Rick Holmes: Health cost standoff

Rick Holmes

On the premiere of "Boston Med" Thursday, we watched as surgeons at Massachusetts General Hospital pulled a bullet out of a Framingham police officer's throat that had come within centimeters of killing him. We saw two dying women receive new lungs at Brigham & Women's, then watched the transplanted lungs inflate and their families rejoice.

The documentary series, which will run for eight episodes on ABC, is compelling TV. It reminds us that real human dramas playing out in hospitals everywhere can be more moving than any soap opera script. It shows the dedication and skill of hospital physicians, and the stress they must live with. And "Boston Med" can't help but enhance the already stellar reputations of the three big teaching hospitals (Children's Hospital will be featured in a future episode) that let producer Terence Wrong and his cameras into their operating rooms.

But there's another side of these hospitals "Boston Med" is unlikely to reveal. There is a money-making side to the hospital business as well as a life-saving side. There, executives operate on our wallets. They wield great financial power, political muscle and market clout, and have used all of it over the last 20 years to get bigger and richer. In the process, they have helped give Massachusetts the highest health care costs in the country.

For decades, community hospitals have complained about incursions on their territories by the big Boston teaching hospitals. They, too, have dedicated, skilled physicians delivering great care, usually at sharply lower costs, but it's hard to compete with the reputations and the market clout of the big guys. Partners, the parent of Mass. General, Brigham & Women's and a family of suburban hospitals, helped put Waltham-Weston Hospital out of business 10 years ago. Through Newton-Wellesley Hospital, Partners last year tried to drop an out-patient surgical center in the middle of MetroWest Medical Center's territory, a potentially crippling blow diverted through the intervention of Attorney General Martha Coakley's office.

Coakley has intervened again, this time in the form of a report that drops responsibility for rising health care costs squarely in the laps of the big Boston hospitals.

Health reform fatigue is probably one reason why her report got little notice when it was released in March. Coakley's office had been charged by the Legislature with helping identify factors driving health care costs, and given authority to collect cost and pricing information health care providers usually keep private.

The most interesting new information focused on the financial relationships between the state's big hospitals and its big insurance companies. Those powerful interests, who worked together four years ago to reform the state's health care system, are now in a bitter fight over controlling health costs.

It's a fight playing out in the race for governor, where Republican Charlie Baker, the former CEO of one of the state's biggest insurance companies, is challenging Gov. Deval Patrick, who has made the insurance companies the villain in the health costs crisis. In April, Patrick's administration rejected hundreds of health premium rate hikes, throwing the insurance companies' finances in turmoil.

A panel from Patrick's own Division of Insurance overturned nearly all those rejections Thursday, in a ruling based in part on the conclusion in Coakley's report: That the big hospitals and physician provider groups are using their market power to squeeze ever larger payments from insurance companies.

This game usually is played out behind the scenes, but a public standoff in 2000 illustrates how it works. Partners was in contract renewal negotiations with Tufts Health Plan, one of the state's largest insurers, and it wanted Tufts to pay Partners physicians and hospitals considerably more than other providers were charging. Pay our price, Partners said, or your policy holders won't be treated by our doctors at our hospitals. Holding firm, Tufts began informing its premium-holders that access to some providers might have to be limited in order to keep premiums down.

Tufts started hearing from members upset they might have to change doctors. Then it started hearing from employers, saying they couldn't offer Tufts to their employees if they wouldn't have access to Partners physicians and hospitals. Eventually, Tufts blinked.

Because of that kind of negotiation, insurance companies may have to pay two or three times as much if a policy-holder delivers a baby at Mass. General as opposed to a community hospital. Such disparities in cost, Coakley's report found, are widespread.

The report's data analysis tested all the arguments why costs should be higher at some hospitals than others, and none of them held up. The high-priced hospitals don't provide a higher quality of care, it concluded, nor do they serve populations that are sicker or require more complex services. The disparity in costs doesn't correlate to percentage of patients on Medicare or Medicaid, nor to whether they are teaching vs. non-teaching hospitals.

"Price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities," the report states. Moreover, it concludes, increases in health care costs over the last few years haven't resulted from people using more health services, but simply because providers have raised their prices.

The higher prices only correlate to "market leverage," according to the report. Where the hospitals and physician groups control the market, they demand higher payments. As higher priced hospitals gain market share at the expense of lower priced hospitals, the disparities will just get worse.

The hospitals have responded with their own study, which questions Coakley's methodology and conclusions, but fails to offer a convincing reason for the price disparities. They've also challenged another state report that found the insurance companies short on cash reserves - even before Patrick quashed their rate hikes - while the big hospital groups are awash in cash.

Most people see health care costs in their insurance bills. They don't see how much the doctors and hospitals are charging the insurance companies. So it's easier to blame the insurance companies for rising premiums than the family doctor or those attractive, dedicated health professionals on "Boston Med."

That's one reason Barack Obama chose to make insurance companies the bad guys in the health reform debate, but there were others: The physicians and hospital lobbies were supporting his bill, while the insurance lobby opposed it.

Patrick is following Obama's playbook for similar reasons, and one more: Charlie Baker is former top dog at Harvard Pilgrim Health Care. You wonder if Patrick would see things differently if Baker had run a hospital instead of an insurance company.

Meanwhile, nobody is acting on the conclusions in the Coakley report. State Senate President Therese Murray has made health cost containment a priority, but her bill doesn't directly address the practices of the providers. Her bill, already adopted by the Senate, would address some cost factors at the margins, but House Speaker Robert DeLeo shows no interest in even taking it up.

Patrick has a bill that would give him more authority to control rates set by providers as well as insurers, and would open up contracts between insurers and providers to government review. But it's not going anywhere either.

The rich hospitals and the rich insurance companies both have clout on Beacon Hill and hired-gun lobbyists pushing their pleas. Cases like this remind me of how I feel when the Yankees play the Mets: You wish there was a way they both could lose.

The next move is up to Martha Coakley. You remember her. Six months ago she was being reviled by Republicans and Democrats alike, for the crime of losing the Senate election to Scott Brown. Interestingly, in this season of voter discontent, she's the only statewide official who is coasting to re-election without a challenger from either party.

Coakley fingered the anti-competitive practices of the big hospitals in her report, but she's done little since. There have been no prosecutions or, as far as is known, no referrals to, for instance, federal antitrust prosecutors. She told me some months ago the AG could go after hospitals, which are classified as nonprofit public charities, for uncharity-like business practices - like horning in on another hospital's turf - but she hasn't done it yet.

Meanwhile, Patrick would like to appeal the Division of Insurance's Thursday decision overturning his rejection of the insurers' premium hikes, but the governor doesn't have the authority to appeal. That power is vested in Coakley, the attorney general, and, so far, she's not talking.

For real, life-or-death drama, tune into "Boston Med." But when it comes to the skyrocketing health costs that are draining the budgets of families, businesses and governments, the political drama playing out on Beacon Hill is more to the point.

Rick Holmes, opinion editor of the MetroWest Daily News, blogs at Holmes & Co. ( He can be reached at