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AG says discrepancy in health care costs a consumer burden

Calls price disparity a consumer burden

Attorney General Maura Healey.
Attorney General Maura Healey.(Steven Senne/AP/File)

Some Massachusetts hospitals and doctors continue to charge far more than others for the same level of health care, a trend that is pushing medical spending higher across the state, according to a report released Friday by Attorney General Maura Healey.

The study found that large price variations between health care providers remain a problem, creating a “dysfunctional” market that will contribute to rising medical costs for years to come. That price variation, combined with accelerating prescription drug costs and increased use of medical services, is likely to push statewide medical spending even higher, the attorney general’s office warned.

“Massachusetts has been a leader in health care reform, but challenges remain,” Healey said in a prepared statement. “Continued cost increases are a burden on families and businesses, and it is clear more needs to be done to address continuing payment disparities that threaten long-term cost containment goals.”

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Massachusetts health care costs are among the highest in the nation. Price disparities among hospitals and doctors contribute to rising costs because the most expensive providers continue to attract more patients, increasing overall medical spending.

Healey’s predecessor, Martha Coakley, first identified the wide differences in pricing in 2010, blaming it in part on the market power of large health systems such as Partners HealthCare, owner of the prestigious Boston teaching hospitals Massachusetts General and Brigham and Women’s.

Healey’s report warned that as high-priced hospitals continue to earn more than their competitors, they have more to invest to attract more patients, pushing overall health care spending even higher. The report found Mass. General and the Brigham, two of the state’s most expensive hospitals, account for nearly 1 in every 5 hospital stays for patients in Massachusetts with commercial insurance.

Stuart Altman, chairman of the Health Policy Commission, a state agency that tracks health spending, said it’s unclear why patients continue to flock to high-priced health systems, even though many insurance plans shift more medical costs to consumers through higher copays, coinsurance, and deductibles. “We need to dig in on that issue,” he said.

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The attorney general’s report did not cite differences in prices of specific procedures, but a 2008 Globe investigation found that providers such as Partners and Boston Children’s Hospital were paid 15 to 60 percent more than most of their competitors for surgeries, MRIs, X-rays, and other medical services.

Partners spokesman Rich Copp said Friday the new report is one of many “moving pieces” in the debate about health care costs.

“Price variation exists in almost every state in the nation, so Massachusetts is not unique,” he said. “When evaluating health care prices or costs, you must also carefully consider the quality of care and the types of services being delivered to patients, which this report did not do.”

He added that Partners has made progress in controlling costs, for example, by participating in a federal program that cut $141 million in spending for Massachusetts patients on Medicare.

After moderating in recent years, health care spending has begun to accelerate in Massachusetts. In 2013, the growth on medical spending came in below the 3.6 percent benchmark, but last year significantly exceeded it, jumping 4.8 percent, largely due to soaring costs of Medicaid, the government program that insures the poor.

(Bill Greene/Globe Staff)

The benchmark was established by a 2012 state law aimed at containing health care costs.

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Despite the law, Healey’s report provides more evidence that bringing medical costs under control is easier said than done. For example, alternative payment models, which give doctors and hospitals a “global” budget under which to care for a group of patients, are on the rise. These models are meant to reward providers for keeping patients healthy, instead of giving them incentives to do lots of tests and procedures, as under traditional fee-for-service payments.

But the new report finds that alternative payment models are simply reinforcing price variations, with some providers collecting higher budgets than others for the same quality of care.

“We’re placing a whole lot of hope on global payments,” said Lora M. Pellegrini, chief executive of the Massachusetts Association of Health Plans, which represents health insurers. “But global payments aren’t necessarily the answer.”

In addition to Partners, Healey’s report lists Atrius Health of Newton and South Shore Hospital of Weymouth as among the state’s highest-priced providers, based on the rates they charge for two common types of insurance plans.

Atrius Health’s chief executive, Dr. Steven Strongwater, said the 750-doctor group has recently negotiated contracts with insurers that are “at or below market average payment rates.

“Everything we do is focused on improving patients’ lives and health outcomes, and ensuring value by reducing total medical expenses,” Strongwater said.

South Shore Hospital spokeswoman Sarah Darcy said, “Our health system is committed to providing value to patients and families.”

The attorney general’s office outlined several recommendations for addressing health care costs, including considering direct regulation of provider prices or medical spending.

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The association of health plans and the Service Employees International Union are among the organizations that have pushed for greater regulation. The SEIU, Local 1199, is promoting a bill and ballot question that seek to address disparities by limiting payments to wealthier hospitals.

But Timothy F. Gens, executive vice president at the Massachusetts Hospital Association, a trade group, said the attorney general’s report focuses too heavily on hospital price variation and not enough on soaring drug costs and other factors.

“Price variation is an issue,” he said, “but it’s not the singular issue.”


Priyanka Dayal McCluskey can be reached at priyanka.mccluskey
@globe.com. Follow her on Twitter @priyanka_dayal.