AG Inks Deal To Rein In Partners HealthCare, But Does It Go Far Enough?

If you check in to a hospital or see a doctor connected to the Partners HealthCare network, your care will almost certainly cost more — sometimes a lot more — than at any other hospital in the state.

Brigham and Women's, a Partners hospital, might get $1,500 for an MRI, while the same health insurance plan would pay Beverly Hospital roughly half that amount for the same test.

A deal reached Monday between Partners and Attorney General Martha Coakley aims to address that disparity in exchange for allowing the network to acquire Shore Shore Hospital and Hallmark Health.

"[Partners is] a Goliath in a market that has used its dominance to drive up costs," Coakley said at a press conference Monday. "Those higher prices have led to an increased burden for families, for businesses, they've drained taxpayers ... and they have contributed to the difficulties that many of our community hospitals have had to compete and to stay in business.

"How to address the Partners problem has been an issue in our commonwealth for years," Coakley added. "But with this agreement, I believe we move from just documenting that problem to solving it."

Coakley and the U.S. Department of Justice have looked for several years at whether Partners' use of market clout violates antitrust laws. When Partners' plan to acquire South Shore Hospital landed on Coakley's desk for review last spring, South Shore became leverage for an agreement in principle that Coakley and Partners representatives signed Monday.

The deal ties cost increases for Partners hospitals and physician groups to inflation through 2020.

Aron Boros, executive director at the state's Center for Health Information and Analysis, says any concession from Partners on payments in significant.

"Partners is so big that out of your premium dollar, 20 percent goes to Partners hospitals and Partners physicians. So if we’re able to rein in that spending over time, it makes a difference not just for patients at those hospitals, but for the entire population of Massachusetts," Boros said.

But will the deal close the gap between what Brigham and Women's is paid for that MRI as compared to Beverly Hospital? Only if the low-cost hospitals get some significant rate increases.

If Partners prices rise 2 percent a year, and prices for similar Boston hospitals go up 3.6 percent, the gaps narrow, Boros says.

"Specifically, our 2012 data shows that Brigham and Women's prices are 24 to 33 percent higher than Beth Israel Deaconess Medical Center and 26 to 59 percent higher than Tufts Medical Center. After six years, these gaps close to 13 to 21 percent higher for BIDMC and 15 to 45 percent higher for Tufts," Boros said.

Of course that assumes insurers in Massachusetts would offer lower-cost hospitals rate increases that are almost twice as high as Partners, something they have never done before.

And they shouldn't, says Nancy Kane, who's been studying hospital financing in Massachusetts for more than 30 years and teaches at the Harvard School of Public Health.

"It doesn't make the whole more affordable if everybody's trying to grow their rates," Kane said. "[The AG's deal] doesn't address the larger issue of affordability. It's sort of a Band-Aid at this point."

Kane says if the state wants real competition among hospitals, it would have to either set rates or force Partners to sell off some of its hospitals.

Under the deal reached Monday, Partners will be allowed to add three hospitals: South Shore, Melrose-Wakefield and Lawrence Memorial. The AG's ban on hospital acquisitions through 2020 does not include Emerson Hospital, one of the few remaining independent community hospitals, and it does not prohibit Partners from expanding in western Massachusetts, New Hampshire or other surrounding states.

Partners is also agreeing to limit the number of physicians it employs. But the threshold is the number of doctors Partners employed in 2012. Since Partners is below that number now, it can add 550 doctors, a significant number, over the next three years, and then increase 2 percent a year for the next two years.

Partners will no longer be able to negotiate contracts that include affiliated doctors. It's not clear if this will curb Partners' reach, as Coakley suggests, or will press independent doctors into a Partners physician group.

Supporters of the agreement say the most significant element may be that Partners can no longer say to insurers: take the whole network or you don't get any of our hospitals. Insurers will negotiate separately with Partners' teaching and community hospitals if the deal is filed as is in court.

"In many ways what this does is allows Partners to go forward, and to show the community that it can lower prices over time," said Stuart Altman, who chairs the state's Health Policy Commission. "But it restricts [Partners'] ability to use their bargaining power in the way they have in the past decade or two."

Partners CEO Gary Gottlieb says he’s pleased to have an agreement that means the purchase of South Shore Hospital and the two Hallmark Health hospitals — Melrose-Wakefield and Lawrence Memorial -- can proceed.

"We have a pathway to move forward with a vision that we've embraced for an extended period of time," Gottlieb said. "To continue to make the investments that we believe are important, in helping to make health care more accessible and more affordable to the people of our communities."

Gottlieb says he isn’t sure if Partners will need to renegotiate existing contracts to keep costs in line with inflation. That’s one of many details to be worked out before this agreement is filed in court, making parts of it binding for 10 years.