What's Really Behind the Healthcare Spending Disparity in Massachusetts?

Mixed reactions followed the release of Massachusetts' first annual healthcare report, which found Boston-based Partners HealthCare received 31 percent of the money Massachusetts commercial payers spent on acute-care hospital services last year.

The report, which is required under Gov. Deval Patrick's 2012 healthcare cost-control law, found Partners not only dominated payers' acute-care hospital spending, but it also held the top spot for payments to physicians. Partners-affiliated physicians received 25 percent of the payers' money in 2011.

Paul Levy, former president and CEO of Beth Israel Deaconess Medical Center in Boston and author of the blog Not Running a Hospital, wrote a post saying Partners' hold is no surprise.

Mr. Levy disagreed with a statement made by Stuart Altman, chairman of the Massachusetts Health Policy Commission, in a Boston Globe report. Mr. Altman said the report underlines why Massachusetts is "the most expensive state" in the country: because of the structure of its healthcare system and prominence of academic medical centers.

Mr. Levy said the explanation for the Massachusetts' high costs is not that patients visit expensive teaching hospitals, including those owned by Partners, more than patients in other states. "What if the explanation, instead, is that the amount Partners' hospitals and doctors receive for patient care — in its academic centers, in its community hospitals, and its physician office practices — has been substantially above the rest of the market for two decades?"

While patients visiting academic medical centers is a cost factor, Mr. Levy said the real cost comes from a dominant provider (which is still expanding its holdings) receiving hundreds of millions of dollars in excess revenue relative to its market. Furthermore, "the dominant insurer has displayed no capacity for taking on that behemoth," Mr. Levy wrote.

Will these new annual spending reports help curb state healthcare costs? Mr. Levy expressed doubt. "You can't control healthcare costs in Massachusetts without equalizing the rates of pay among the health providers by basing the amounts paid on clinical value received, irrespective of market power," he wrote. "However, there is no appetite in this state to make that happen."

In a separate Boston Globe report, one official from the Center for Health Information and Analysis, which compiled the report, was taken aback by the disparity in the results. Aron Boros, executive director of CHIA, said he was most surprised by the difference between Partners and its next largest competitor, Boston-based Caregroup.

Hospitals associated with Caregroup, including Beth Israel Deaconess Medical Center, received approximately 9 percent of the money spent on hospital care compared with Partners' 31 percent. Next, Worcester-based UMass Memorial Health Care received 7 percent, while Boston-based Steward Health Care System and Burlington-based Lahey Health received 5 percent of acute-care spending each.

Mr. Boros said Partners has been able to negotiate high prices with all insurers, unlike other systems. "None of them has the consistent success of Partners in driving prices up," he told the Boston Globe.

Partners responded to the report's findings, saying the system cares for about 1.5 million patients each year, reasoning the results.

Partners has also been active in mergers and acquisitions. It recently completed a deal with 140-bed Cooley Dickinson Hospital in Northhampton. It is trying to add South Shore Hospital in Weymouth to its system, as well, and that deal is currently under regulatory review.

More Articles on Healthcare in Massachusetts:

Massachusetts Residents Pay More for Less Coverage, Report Says
Partners HealthCare Receives 31% of Massachusetts Payers' Acute-Care Spending
Partners HealthCare Q3 Operating Income Falls 16%

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