Report: Consolidation could fuel costly trend on health care prices
The drivers of health care costs in Massachusetts – provider price increases, the gap between high and low paid providers and the volume of care delivered in high-price settings – have been identified consistently by researchers over the past five years as policymakers have grappled with how to slow cost growth, according to a new analysis.
If the themes sound familiar, it’s because they have been repeatedly flagged by state agencies trying to understand what’s behind the high cost of health care.
An analysis of state reports conducted since 2008, and performed for the Massachusetts Association of Health Plans, identified 10 recurring factors that have contributed to rising costs for employers and consumers. Among them, researchers found that health care is most often delivered in high-price settings that don’t necessarily correlate to a greater quality of care.
Academic medical centers tend to be associated with higher health care costs, and a significant gap has continually been observed between the highest and lowest paid providers, while those hospitals and clinics with the lowest reimbursement rates tend to treat the highest volume of patients on Medicare and Medicaid.
The report, to be released Monday and compiled by Freedman HealthCare, reviewed 16 cost trend reports, including studies done by the Division of the Insurance, the Attorney General’s office, the Center for Health Information and Analysis (formerly the Division of Health Care Finance and Policy) and the Health Policy Commission.
“We’re seeing so many changes now in the Legislature and we’re going to have a new governor in January and we’re continuing to see the same trends over and over and hearing the same things, so it’s important to focus and monitor to see if we’re making progress,” said Lora Pellegrini, president of the Massachusetts Association of Health Plans, a trade group that represents the interest of insurers.
Provider pricing and the impact of market clout in price negotiations with insurers have emerged in recent years as a focal point for lawmakers and regulators who are seeking ways to limit cost growth in an industry where prices were heavily regulated before passage of an early 1990s deregulation law.
“The large provider organizations are not only large in terms of volume but because they tend to be market dominant they demand higher prices,” said John Freedman, a physician who has also worked for Tufts Health Plan and conducted the analysis of the state reports.
In negotiations, providers and payers have become “sensitive” to the cost growth benchmarks established by a new law in 2012, but “there’s nothing to suggest that these kinds of trends couldn’t continue to happen,” said Pellegrini.
Freedman said increasing provider prices has led to higher health care premiums and consumer cost sharing.
Noting how the findings of each report he reviewed were sometimes questioned when they were produced because they relied on older data when real-time statistics were not available, Freedman said he hoped his analysis would put to rest any doubts.
“The argument that we still don’t know what’s happening yesterday is true, but these are persistent trends and more recent data is highly unlikely to radically change what’s happening behind these trends that we’re seeing,” he said.
Amid a shifting away from a fee-for-service model to a system of “global payments” that encourages integration of care, Freedman said his research found “limited evidence” to suggest that payment model produces cost savings, in part because of the bonus providers receive for demonstrating quality of care and keeping costs under budget.
As the state’s largest provider network, Partners HealthCare has put its proposed acquisition of South Shore Hospital on hold as negotiations with regulators in the attorney general’s office continue, Freedman also mentioned the growing concern that market consolidation will lead to even higher prices rather than the savings from integrated care and greater efficiency promised by the hospital networks.
“Right now we’re putting this out there. It’s not enough that providers talk about efficiency and integration, but they have to demonstrate that,” Pellegrini said.
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