Panel recommends regulating hospital prices to bring down costs

Boston Medical Center.Craig F. Walker/Globe Staff/Globe Staff

After six months of often contentious debate, a special state commission is calling for tighter regulation to control hospital costs, but the panel remains sharply divided over how to proceed.

That recommendation is the most controversial of nine outlined in a more than 100-page report that examines why some Massachusetts hospitals are paid much more than others for the same services, and how to tackle the disparities.

The draft report, a copy of which was obtained by the Globe, also calls for more transparency about the costs of medical services and encourages greater use of tiered health plans, in which consumers pay more out of pocket to use higher-cost hospitals.

The panel’s suggestions will add pressure on legislators to find ways to control health care costs for businesses and consumers without harming hospitals, which are among the state’s largest employers.

The commission is the product of hastily approved legislation last year to avoid a controversial ballot question from the Service Employees International Union. The initiative sought to slash payments to Partners Healthcare, the state’s largest health care network, and redistribute the money to lower-paid hospitals.

The panel, composed of hospital and insurance executives, public officials, employers, and academic experts, cannot issue new regulations.

It will send its completed report next week to legislators and Governor Charlie Baker, who could choose to act on the recommendations.

Hospital leaders are already bracing for major changes to national health care law under President Trump.

The planned overhaul of the Affordable Care Act, also known as Obamacare, could cut into hospital payments, which hospital leaders say could force them to cut jobs.

The commission’s work made clear that there is little consensus about how to deal with the issue of health care price disparities in Massachusetts.

After a half-year of deliberations, members of the 23-member group still clashed during their final meeting Tuesday.

“There are parts of this report that I flat-out disagree with,” said Partners chief executive Dr. David Torchiana. Partners’ hospitals, including Massachusetts General and Brigham and Women’s, are among the priciest in the state and are likely to feel the effects of any regulation of hospital prices.

Members of the panel remained so divided that they decided to scrap the executive summary of their report, after failing to agree on the language.

“Not everybody will agree with every aspect of the report,” acknowledged state Senator James T. Welch, cochairman of the commission, “but that’s what consensus and collaboration and negotiation is all about.”

The commission agreed that variation in prices is sometimes warranted, but that a hospital’s market power and brand alone should not be used to justify higher prices.

Reports have shown that some large health care providers extract higher payments from insurers at least partly because of their size. This drives up medical spending because the most expensive providers also tend to attract the most patients.

Baker, in his budget plan, already proposed capping hospital rates. His plan would allow no annual rate increase for the state’s most expensive health care providers, while mid-priced providers would be limited to 1 percent increases, and the lowest-priced providers would not be capped.

The commission’s proposal is less specific: It says a state entity, such as the Health Policy Commission or the Division of Insurance, should be given the authority to reject contracts between insurers and care providers if the payments are too high. It also suggests establishing a minimum rate for providers on the low end of the payment scale, in order to help struggling community hospitals.

But Partners’ Torchiana said in an interview that such “price caps” amount to “sanctions” on Partners hospitals, which are among the most prestigious in the country.

“Really what we need in health care more than anything else — we need some stability, we need some freedom from new interventions, new regulations,” he said.

A group representing the health insurance industry, meanwhile, said the commission’s recommendation didn’t go far enough in suppressing high hospital payments.

“I never was under any illusion that this wouldn’t be really, really hard and there would still be a real lack of consensus even on the last day,” said Lora M. Pellegrini, president of the Massachusetts Association of Health Plans.

The SEIU’s Local 1199, which pushed the issue in its ballot campaign last year, applauded the draft report for addressing “the unfair way Massachusetts hospitals are reimbursed for care.”

The debate over health care pricing is likely to continue in the Legislature, which could address the issue in the state budget, as the governor has proposed, or wait and pursue new health care legislation.

House Speaker Robert A. DeLeo avoided talking about health care costs in a speech before business leaders Tuesday. A spokesman said DeLeo will review the commission’s report when he receives it.

Senate leaders have said they want to tackle health care costs this legislative session, but Senate President Stanley C. Rosenberg’s office also declined to comment on the report Tuesday because it has not been completed.

A spokeswoman for the governor said Baker looks forward to reviewing the commission’s recommendations “as the Commonwealth explores future options to reduce the cost of health care and increase transparency for taxpayers.”