Earlier this year, Massachusetts released health data which found that insurance companies were paying some hospitals significantly more than others for providing similar care, even though the higher paid hospitals were not producing better outcomes. The cause of the cost disparities was difficult to determine, but a report by state Attorney General Martha Coakely argued that the difference may be partly attributed to provider market clout, which allows dominant (so-called “brand name”) providers who hold monopolies to charge more without necessarily offering better care.
Yesterday, House Minority Leader Ronald Mariano introduced a measure that he claims would address the problem and save the state up to $267 million. Under the bill “Massachusetts health insurers would be required to pay lower rates to some of the state’s most expensive health care providers, while boosting rates for some of the lowest-paid providers”:
Mariano, D-Quincy, said the bill would immediately address the price disparities. It would potentially impact the 20 percent of hospitals and physicians at the high end of the rate spectrum, along with the 20 percent at the lowest.
High-cost providers would not be allowed to renew contracts or enter into new ones with insurers unless their rates are lowered to below the 80th percentile of all health plan rates. Conversely, insurers would be prohibited from entering into or renewing contracts with the lowest-cost providers unless those rates are increased beyond the 20th percentile of all plans.
In a statement, Mariano added that the measure would compliment Gov. Deval Patrick’s (D) ongoing effort to control health spending by shifting the state from a fee-for-service payment system to one that rewards outcomes and better care coordination. “Changing the payment system will take several years but employers and consumers can’t wait that long,” he said. “If we expect the health care system to function properly and more efficiently, closing the gap between lower-paid providers and higher-cost providers needs to be a priority and we must start now.”
Indeed, eliminating price disparities that don’t result in better health outcomes could be a serious money saver — both for the state and individuals. But she state could even go a step further and create an authority that would negotiate set prices with all providers, thus undercutting hospital monopolies and ensuring that health dollars are spent delivering better health care rather than paying for some kind of business “brand.”