Options Weighed To Address State's Health Care Price Variations

Updated 6:50 p.m.

BOSTON — Variations in prices for the same service at different hospitals in Massachusetts do not reflect different qualities of care and have not evened out over time, according to a Health Policy Commission report released Wednesday.

The report found that higher prices "are not generally associated" with better care, and that prices vary across the different types of hospitals — academic medical centers, teaching hospitals, community hospitals — as well as within each individual group.

To highlight the difference in costs just at community hospitals during a Wednesday meeting, Health Policy Commission executive director David Seltz pointed to levels of spending on maternity care. Spending for a low-risk pregnancy ranged from $16,000 at North Shore Medical Center to $9,000 at Heywood Hospital.

"While some variation in prices is warranted to support activities, unwarranted variation in prices — combined with a large share of volume at those higher-priced institutions — leads to higher spending overall and inequities in our distribution of resources," Seltz said.

Chairman Stuart Altman pointed to extensive teaching, "serious research," and services like burn units or psychiatric centers as factors that provide value at a hospital and might cause acceptable levels of price variation.

The commission found that quality of care and mean income in the service area are not generally associated with a hospital's commercial prices. Larger system size, status as a teaching hospital, and low competition are among factors that tend to be associated with higher commercial prices, while hospitals with more Medicare and Medicaid patients tend to have lower prices.

The report's release comes as the Legislature's Health Care Financing Committee prepares to review a proposed ballot question aimed at addressing variations in hospital prices for similar services and as lawmakers warily keep an eye on rising prescription drug and health care system expenses.

The ballot initiative is backed by 1199SEIU United Healthcare Workers East. Tyrek Lee, the union's vice president for community hospitals, said in a statement Wednesday afternoon that the report shows "urgent need" for pricing reforms like those proposed in the initiative.

"This report, along with prior reports by the Attorney General's office, confirms what healthcare workers have said about healthcare pricing disparities posing a grave threat to consumers, community hospital access, and to healthcare jobs across the state," Lee said.

The ballot question is among several possible strategies for tackling price variation, Altman said.

"It's one option. To me, it's not the right one," he told the News Service. "One of the things that I've stated, and what this report does, is that some variation is appropriate. The question is how much and where should it be, not just some arbitrary percentages of stuff like that. I think if we're going to move to that next stage, we've got to be more sophisticated."

Developing a strategy to manage variations will be a complex process, Altman said.

The commission on Wednesday discussed gathering stakeholders to research and develop policy recommendations. Ideas up for consideration include limiting price variation to value-based factors, enhancing market transparency, and transitioning away from the use of historic spending for setting global budget.

Gov. Charlie Baker has spoken repeatedly about how he thinks price transparency for consumers will help mitigate the variations.

Lahey Health CEO Dr. Howard Grant said he appreciated the commission's conclusion that a solution must be found to widespread price variation. His health system is urging the Legislature and governor to take action on the issue, he said.

"The consequence of not doing so is that we're going to continue to lose more community hospitals, more value providers who are delivering really high-quality care at relatively low cost," Grant said.