-threatening complications. These results feed into a hospital's quality rating. But bills sometimes don't identify which patients are sicker and more likely to experience complications. So if a hospital treats many sicker patients, it may receive a lower quality rating.

State employees who are enrolled in a traditional fee-for-service plan, administered by a company called Unicare, also will have to choose between three different hospital networks. The network that includes all hospitals will cost the most; the employee's share for a family premium will be $228.20 a month. In this plan, employees can go to any hospital they want. But employees who choose a plan that limits their choices mostly to community hospitals will pay 26 percent less, or $168.16 monthly for a family. State employees also can enroll in two smaller health maintenance organizations that are not offering tiered hospital or doctor networks; they are not statewide and generally offer lower premiums.

Tufts will roll out its tiered hospital network, called Navigator, to all employers Jan. 1. The insurer originally planned to have a third tier of even lower-ranked hospitals right away, for which members would pay $600 per admission. But hospitals heavily lobbied Tufts and persuaded the company to delay the additional tier until Jan. 1.

Harvard Pilgrim Health Care also is developing a tiered product, but it will charge companies and their workers higher insurance premiums for choosing higher-cost primary care physician groups, instead of focusing on hospitals. The insurer still is developing the details of the plan, but plans to make it available to Massachusetts employers Jan. 1. The state will adopt the plan for state employees July 1, 2005; for now the state will use a Harvard Pilgrim product similar to what the state currently offers.

Private employers can decide whether or not to purchase the products. Tufts and Blue Cross and Blue Shield of Massachusetts began offering companies tiered hospital networks three years ago, but the rankings were based only on cost, not on quality, and were not popular. Consumers paid a surcharge to get treatment at the state's expensive teaching hospitals.

But Richard Lord, president of the Associated Industries of Massachusetts, an employers organization, said that after three years of insurance premium increases, companies will start to sign up because they are looking for any way to direct consumers to hospitals and doctors that provide the best medical care at the lowest prices.

"Employers are really going to go for this," he said. "A lot of them will embrace this."

Yesterday, a coalition of 28 large employers, including JCPenney and Sprint, met in Chicago to push for uniform standards for measuring hospitals and doctors on cost and quality -- and to reward them financially by nudging patients their way.

"The momentum is building," said Susan Connolly, of Mercer Human Resource Consulting's Boston office.

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