"A Handshake That Made Health Care History"--A Boston Globe Expose: A "Quiet Deal" Between Mass Blue Cross and Boston's Most Powerful Hospitals

In a lengthy expose entitled, "A Hand Shake That Made Health Care History," the Boston Globe details what it called a "gentleman's agreement that accelerated a health care cost crisis" in Massachusetts. The reported deal was between Partners Health Care, the state's biggest health care provider, and Massachusetts Blue Cross, the largest state insurer.

The article charges that the agreement all but kept the national health plans from gaining a foothold in the state and forced the state's other not-for-profit insurers to accept Partner's terms.

I will suggest this article, apart from its sensational reporting, may have two significant implications:

1. There will now be more pressure for Massachusetts to change the financial terms with its health care providers in order to keep the Mass Health Law afloat. The Massachusetts Health Law is coming up on its third year and its unsustainable costs are generally seen as a huge challenge for its long term viability. Getting those costs under control will have to focus on what is paid to providers more than any other issue. This may be the opening salvo on what will be more focus and pressure on what doctors and hospitals are paid in the state. The day this law was passed the die was cast that the generous payments made to powerful providers would have to be faced--sooner or later--and that day is upon them.
2. Getting doctors and hospitals onside will be the real challenge to health care reform. Health care reform in Massachusetts, and more importantly in Washington, will require payment policy that doctors and hospitals can buy into and at the same time result in sustainable costs for any new health reform plan. While hospitals are more powerful in Boston than most other markets, I would argue that this story is a study in just who really is, or can be, the most powerful player in the American health are system--it is the health care provider.
   

The recent CBO cost study underscores that it is what is being paid to health care providers that will be the real challenge to reform. If the docs and hospitals don't like the health reform plan they are politically powerful enough to kill it. If it is too generous to providers, the plan will be fiscally unsustainable.

Here is a small excerpt from the Boston Globe Story:

"Partners Healthcare was born in 1993, but its powerhouse potential didn't fully hit home until 2000. That's when the emerging giant cut a quiet deal with Blue Cross to ratchet up insurance costs across the state. Nothing in Massachusetts healthcare has been the same since.

"It was the gentleman's agreement that accelerated a health cost crisis.

"And Dr. Samuel O. Thier, chief executive of Partners HealthCare, and William C. Van Faasen, chief executive of Blue Cross Blue Shield of Massachusetts, weren't about to put it in writing.

"And so, in May 2000, the two simply shook hands on this: Van Faasen would give Partners doctors and hospitals the biggest insurance payment increase since Massachusetts General and Brigham and Women's hospitals agreed to join forces in 1993.

"In return, Thier would protect Blue Cross from Van Faasen's biggest fear: that Partners would allow other insurers to pay less. Those who helped broker the deal say Thier promised he would push for the same or bigger payment increases for everything from X-rays to brain surgery from Van Faasen's competition, ensuring that all major insurers would face tens of millions in cost increases. Blue Cross called it a "market covenant."

"The deal, never before made public, marked the beginning of a period of rapid escalation in Massachusetts insurance prices, a Spotlight Team investigation has found, as Partners repeatedly used its clout to get rate increases and other hospitals tried to keep up. Individual insurance premiums have risen 8.9 percent a year ever since the "market covenant," state figures show, more than twice the annual rise in the late 1990s.

"Both Partners and Blue Cross deny that they acted improperly in the 2000 payment negotiations or in their dealings since. Partners issued a statement saying that Thier pledged only that he would treat all insurers equally. Blue Cross executives have said that the big pay raise to Partners in 2000 was needed to offset years of low rates."

You can read the entire article here.