Massachusetts: high prices in a managed care stronghold - includes related information on reform legislation

Business & Health, Oct, 1995 by Dan Wise

Although the Bay State's Medicaid program is one of the nation's most expensive despite its heavy influx into managed care, costs have risen only 2 percent in the past two years, says Bruce Bullen, director of the state Division of Medical Assistance. The national growth rate for Medicaid is five times as high. Officials attribute the program's higher costs to a combination of factors: Massachusetts' high cost of living and higher overall medical costs and a more generous Medicaid package that includes such benefits as home nursing and personal attendants.

The state plans to move the 3,000 primary care physicians in Primary Care Clinician to a capitated system to drive costs down, Bullen says. But he's not at all sure the state's stepped-up merger activity will have that effect on health-care costs.

"We have our antennae out for a shift in the balance of power," he says. "These consolidations of hospitals and HMOs are not in the purchasers' interest."

BIGGER IS NOT ALWAYS BETTER

Indeed, mergers are increasingly common here, as in the rest of the country. Last year Harvard Community Health Plan merged with Pilgrim Health Plan, centered in southern Massachusetts. The new entity, Harvard-Pilgrim Health Plan, now has more than 35 percent of the statewide market. Blue Cross and Blue Shield of Massachusetts owns two HMOs and accounts for another 30 percent.

The Alliance Community Health System, a network formed by individual physicians and community hospitals just this year, may be another key player. Richard Vemick, a cardiologist and president of the venture, has signed agreements with more than 400 primary care physicians, 12 community hospitals and three tertiary-care hospitals. All participating physicians will be equity partners, Vernick explains, based on the belief that having financial responsibility for patient care is the only way to achieve true managed care savings. The Alliance system, he adds, will resolve a problem doctors who participate in multiple networks always face. "Trying to manage a case can be confusing because the procedures and reporting requirements differ for each payer. With our network, there will be two levels of reporting--one from the physician to the network, and then the network will break out of that information what the insurers need."

But it was the 1994 merger of Massachusetts General and Brigham and Women's hospitals, Boston's largest academic medical centers and longtime rivals, that garnered the most attention. Pressures from managed care, resulting in declining occupancy rates, and adjustments in Medicare reimbursement impelled the move, both parties said.

Developing an integrated health system by acquiring or affiliating with primary care practices throughout eastern Massachusetts is a key strategy of the newly created Partners Health Care. The aim is to build a patient base large enough to shore up hospital revenues and continue to attract research dollars threatened by Medicare cutbacks. Officials of Partners say they hope to put together a network of 850 primary care doctors, and thus far the count stands at about 500. Ellen Zane, who's in charge of networks, says the idea is to own about one-third of the practices.