Behind The News That Partners And Tufts 'Ripped Up' Their Old Contract

Bob: We bring you a health care story this morning with many layers. It begins with this headline: Partners HealthCare is volunteering to take less in a new contract with Tufts Health Plan. But beneath that headline is a world of spinning changes that will affect hundreds of thousands of jobs and billions of dollars of spending in Massachusetts. Joining us to discuss the dynamics is WBUR's Martha Bebinger. Let's start with: What happened in this contract?

Martha: For more than a year now, Governor Patrick has been calling on hospitals to reopen contracts and take less money. Partners, with some of the highest paid hospitals, did, first with Blue Cross last October and yesterday with Tufts Health Plan. In the Tufts case, Partners had two years left on a contract that was scheduled to increase 6-7 % every year and Partners agreed to take 2-3% instead. Here’s Partners CEO Gary Gottlieb:

"It’s a pretty big deal to look at that contract and say look, I want to rip that up and I want to take less money, that’s a big deal. What it says is that we’ve got a market that is dynamic and that that market is working."

Partners also agreed to move all Tufts HMO patients into a global payment contract where doctors have to manage a budget for their patient’s care.

Bob: Dr. Gottlieb says Partners is doing this because the network realizes that rising health care costs are forcing cities and towns to cut jobs and making life difficult for many families and state government. What else is behind this decision?

Martha: It is very unusual, both here in across the country, for a hospital to voluntarily say give me less money than you were planning to. And it demonstrates the pressure that Partners, in particular, but other hospitals, too, are under from Beacon Hill and from the federal government to cut health care spending.

Hospitals are worried that if they don’t cut costs themselves, the state will do it for them. It will set rates, and this could really hurt the highest-paid hospitals, including Partners. Partners is also under a lot of pressure from insurers who are charging some patients more to use high-cost hospitals and from doctors who are starting to balk at sending patients to the most expensive hospitals for routine surgery or treatment.

Bob: If hospitals, including Partners, are taking less money than they have in the past, and health care premiums aren't rising as much as they have in recent years, do we still have a problem with health care costs?

Martha: Many of the hospitals say no, and are waging a pretty intense campaign with State House leaders. The hospitals and some physician groups say the market is taking care of this problem, the Partners contract being another example and a window into this debate.

But economists say the long term trend is still costs that will consume personal, business and government budgets. David Cutler, an economist at Harvard, says it’s great that hospitals are taking 2-3% increases instead of 6-7%, but there’s a lot more room to squeeze out savings:

"Our best guess is that medical spending is about a third higher than it needs to be. It’s entirely reasonable to say that over the next 10-15 years we ought to be able to eliminate that."

Cutler, who is advising lawmakers, employers and leaders in the health care industry says the state should aim to keep all health care costs, not just hospital contracts, in line with inflation.

Bob: But does the state need to enforce that goal of keeping health care costs in line with inflation?

Martha: Well, that’s one of the main questions in this fierce debate going on behind the scenes. If all the parties agree that health care costs should not grow faster than inflation, what would happen to hospitals and physicians who don’t meet the goal?

There are different answers in the House, Senate and governor’s office. But Gov Patrick’s secretary for Administraton and Finance, Jay Gonzalez says the reduced contracts, like this one with Partners, wouldn’t have happened unless Governor Patrick had put some demands on insurers and providers.