Harvard Pilgrim Health Care is teaming up with more than 50 hospitals and 16,500 doctors across the state to offer Massachusetts employers and their workers a 10 percent savings on health insurance by forming what they call a “focused network’’ of medical care groups that excludes Partners HealthCare System Inc. and other high-priced providers.
The goal is to contain costs by giving businesses, municipalities, consumers, and other insurance buyers a new choice for coverage. While the new network limits where patients can receive care, it boasts a broad coalition of more moderately priced Boston teaching hospitals, such as Tufts Medical Center, Boston Medical Center, and Beth Israel Deaconess Medical Center; regional providers that include Lahey Clinic in Burlington and Baystate Medical Center in Springfield; and community hospitals such as Beverly Hospital, Cambridge Hospital, and St. Elizabeth’s Medical Center in Boston.
By requiring providers in the network to keep the cost of their services below a certain level, Harvard Pilgrim hopes to pressure more expensive hospitals to cut their own rates to compete - or risk losing market share to lower-priced rivals.
“It’s a blunt instrument,’’ said Eric H. Schultz, chief executive of Harvard Pilgrim. “But it’s getting to the point where cost is a barrier to some services, and for some patients.’’
The insurer, based in Wellesley, also believes the new offering - called Focus Network MA - can generate strong sales by appealing to employers who have long complained that escalating premiums limit their ability to expand markets and services. Health insurers have rolled out an increasing number of limited network plans during the past year, restricting members to certain doctors or hospitals. But some insurance subscribers have balked at the changes, saying overly narrow plans force them to travel too far, switch doctors or specialists, or lose access to high quality care.
The new collaboration - which still needs state Division of Insurance approval - is designed explicitly to allay such concerns and “move the needle’’ toward lower prices, according those involved in its development. “If value has meaning, the needle should move,’’ said Kenneth Hanover, chief executive of Northeast Health System, the Beverly hospital group that is completing a merger with Lahey Clinic.
Another aim is to make health care costs more understandable to individuals and employers. “The goal is to create a real market in health care,’’ said Kate Walsh, chief executive of Boston Medical Center. “This will get people to the services they need in a timely way.’’
While Harvard Pilgrim is stressing the wide range of hospitals and medical services that are part of the new network, just as significant to many health care market watchers is who was excluded: many hospitals identified by the state attorney general’s office as the highest-priced. Among them are Massachusetts General and Brigham and Women’s hospitals in Boston and others owned by Partners, the state’s largest hospital and physicians group. Also left out are hospitals that enjoy geographic monopolies, such as Cape Cod Hospital in Hyannis and Cooley Dickinson Hospital in Northampton.
Indeed, the network’s provider directory may symbolize a new cost-conscious alliance that seeks to challenge the dominance of Partners and other higher-priced competitors.
“This really feels like a partnership in many ways,’’ said Kevin Tabb, the new chief executive of Beth Israel Deaconess. All of the hospitals will continue to operate independently, however, and have separate payment contracts with Harvard Pilgrim.
The insurance company said it developed the network using a formula that calculated hospital prices and total medical expenses for doctors. Before applying to the insurance division for permission to sell the plan, Harvard Pilgrim sent letters to all providers, including those who were excluded, giving them a chance to negotiate lower reimbursements. If they do so in the future, they will be welcomed into the network, the insurer said.
Partners spokesman Rich Copp said it knew Harvard Pilgrim was working on a new product. But he would not say whether Partners hospitals might reduce prices so they can participate. “It’s similar to other efforts in the marketplace to develop new models of care,’’ Copp said. “We’re always paying attention to what’s happening in the marketplace.’’
Many of the hospitals in the new network clearly are counting on gaining a competitive advantage. Tufts Medical’s Floating Hospital for Children, for example, will be the only full-service children’s hospital in the Boston area for participants in the new plan. “If this works, we’re serious about [reducing] health care costs in the state,’’ said Eric J. Beyer, chief executive of Tufts Medical Center. “If it doesn’t work, we should stop talking about health care costs.’’
Two key questions in determining the new network’s impact on health care costs will be how widely employers embrace it and whether patients are willing to leave Partners’ prestigious hospitals, including its Harvard-affiliated academic medical centers, for lower-cost care elsewhere.
“What Harvard Pilgrim is basically doing is it’s chopping out the top tier, but it’s keeping the network very broad,’’ said Stuart H. Altman, health policy professor at Brandeis University in Waltham. “When you have a very broad network, the [hospitals] involved may not see a big change in their patient volume, but patients will have more choices.’’
Schultz said the network will cost customers - mostly businesses and other employers - 10 percent less than a comparable insurance plan that includes all health care providers, including the most expensive. If they keep employer contributions stable, the savings would also be passed on to employees.
“We have been hoping for something just like this,’’ said Richard C. Lord, president of Associated Industries of Massachusetts, a trade group representing 6,000 businesses, referring to the new Harvard Pilgrim product. “For years, the health insurers have been offering employers products that were all the same - and were priced all the same. This gives employers choices they didn’t have before. The market is getting more competitive.’’