Levy Deconstructs NYT On Global Payments In Massachusetts

Here's the ever-persistent Paul Levy offering analysis on the page one story in today's New York Times about cost-cutting health reform efforts in Massachusetts.

The Times piece cites experiments with global payments, and quotes Brandeis health economist Stuart Altman saying that Partners HealthCare's recent announcement to enter into such an arrangement with insurer Blue Cross Blue Shield of Massachusetts is "a big deal because they’re the biggest player in town and it sort of solidifies that this will be one of the major changes in the system and that it’s likely to be around for a while.”

Levy writes:

The reporters give credence to the premise, even though there is not empirical support for the conclusion. Indeed, such support as exists in Massachusetts suggests that the manner in which global payments were introduced resulted in higher, rather than lower, costs. The story also fails to discuss consumer concerns about such plans, which would limit choice.

But then, the reporters retell the big lie, the one that suggest that concerns about the cost trends of the dominant provider group have been alleviated by a recently signed contract. Ready? Here you go:

"Under market and political pressure, Partners also agreed to renegotiate its contract with Blue Cross Blue Shield and accept lower reimbursements, which is expected to save $240 million over three years. ... Blue Cross Blue Shield of Massachusetts said payments to Partners would increase at about 2 percent a year rather than the previously anticipated 5 percent to 6 percent."

Let's deconstruct this. First of all, the PHS contract had one year to run, not three years. Whatever rate renegotiation they accepted for the last year of the contract, they would have been smoking something to think that they would have received 5 to 6 percent going forward. Also, as previously mentioned here, the base on which they get their "about 2 percent" increase is substantially above the market. Other hospitals that were at or below market rates also received rate increases in the "about 2 percent range" — starting one or two years ago. Indeed, with other, non-dominant hospitals, BCBS started those negotiations by offering negative or zero change in rates. Partners, then, didn't give up anything going forward. It was permitted to keep its huge bolus of embedded, above-market rates.