• Cost Drivers in Massachusetts Health Plan
  • February 11, 2010
  • Law Firm: Holland & Hart LLP - Denver Office
  • The Massachusetts Attorney General, Martha Coakley, issued a preliminary report on January 29, 2010 on the conclusions of her Investigation of Health Care Cost Trends and Drivers, required by a Massachusetts statute. (Yes she is the infamous Democrat who lost Kennedy’s Senate seat to Scott Brown and stymied the Obama Administration’s health care reform drive.)  The results are interesting, if not totally surprising.  The biggest driver is hospital and provider leverage on insurance companies and a steady increase in price rather than utilization over the past four or five years.

    The Attorney General issued Civil Investigative Demands (“CIDs”) to various hospitals. physician groups and insurance companies to obtain pricing and utilization data. She found that some hospitals were being paid up to 200% more than others and that some physician groups were paid up to 190% of others for providing similar services. The price variations were not related to the quality of the services, the relative sickness of the population, the percentage of Medicare or Medicaid population, whether the provider was a teaching facility or research facility or relative hospital costs. It was also not related to the methodology of payment, that is, global billing or fee for service.

    The only significant correlation for price was market leverage, based mostly on size and location. They also were related to brand name and specialty service line factors. Insurance companies indicated that their failure to contract with a large provider organization would handicap their provider network.

    “Data from two large health plans show that price increases are responsible for roughly three quarters of the total health care cost increases in the commercial health care marketplace over the last three years.”

    The report, while not minimizing the necessity to control utilization, underscored the fact that controlling health care costs must address the problem of unrestricted price increases based upon market leverage.

    “Bending the cost curve will require tackling the grown in price and market dynamics that perpetuate price inflation and lead to irrational price disparities.”