How Boston’s top hospitals are paid much more

The front-page story in today’s Boston Globe takes aim at the disproportionate payments that Boston’s nationally ranked Massachusetts General and Brigham and Women’s Hospital receive. Together, they form an entity known as Partners Healthcare.

A community hospital may receive $17,000 for an angioplasty. The same procedure done at the Brigham would cost $24,500. The trouble is, outcomes are not necessarily better:

The growing, if still inadequate, body of data available about hospital quality paints a fairly consistent picture of the care at the Brigham and Mass. General: often good, but rarely extraordinary, and sometimes inferior to the care available at other hospitals.

Why are they allowed to charge exponentially higher rates? One reason is because they can. Patients demand their services.

Both hospitals both rate high in the US News hospital rankings, and are able to coerce insurance companies to pay their rates. Patients have an insatiable appetite for “brand-name” medicine, which gives the hospitals the clout they need when negotiating with insurers:

Partners’ dominance became clear in 2000, when executives of Tufts Health Plan had the temerity to refuse Partners’ demand for a substantial rate increase. Partners countered by declaring it would no longer accept Tufts insurance at its hospitals. Within days, as thousands of Tufts customers threatened to change insurance rather than lose the right to treatment at the two famous hospitals, Tufts gave in to Partners’ demands. Since then, Partners has negotiated one big pay increase after another from insurance companies fearful of a similar humiliation.

Many routine cases can be handled by community hospitals, and often don’t need expensive, tertiary care centers on Boston. Patients however, don’t always accept that explanation:

Partners’ Lee, a cardiologist who still sees patients in addition to his management job, argues that patients are voting with their feet.

“There’s a very fair question of can we afford that as a society, but there’s no question in our market that people want this,” Lee said. “I have people come and see me from New Hampshire and Rhode Island for their blood pressure, and I tell them, ‘You don’t need to come here,’ and they say, ‘But I want to,’ and I think they’re sometimes offended because I’m trying to chase them away.”

Partners Healthcare is leveraging patient demand, and along with ruthless strategy, receives payments up to 30 percent higher compared to the state’s other medical institutions. The dominance hurts the competition, which can end up affecting patients. Boston Medical Center, where I trained, caters to the city’s poorer demographic, and receives $490 for an MRI, compared to $1,100 at Children’s Hospital 15 minutes away. It’s no secret that they are undergoing financial trouble.

I don’t blame Partners for maximizing their revenue. They know that no other city in the country can boast two nationally ranked academic institutions, and take advantage of that fact to bully the insurance companies. It’s smart business.

Those that are unhappy with the situation – insurance companies, competing hospitals, and health policy wonks looking to control health care costs – need to rein in patient demand for their services. Educate the public that community hospitals can provide care equal to, or better than, MGH and the Brigham in routine cases.

Those that insist on being treated at these iconic institutions should pay out of pocket to justify the extra costs these hospitals charge.

Creative Commons image license from timyu.

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  • DR. MARY JOHNSON

    Interesting. Allow me to share an old story:

    The coffers of Medicaid’s “disporportionate share” program in North Carolina (designed to compensate hospitals for seeing a “disproportionate” share of “underserved” patients) was liberally plundered several years back (over a period of seven to ten years if memory serves) to the tune of between a half billion and a billion dollars (depending on who you listen to).

    In an incredible blunder, control/management of the program was literally gifted by the state government upon one of the largest hospitals in the state (which for blogging purposes here shall remain nameless).

    As a result there was virtually no oversight of how the program was administrated – or (taxpayers’) money was doled out. Some hospitals benefited MUCH MORE than others.

    Millions (if not a billion) were misappropriated. The state auditor brought the matter to light (in true North Carolina fahsion, he was subsequently tossed from office for his efforts) . A long Federal investigation resulted in NO ONE being prosecuted, sanctioned or fined.

    A settlement was negotiated for pennies on the dollar.

  • Anonymous

    Kevin,
    I was a patient at MGH for a routine procedure – childbirth. Since I had no complications, theoretically, I could have gone to a community hospital 10 minutes away from me. Except that I know that I would have gotten worse care there (close relative practices at both hospitals). I would have probably ended up with an emergency c-section. MGH has a pretty low c-section rate (much lower than the community hospital), even though they have a booming high-risk practice. That is due to many different factors. But as far as I, the patient, is concerned, that’s where I want to go. So, saying that a community hospital can provide similar care is simplistic. Maybe yes, maybe no. In my case, it’s a big fat no.
    Another question that comes up, though, is where that increase in fees goes. Partners is not known for paying their employees well, including staff physicians. Some physician salaries at MGH border on the line of embarrassing.

  • Anonymous

    The 800 pound gorilla gets what he wants. In most hospital/provider/insurer relationships, the insurer is the gorilla. In Mass, Partners is the gorilla.

  • Dr. K

    As long as the market will bear these extreme costs and medically unnecessary procedures people will act with their feet. However, with employers turning to high deductible/consumer directed healthcare plans, patients will have to do their homework, hopefully with their doctors counsel, as they go through their large deductibles (up to $7500 for a family). Health at any cost goes only so far as insurance pays for it; unless you are very wealthy. Please visit my website, http://www.kreisbergandassociates.com. Dr. Jeffrey Kreisberg

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