Patrick: Use Anti-Trust Laws To Fix High Hospital Prices

WBUR’s Martha Bebinger reports:

I’ve been waiting to hear from Governor Patrick on one of the most controversial health care cost control issues on Beacon Hill: what to do about hospitals that charge three, four or five times more for an MRI (and hundreds of other services) with little or no difference in quality.

Two reports from Attorney General Martha Coakley and at least two from the Governor’s administration (the latest here) say that inflated prices based on the market clout of major teaching hospitals are a major factor driving health care costs in Massachusetts.

Governor Deval Patrick addresses members of the Greater Boston Chamber of Commerce Photo courtesy of the Chamber

Now we have some insight into the Governor’s position on this dicey problem. During a Greater Boston Chamber of Commerce breakfast Tuesday, the Governor was asked whether he wants a provision in the final health care costs bills from the House and Senate that would deal with what’s often called “price disparities” among hospitals? The Governor framed the problem as one of “market clout” and said dealing with the market clout of top Boston hospitals is in the hands of AG Coakley.

The AG, said Patrick, “has tools today to address these imbalances and we have to look to her office to use those tools.”

I called Patrick’s office to clarify. What “tools?” An aide says the Governor was referring, loosely, to the AG’s ability to file anti-trust charges against hospitals.

Does the AG agree that she could use anti-trust law to fight market clout in Massachusetts and close the price gap that she says is driving up health care costs?

Here’s the statement I received from Coakley’s spokesman, Brad Puffer:

“The Governor, the Legislature, and our office all agree that there are important market dynamics that should be addressed through greater transparency and appropriate oversight. While it is true that our office has law enforcement tools at our disposal, law enforcement is just one of many mechanisms that must be used to ensure a competitive marketplace. There are many actions that may not rise to the level of an anti-trust violation, for instance, but that still may not be in the best interest of a healthy market. We believe a better mechanism should be in place – one that better tracks data about market consolidation to identify problems early and then is able to act on that data short of involvement by law enforcement.”

Coakley has said in the past that the state needs something more precise than anti-trust laws to close the gap between what hospitals with a lot of market clout and those with little or no clout charge in Massachusetts.  She offered the legislature a remedy during a speech last November to the Massachusetts Association of Health Plans.

Starting in 2015, if the market has not corrected unwarranted price variation, the administration should be able to reject health plan contracts with excessive or inadequate provider price variations.

Health plans should be prohibited from paying provider rates that differ beyond a certain band. One example would be 20% above or 20% below the plan’s average price for the previous year.

The Senate rejected this idea altogether. The House has a 10% surcharge on hospitals whose prices are 20% above the median price for services. I haven’t seen a firm list of hospitals that would have to pay this surcharge, but I’m told that Massachusetts General, Brigham and Women’s, Dana-Farber and Children’s Hospital are among those that would have to pay the tax unless they could prove that their quality or the unique value of the service justified their higher price.

There’s a lot of concern on Beacon Hill about government taking a heavy handed approach to controlling health care costs. But many health care leaders say that if one of the main drivers is the prices that brand name hospitals can and do demand, the state has to do something to limit what these hospitals can charge if it hopes to contain health care costs.

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