Health Insurers Compensate Providers Disparately

While acknowledging that employer payments are not their priority, insurers also continue to pay disparately to providers. While some spread in the compensation may be rational to account for higher cost specialty services, or more payment for coordination of care within larger networks, this method of relatively arbitrary compensation continues to compromise the delivery of care by smaller physician groups and hospitals. Will payment reform in Massachusetts address this matter, or will global capitation fees continue to unfairly favor specific providers over others?

Health insurers mum on practices  

State regulators’ get few answers about talks with providers

By Kay Lazar, Boston Globe Staff / December 10, 2009

Executives from some of the state’s leading health insurance companies, facing an unusual public grilling from state regulators yesterday, refused to answer key questions about why some hospitals and doctors are paid up to three times as much as others for the same services. But some of the company officials acknowledged that the affordability of coverage for employers and their workers is not a priority in negotiating contracts with health care providers. Instead, they said, provider payments are based on fierce competition among hospitals and doctors in some areas of the state, as well as employers’ insistence that a particular hospital or physicians’ group be included in their plan. The testimony was part of a monthlong probe by the state Department of Insurance into the reasons for disproportionately high health insurance rates paid by small businesses; but the agency has expanded its investigation to determine what is behind the soaring increases in insurance costs overall, including the large disparities in payments to providers. In at least a half-dozen instances, executives from the state’s second- and third-largest insurers - Harvard Pilgrim Health Care and Tufts Health Plan - declined to answer regulators’ questions. They explained their companies had signed confidentiality agreements with certain hospital or physician groups that prevented them from disclosing the information publicly because doing so would put the insurers at a competitive disadvantage. “You identified a number of answers you are reluctant to provide in a public forum,’’ deputy insurance commissioner Kevin Beagan said toward the end of an hourlong questioning of Marc Spooner, Tufts vice president of provider contracting. “Why?’’ “Some of these terms relate to confidentiality constraints,’’ Spooner said. Executives from the state’s largest insurer, Blue Cross and Blue Shield of Massachusetts, are scheduled to testify when the hearings continue tomorrow. While Tufts and Harvard Pilgrim officials did not name the providers that are getting more generous fees - and declined to identify them when asked later by a reporter - the Globe Spotlight Team reported last year that Partners HealthCare hospitals are often paid more for services than competitors. Some specialty hospitals, or hospitals with little competition in their area, also tend to get higher payments. Most of the questions the insurers declined to answer sought details about the balance of power between the insurers and the providers in their contract negotiations. For instance, the regulators asked whether the contracts allow the insurer to adjust or renegotiate reimbursement rates to a provider if the insurer obtains information about what another insurer is paying that provider. Harvard Pilgrim’s Rick Weisblatt, senior vice president for health services, testified that the insurer generally provides more generous reimbursements to large, well-organized networks of physicians compared with smaller groups for providing the same medical services. “It’s on average 45 percent higher [for a large network] than for a smaller, more loosely organized network,’’ Weisblatt said. “There can be as much as a 300 percent difference between the highest and lowest [paid provider] for the same service.’’ The sparsely attended hearing, in a drab fifth-floor conference room at the agency’s headquarters, featured mostly dense, bureaucratic answers to pointed questions. In one instance, Beagan, the deputy commissioner, pressed Spooner to explain whether Tufts considers the impact on employers when it sits down to negotiate expensive contracts with health care providers. Those contract costs are passed on to employers. “Do you start,’’ Beagan asked, “with what you think employers are willing to pay?’’ Spooner replied that contract talks with providers are “an interactive process’’ that takes into account the competition among providers. Undaunted, Beagan pressed again. “So the amount the employer would pay is not your target?’’ Beagan asked. “No,’’ Spooner said. Small-business owners say they have been clobbered by annual double-digit increases in health insurance costs for the past several years, and that increases for 2010 are the highest they have seen in years. While the state’s major insurers said in September the 2010 rate increases statewide would range from 7 to 12 percent for all employers, many small-business owners say they are getting hit with increases that are three times that amount. “These increases continue to be the worst in recent memory,’’ Retailers Association of Massachusetts president Jon Hurst said yesterday by e-mail. “Everything is in the 20-45 percent range from the feedback we are getting.’’ During a break in yesterday’s hearing, Beagan said they had yet to pinpoint anything from the testimony that would specifically explain the large disparities in insurance prices charged to small employers compared with larger companies. Beagan said testimony and data expected next week from the insurers about the amount of medical care that large and small companies use may shed light on why insurers charge different prices. Toward the end of the hearings, Joseph Murphy, acting insurance commissioner, told the insurers that state law gives his agency the authority to collect the information that the executives had declined to provide in public. He said the agency will be sending them letters demanding the information. He added that insurers’ individual answers would not be made public, but that his agency would release a report summarizing their answers in general.