| The Massachusetts Attorney General, Martha | | | | that have had a substantial negative impact on cost |
| Coakley, issued a preliminary report on January 29, | | | | containment. |
| 2010 on the conclusions of her Investigation of Health | | | | One of the principal contract provisions that tended to |
| Care Cost Trends and Drivers, required by a | | | | chill competition was the "payment parity provision" |
| Massachusetts statute. (Yes she is the infamous | | | | that tend to lock in payment levels and prevent |
| Democrat who lost Kennedy's Senate seat to Scott | | | | innovation and competition based on pricing. If an |
| Brown and stymied the Obama Administration's health | | | | insurance company gives a rate increase to providers |
| care reform drive.) The results are interesting, if not | | | | it uses payment parity provisions to insure that the |
| totally surprising. The biggest cost driver seems to be | | | | provider will insist on similar rate provisions from the |
| hospital and provider leverage on insurance companies | | | | insurance company's competitors, so that all premiums |
| and a steady increase in price rather than utilization | | | | will rise together and the initial insurer will not be at |
| over the past four or five years. | | | | competitive disadvantage in giving a rate increase. |
| The Attorney General issued Civil Investigative | | | | Product Participation Provisions are contract clauses |
| Demands ("CIDs") to various hospitals. physician groups | | | | that high market leverage providers insert in health |
| and insurance companies to obtain pricing and utilization | | | | insurance provider agreements that prohibit insurers |
| data. She found that some hospitals were being paid | | | | from created limited network products and tiered |
| up to 200% more than others and that some physician | | | | products that might steer patients away from them. |
| groups were paid up to 190% of others for providing | | | | Examples of these provisions are called "anti-steering", |
| similar services. The price variations were not related | | | | "guaranteed inclusion" and "product participation parity" |
| to the quality of the services, the relative sickness of | | | | clauses. "Anti-steering clauses stop insurers from |
| the population, the percentage of Medicare or Medicaid | | | | creating new products that might steer patients away |
| population, whether the provider was a teaching facility | | | | from certain providers. "Guaranteed inclusion" clauses |
| or research facility or relative hospital costs. It was | | | | guarantee the participation of certain providers in |
| also not related to the methodology of payment, that | | | | certain products. On the insurance company side |
| is, global billing or fee for service. | | | | "product participation parity" provisions mandate a |
| The only significant correlation for price was market | | | | provider's participation in an insurer's product if that |
| leverage, based mostly on size and location. They also | | | | provider agrees to participate in similar product offered |
| were related to brand name and specialty service line | | | | by a competing insurance company. |
| factors. Insurance companies indicated that their failure | | | | The Attorney General found that there was |
| to contract with a large provider organization would | | | | widespread practice of insurance companies making |
| handicap their provider network. | | | | supplemental payments to providers, for such things as |
| "Data from two large health plans show that price | | | | signing bonuses, infrastructure payments, as well as |
| increases are responsible for roughly three quarters of | | | | bad debt or government shortfall payments. These |
| the total health care cost increases in the commercial | | | | are murky payments which tend to reduce the |
| health care marketplace over the last three years." | | | | transparency of real insurance cost structures. |
| The report, while not minimizing the necessity to control | | | | Growth caps are contract provisions that limit the |
| utilization, underscored the fact that controlling health | | | | growth of provider organizations. These contractual |
| care costs must address the problem of unrestricted | | | | provisions can limit growth in the number of physicians |
| price increases based upon market leverage. | | | | who will be paid under a newly increased rate or limit |
| "Bending the cost curve will require tackling the grown | | | | growth of particular specialties in a geographic area or |
| in price and market dynamics that perpetuate price | | | | in acquisitions of practices over a certain size. Although |
| inflation and lead to irrational price disparities." | | | | these provisions might be seen as advancing |
| The Report faulted the leveraged based disparities | | | | competition at one level, in practice they can prevent |
| among health providers in pricing as the principal driver | | | | smaller physician groups from meaningfully competing |
| in health care cost increases in Massachusetts over | | | | with larger physician organizations. |
| the past five years. In particular it noted that providers | | | | True health care reform that attempts to effectively |
| with leverage due to size, geographic location and | | | | control costs will have to address these kind of |
| branding had a substantial leg up in negotiations with | | | | structural impediments to containing price advances |
| insurance companies. Interestingly, the study identifies a | | | | and diminishing competition the health care system. |
| number of specific health insurance contract provisions | | | | |