A new contract struck between Partners HealthCare System Inc. and Tufts Health Plan will help control health care costs in Massachusetts by limiting payment increases to Partners’ hospitals and doctors to the rate of inflation, both sides said yesterday.
Partners, the state’s largest hospital and physicians organization, tore up the last two years of its existing contract with the health insurer, replacing the pact with a new four-year agreement that, while still giving Partners more money each year, will lower Tufts’ reimbursements to the medical care provider by about $105 million from what they would have been under the former rate structure.
Payment increases over the four-year term of the new contract will be between 2 and 3 percent - roughly the rate of inflation - about half of what Partners’ providers would have received during the last two years of the current contract.
“This suggests that this market, in terms of health care costs, has put the brakes on,’’ Gary L. Gottlieb, chief executive of Boston-based Partners, said in an interview.
Barbara Anthony, the state’s undersecretary of consumer affairs and business regulation, said the pact was the latest result of “the conversation begun by my boss,’’ Governor Deval Patrick, who sought to cap insurance premium increases in 2010, contending that they were crippling small businesses, families, and the state economy.
“This is evidence that the conversation is continuing among the people who can really reduce health care costs, the providers and insurers,’’ Anthony said. “For the sake of businesses and consumers, we’d like to see no increases. But this is good progress.’’
The agreement with Tufts, based in Watertown, covers payments to Partners’ doctors groups and hospitals, including Harvard-affiliated Massachusetts General and Brigham and Women’s hospitals in Boston. It follows a similar agreement Partners reached last October with the state’s biggest health insurer, Blue Cross Blue Shield of Massachusetts.
As with the Blue Cross deal, the new Tufts contract requires Partners medical care providers to accept so-called global payments. Those payments force doctors and hospitals to take on risk by giving them budgets for patient care rather than allowing them to bill insurers for individual patient visits, tests, and procedures.
The goal is to contain health care costs, which had been rising by double-digit percentages annually for much of the past decade. Combined with reduced payment increases under its new Blue Cross pact, Partners said, the deal with Tufts means the insurer’s overall payments will be $345 million less than they would have been otherwise over the next four years.
Tufts chief executive James Roosevelt Jr. said that with the new Partners pact, about 35 percent of its members - and about 70 percent of its members in health maintenance organizations - are now covered by risk-based contracts. Tufts’ coordinated care model, the program under which Partners will be reimbursed, resets the budgets and quality measures given to health care providers each year. By meeting certain goals, such as reducing hospital readmissions, doctors can earn more money.
“We’re pleased they [Partners] were willing to reopen a contract that had two years to run,’’ Roosevelt said. “We think this is a major step in reducing health care costs.’’
Partners, which has also begun negotiating a new contract with another major Massachusetts health insurer, Wellesley-based Harvard Pilgrim Health Care, was bowing to the new realities in the health care sector and the state economy, Gottlieb said.
“We appreciate that the market has shifted,’’ he said. “The market has become increasingly price sensitive. So we’re starting to take costs out of the marketplace. . . . Our desire overall is to look toward moving away from fee-for-service medicine.’’
Gottlieb said the reworked contracts with Tufts and Blue Cross demonstrate that the market is working and there is no need for state government to regulate payments to providers - an idea being weighed by lawmakers.
Roosevelt, however, said, “there’s still the need for the state to set enforceable goals for what we’re spending for health care in Massachusetts.’’ In particular, he said, state government needs to address the disparity in reimbursements between providers with “market power,’’ including Partners, and others that receive lower payments.
The new contracts reinforce moves already underway at Partners’ hospitals and other Massachusetts providers to deliver health care in a more efficient and coordinated way.