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SPOTLIGHT FOLLOW-UP | unhealthy system

State panel to examine payments to Partners

Editor’s note: This story was originally published on Jan. 1, 2009.

Governor Deval Patrick will convene a panel of top state officials Monday to look into whether a recently disclosed, eight-year-old agreement between Partners HealthCare System Inc. and Blue Cross Blue Shield of Massachusetts drove up healthcare costs, making it harder to extend healthcare insurance to all residents.

The panel will also look at current contract negotiations between Partners, the state's biggest health care provider, and healthcare insurers to see whether the negotiations might also create artificially high rates that threaten healthcare reform, officials said.

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The governor called the panel in response to a Globe Spotlight Team article Sunday that detailed how the agreement between Dr. Samuel O. Thier, then chief of Partners, and William Van Faasen, then chief executive of Blue Cross, gave the state's largest hospital system its biggest price increase in years and protected it from competition. Under that handshake agreement, Partners would not accept lower payments from other healthcare insurers, which in turn could have allowed them to undercut Blue Cross on price, officials directly involved in the talks told the Globe.

The panel will include Inspector General Gregory Sullivan, Leslie Kirwan, secretary of administration and finance; Dr. JudyAnn Bigby, secretary of health and human services, and Insurance Commissioner Nonnie S. Burnes. Attorney General Martha Coakley is invited but cannot attend because she will be out of town.

"Containing health care costs is essential to ensure continued success of our remarkable health care reform initiatives, with more than 98 percent of our residents covered by health insurance," said Joe Landolfi, Patrick's communications director, in response to a Globe inquiry.

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"The governor has asked these agencies to explore what coordinated actions, if any, the state should take to address the issues raised by the story in the context of the administration's ongoing efforts to control health care costs in Massachusetts."

The panel is expected to reconvene as necessary.

Spokesmen for Partners and Blue Cross, told yesterday of the upcoming meeting, did not take issue with it. "We welcome a fair and open discussion about the many factors contributing to rising health care costs both here in Massachusetts and throughout the nation," said Rich Copp, a spokesman for Partners. "Partners HealthCare is committed to working with government leaders and other stakeholders to address some of the complex issues facing the entire healthcare system."

Said Jay McQuaide, a spokesman for Blue Cross Blue Shield of Massachusetts: "We are always willing to work with anyone who is interested and committed to the important issues of the accessibility, quality, and affordability of health care." He said Blue Cross has increasingly focused on payment plans in which doctors and hospitals get more money if they improve the quality of the care they deliver.

Partners officials and industry allies say Partners should not be blamed for medical inflation, a national problem. And they say that their rise to power gave Massachusetts a needed counterforce to insurance companies that underpaid hospitals and doctors through much of the 1990s.

Previous Spotlight Team articles examining Partners, the parent of Massachusetts General Hospital and Brigham and Women's Hospital, looked at how the healthcare system has expanded aggressively outside of Boston, and how it is better paid than many of its competitors.

But the focus of the governor's panel will be costs, not competition.

"The Globe Spotlight report Sunday raised concerns with the governor," said a senior administration official who has been briefed on the upcoming meeting. "We don't want to see anything that would jeopardize the success we have achieved to date in extending healthcare coverage to all state residents."

The official said that while the panel will look at the 2000 agreement between Partners and Blue Cross, the emphasis is on the impact of that deal, not the players involved.

"This is not meant as an attack on Blue Cross Blue Shield or Partners," he said. "It's about the idea that the deal that may have been struck has had a negative impact on healthcare costs."

The Sunday Spotlight investigation found that Partners, a company originally launched with the promise of saving hundreds of millions of dollars by consolidating two famous hospitals, instead became a driving force behind the high cost of medicine in Massachusetts. Blue Cross has increased the rate it pays Partners by 75 percent since 2000, far more than increases given to other teaching hospitals that mainly treat adults. Sunday's article described how Tufts Health Plan and Harvard Pilgrim Health Care had to match the price increase negotiated with Blue Cross in 2000.

Partners, which dominates healthcare in Eastern Massachusetts, is the only healthcare system that includes two of the nation's best hospitals. Using previously secret payment data, the Globe stories showed how Partners' hospitals earn as much as 30 percent more than the other top-flight teaching hospitals that are its competitors, even though its quality measures aren't always superior.

The most recent Partners and Blue Cross contract, settled over the summer, provides more modest increases, Partners officials said in interviews this week. The contract calls for increases in payments for medical services in the range of 5 to 6 percent a year, which is roughly medical inflation, said Partners chief financial officer Peter Markell.

Since it became law in 2006, the state's health reform initiative has helped extend healthcare insurance to about 440,000 residents, bringing the percentage of the population with coverage to more than 97 percent, the highest in the nation. Residents earning less than three times the federal poverty level are eligible for government-subsidized or free healthcare policies.

But the recession has made things tougher for the state and residents. The state, facing a big budget deficit, is stretched to continue its subsidies for healthcare coverage and to hospitals that provide care to the poor. Meantime, some residents have lost jobs that provided healthcare coverage, and are struggling to pay for insurance on their own. For others, the rising cost of healthcare has threatened to make policies unaffordable.

Jack McCarthy of the Inspector General's Office said Sullivan will attend Monday's meeting. "The IG looks forward to working with the governor to attack the cost of health care, which is a serious budget buster," said McCarthy, the senior assistant inspector general.

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