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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