Solutions to Health Care Price Variations Show Divide

DATE : June 29, 2021



Lawrence General Hospital receives around $100 from insurers for performing a chest X-ray, while Boston's Massachusetts General Hospital gets $180, Sen. Barry Finegold told his fellow lawmakers on Tuesday. 

"I ask the question: is someone in Boston twice as important as someone in Lawrence?" the Andover Democrat said during a virtual Health Care Financing Committee hearing. 

Finegold and Rep. Frank Moran, who both represent Lawrence, appealed to the committee to support a bill (H 1299, S 760) that Moran said would require commercial health plans to reimburse safety-net hospitals at a level at least equal to the insurers' statewide average relative price. 

Moran said the bill would "provide urgent financial assistance to all safety-net hospitals throughout the commonwealth," including Lawrence General, and "ensure that they are allowed to continue providing essential services to underserved populations for the indefinite future."  
Several other bills before the committee also seek to address the differing rates that medical providers are paid for the same services. 

Lora Pellegrini, the president and CEO of the Massachusetts Association of Health Plans, said that payer mix and patient attrition "have had a significant impact" on the "handful" of community hospitals that have reported financial losses over the past several years, and that the "most appropriate way" to boost those hospitals is by increasing the rates paid to cover care given to patients in the public Medicaid program.


She said hospitals that have a disproportionate share of patients insured through public payers often report positive margins from commercial payers but lower Medicaid and Medicare reimbursement rates lead to negative margins from public payers. 


"Increasing commercial rates will only lead to higher premiums for Massachusetts consumers and small business owners and would do nothing to close the gap between the highest and lowest paid providers," Pellegrini said in a statement. "Any legislative proposal to address provider price variation should not merely give increases to low paid providers but must also lower the rates of the state's highest paid providers. Simply setting a rate floor, without a rate ceiling, will add to health care spending and will not successfully address the hospital funding inequity that exists in the Commonwealth." 


Provider price variation -- and its impacts on hospital finances and overall health care costs -- have vexed policymakers for years. 


In 2017, a commission tasked with studying the topic could not unanimously agree on recommendations but ultimately put forward a slate of suggestions including a rate floor for lower-paid community hospitals. 


This year, a health care bill Gov. Charlie Baker signed on Jan. 1 included two years of enhanced Medicaid reimbursements for community hospitals serving a high percentage of low-income patients. 


A price-variation report released last week by the state's Center for Health Information and Analysis found that, in 2019, $10.8 billion was paid to acute care hospitals in Massachusetts for services provided to commercially insured patients. The largest amount of commercial payments -- 40.8 percent -- went to academic medical centers, with 32.5 percent going to community hospitals, 14.8 percent to specialty hospitals, and 11.9 percent to teaching hospitals. 


Academic medical centers "tended to have higher" statewide relative prices, and community hospitals with a high public-payer mix had the lowest average commercial statewide relative price, the report said. 


Finegold said that the "substantially lower rates" that safety-net hospitals like Lawrence General, which typically serve low-income or minority communities, receive from commercial insurers amount to "a manifestation of systemic racism in the insurance industry." 


"This is modern-day redlining," he said. "If these discriminatory practices occurred in the banking industry, companies would face severe penalties." 


Saying they lack leverage in negotiations with insurers, executives from community hospitals told the committee that the problem is one that needs a legislative fix.


"We can't afford to walk, because we would close, and we can't afford not to be here, because the public created us so that we would be here to take care of the poor people," said Kim Hollon, the president and CEO of Signature Healthcare in Brockton. "I don't know how you do this outside of legislation. We'll just continue to muck along, doing the best we can until we close. We just keep shaving off toes and arms as we try to make it, but this isn't going to change without legislation." 


The hearing also featured testimony on bills aimed at making health care more affordable to consumers and small businesses and at preserving access to essential medical services. 


Sen. Cindy Friedman, who chairs the committee with Rep. John Lawn, said the conversation underscored that "the major challenges that we have faced in the health care system are daunting." 


"I think we can solve them, but I know that it's going to take something from every single entity in the overall system for us to solve these problems, because we can't just add money to the system. We can't keep increasing what we spend on health care as a way to solve the problem, because as we heard today very profoundly, it's falling on the backs of our residents, and we just can't keep doing that. People can't afford it and people can't afford to be in the business of providing it, so we have a lot of work ahead of us." 



Katie Lannan, State House News Service, 6/29/21 4:39 PM