AG Report: Hospital Cache Drives Up Costs

A investigation by Attorney General Martha Coakley finds that doctors and hospitals with the highest clout in the marketplace are paid more by insurers — in some cases twice as much — than their lesser-known counterparts without necessarily providing better care, according to a story in yesterday's Boston Globe.

Reporters Liz Kowalczyk and Scott Allen write:

The yearlong investigation, set to be released today, found no evidence that the higher pay was a reward for better quality work or for treating sicker patients. In fact, eight of the 10 best-paid hospitals in one insurer’s network were community hospitals, which tend to have less complicated cases than teaching hospitals and do not bear the extra cost of training future physicians.

Coakley’s staff found that payments were most closely tied to market leverage, with the largest hospitals and physician groups, those with brand-name recognition, and those that are geographically isolated able to demand the most money.

In an interview with the Globe, Coakely raises concerns about switching from a "fee-for-service" model to one of "global payments" in order to control costs — a move endorsed by a key state commission last year. The paper says, "Coakley’s investigators found that Massachusetts health care costs, which are growing by 7.5 percent annually, are mostly the result of rising prices, not patients getting more imaging tests, surgery, and other procedures," which is one of the main justifications for payment reform.