Examining Discrepancies In Massachusetts Insurance Reimbursement Payments

Ruzanna Harutyunyan's picture

Some hospitals in Massachusetts receive payments from insurers that on average are about 15% to 60% more than payments for the same procedure at competing hospitals, even when there is no evidence that higher-priced care leads to better patient outcomes, according to a Boston Globe review of private insurance data. According to the Globe, an "ongoing Spotlight Team investigation of health care in [the] state found scores of payment disparities for routine procedures in which there is no obvious difference in quality."

The Globe reports that the "payment pattern has become a driving force in the state's galloping health care costs" and "raises hard questions about why certain hospitals and physicians receive premium pay for care that is no better than that of their competitors." Health care executives say that the "dramatic payment gaps have emerged over the last decade as hospitals pushed, with varying levels of success, to offset federal budget cuts by boosting their income from insurance companies," according to the Globe. The hospitals that receive the highest rates are those that "have the bargaining clout" -- often "based on a powerful brand name and elite reputation" or geographical location -- to "demand higher insurance payments," the Globe reports.

The "resulting wide range of payments for the same services reflects a health care system in which deregulation and lax government oversight have allowed the hospitals with the most clout to extract big increases from insurers while everyone else falls behind," the Globe reports. Charles Baker, president of Harvard Pilgrim Health Care, said, "The same service delivered the same way with the same outcome can vary in cost from one provider to the next by as much as 300%," adding, "There is no other sector of the economy anywhere in this country in which that kind of price variability with no appreciable difference in service or product quality can sustain itself over time." The growing payment disparities have not been subjected to public scrutiny because of confidentiality agreements included in contracts between insurers and hospitals.

Partners HealthCare


According to the Globe, "no company has thrived more ... or has had more impact on the cost of medicine" in Massachusetts than Partners HealthCare, which in 1994 was established "to fight back against what its founders saw as the stinginess and lopsided power of insurance companies." Partners was developed as a collaboration between two of the state's most well-known hospitals -- Brigham and Women's Hospital and Massachusetts General Hospital -- and became what some called "the '800-pound gorilla' of Massachusetts health care, able to bend insurers to its will," the Globe reports.

However, while "Partners prospers, 24 Massachusetts hospitals are losing money," the Globe reports, adding that many of those hospitals "would be profitable if they had even a fraction of Partners' contract clout." Massachusetts General and Brigham on average receive payments that are 30% higher than other non-pediatric state hospitals, according to data obtained by the Globe. Peter Markell, Partners CFO, said, "We were willing to take the risk of challenging payers," adding, "If you are never willing to challenge them, of course they are going to jam it down your throat."

National Trend

The Globe reports, "The growing dominance of Partners -- and Children's Hospital for pediatricians -- is a microcosm of the national trend in the last 15 years, as government has increasingly allowed the market to decide what health care will be available and at what price." During that period, "[h]undreds of unprofitable hospitals closed, while many others merged to gain more negotiating power with insurers, which by the mid-1990s, were aggressively denying claims and shortening hospital stays to hold down costs," according to the Globe. Economists say that the clout of merged health care systems contributed to significant increases in medical inflation in the 1990s, and health care specialists "agree that the price run-up did not lead to a similar improvement in quality," the Globe reports (Allen/Bombardieri, Boston Globe, 11/16).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.


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