Health care price regulation pitched, then panned by Baker

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STATE HOUSE, BOSTON, SEPT. 22, 2015….Fighting on two fronts to prop up struggling community hospitals and reduce health care price disparities from hospital to hospital, proponents of regulating health care prices are encountering stiff opposition from the major hospitals and Gov. Charlie Baker.

Health care workers represented by 1199 SEIU United Healthcare Workers East on Tuesday rallied behind Sen. Benjamin Downing’s bill (S 574) that would set a floor and a ceiling on negotiated prices between private insurers and health services providers. In addition to improving the bottom line for many struggling community hospitals, supporters say price regulations would level the playing field for hospitals that lack the negotiating power of larger providers.

The Massachusetts Hospital Association strongly opposes the idea of price controls, and Gov. Charlie Baker, despite stopping short of issuing a veto, made his distaste for price regulation clear.

Should their legislative effort fail, 1199 SEIU Healthcare Workers East is behind two variations of the Downing bill that have been filed as potential ballot questions to put before voters in 2016.

“At its core, the system we have now doesn’t have rates based on quality. It’s based on negotiation,” said Downing, a Pittsfield Democrat whose constituents experienced a disruption in health care access last year with the closure of North Adams Hospital. “This is not sustainable, and you’ll have more community hospitals on the brink of closure, if not closing like North Adams.”

Downing, in his testimony, went out of his way to say that he was not blaming any individual providers, who he said are “acting rationally” within the current system, and said he was open to other ideas.

Baker, who ran Harvard Pilgrim Health Care before entering state politics, said the answer to controlling price variations is transparency, not state regulation.

“We used to have a regulated system and it didn’t work. And the reason it didn’t work is because regulated systems, as a general rule, ultimately sort of fail for all kinds of reason and there was no transparency then around any of the issues around price. I’ve said for a long time that if you want to do something about price disparity make the data available. And that’s going to be a major initiative that we’re going to be pursuing later on this year.”

Baker would not commit to vetoing a bill like Downing’s should it reach his desk, but made clear that his focus will be elsewhere. “There are very few examples that I can find anywhere of where price regulation has worked as well as full-blown transparency. You want to create pressure on people to solve a price problem, throw a little sunshine on it. That’ll move it a lot faster and a lot farther,” he said.

The Committee on Health Care Financing held a hearing Tuesday on provider and payer policies, including Downing’s bill that would limit negotiated health care prices to a range of 20 percent above the median paid to similar providers and 10 percent below.

Members of the committee, including co-chairs Rep. Jeffrey Sanchez and Sen. James Welch, expressed concerns about community hospital closures such as in North Adams and their impact on access. Sanchez pushed MHA officials on whether there might be a way to get at price variation in a manner the hospitals would find acceptable.

Supporters say the bill, as well as the two proposed ballot questions, could wring almost $267 million in spending out of the health care system while lowering payments to high cost providers by $463 million and putting $196 million back into community hospitals and hospitals that serve a large volume of low-income patients on Medicaid and Medicare.

Partners HealthCare, the hospital network that includes many of Boston’s largest and most expensive teaching and research hospitals, would be impacted the most with as much as $444 million in payments from insurers lost due to the price ceiling.

“There are many reasons to oppose this bill. It doesn’t work is the overarching reason,” said Tim Gens, the executive vice president of the MHA. Gens told the committee that the association’s board, made up of representatives from all types of hospitals, unanimously opposes the Downing bill and the ballot petitions.

Because the proposals would only set parameters for private insurance contracts with providers, Gens said they would do “nothing” to address the problem disproportionate-share hospitals face of being “over-reliant” on public payer patients on Medicaid and Medicare.

Arguing that some price variation based on geography and other factors is inherent in the system, Gens also said the issue is far too complex and not well-enough understood to try to fix it by introducing “arbitrary” pricing controls.

“I don’t blame the proponents for being confused about this,” Gens said, suggesting more work needed to be done to study the reasons for the price variations among providers.

Tim Foley, political director for 1199 SEIU Healthcare Workers East, said that while workers continue to fight for higher Medicaid reimbursement rates “it’s time for the private sector to step up and try to solve some of these problems.”

“Health care workers understand that Partners has $7 billion in reserves and community hospitals are closing, and they understand the impact of the difference in rates that Partners gets versus community hospitals. It’s a real problem. We’re very clear on what the issues are and what the solution is and we think the solution is making sure community hospitals have a level playing field in negotiations with insurers,” he said.

Foley said the union hasn’t decided yet which ballot initiative it will move forward with if legislation fails. Neither petition applies the price ceiling to disproportionate share hospitals, and one would phase in progressively tighter price parameters and apply those limits to large doctor groups as well.

Attorney General Maura Healey, in a report released last Friday, said that highly-paid providers continue to increase their market share, driving up overall health care costs statewide. Her report encouraged the consideration of direct regulation of price or medical spending variation “to reduce disparities in the resources available to care for similar patient populations.”

Noting that the most recent CHIA analysis of medical spending found that commercial spending grew at just 2.9 percent, below the state benchmark of 3.6 percent, Gens said lawmakers should allow more time for reforms under the 2012 cost containment law to take hold.

“Chapter 224 is still being implemented. Before we abandon it substantially, I suggest we give it a chance to work,” he said.

One union official called that argument a “red herring,” suggesting that the cost containment law did not address price variations in its attempt to encourage transparency and alternative payment models.

Copyright 2015 State House News Service

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