Massachusetts - Boston Elite Hospitals as Economic Bullies

Portraying Boston’s elite hospitals, Massachusetts General and Brigham, the pride of Partners Health System and legends as academic medical centers, as economic bullies is a politically incorrect thing to do. These are, after all, Harvard teaching hospitals.

But reporting hospital economic bullying is just what the Boston Globe’s Spotlight Team of reporters have done in “A Healthcare System Badly Out of Balance: Call It The ‘Partners Effect,’ Elite hospitals Are Paid Much More for Care That is Often No Better Than Average. It Is the Best Kept Secret in Massachusetts Medicine” in the November 16 edition of the Globe.

But how can this be in this age of “transparency”? Well, write the Globe’s investigative reporters, “The growing payment gap has not been subject to public scrutiny because contracts between insurers and hospitals typically include confidentially agreements.”

That’s why, asserts Charles Blake, president of Harvard Pilgrim, Massachusetts’s second largest insurer, “The same service delivered in the same way with the same outcome can vary in cost from one provider to the next by as much as 300 percent.”

That may be why health care premiums in Boston have jumped 78% since 2000, why premiums in Boston are 30% above the national average, and why the price of inpatient care is going up 10% per year despite drops in utilization, why Brigham and Massachusetts General are paid 30% more for similar procedures than hospitals elsewhere in the state, why Health Partners collected 35% of statewide hospital profits, even though it owned only 16% of the beds.

You may say, these costs increases aren’t fair to consumers or competing hospitals. That may be, but Boston’s culture with its tilt towards academic health institutions permits and encourages it. In Boston, citizens are 2.5 times more likely to pick academic hospitals, where costs are higher. The results of these elite hospitals, say the reporters, are no better on average than in community hospitals, or in less prestigious academic rivals who are less dominant than Health Partners.

Hospitals paid the highest have more bargaining clout – based on brand name, academic reputation, state-of-art technologies, and unique ability to perform certain procedures - to charge more. They charge more simply “because they can.” Or to quote Harris Berman, who was president of Tufts Health Plan in 2000, when it caved into Health Partners demands, because “They’re Partners.”

According to Regina Herzlinger in Who Killed Health Care: America’s $2 Trillion Medical Problem – and Consumer-Driven Care (McGraw-Hill, 2007),

Two or three hospital systems now dominate the markets in many cities. How can you negotiate with a supplier who controls nearly all the capacity in a market? They are non-profit, have no greed owners who demand dividends, and they are doing the Lord’s work. Their presentation is supported by an academic literature that assumes selflessness on the part of nonprofit organizations.”

For these and other reasons, including political leverage as the biggest employer in town and among Boston’s greatest revenue generator, dominant hospitals have tremendous leverage, which makes them capable of suppressing orhwe hospital competition, and even eliminating physician rivals, brash enough to organize and own their own specialty hospitals.

I suppose the moral is: in a city that is bullish on academia, it is easy to be an academic bully. It is even easy to lecture the rest of the world on how to cut costs, as three Partners Health System physicians did recently in the New England Journal; of Medicine. (Morgan, J, Ferris, T, and Lee, T, “Options for Slowing the Growth of Health Costs,” April 3, 2008). The article did not mention high costs of Partners hospitals.

Anyway,

That’s the view from good old Boston,
The home of the Bean and the Cod,
Where the Lowells talk only to the Cabots,
And the Cabots only to God.
Where physicians from elite academic centers,
Pride themselves on being economic mentors.
But where costs are highest in the land,
At least that’s where things now stand.