Regulating Health Care

Insurers and hospitals in Massachusetts snub the regulators

The pols and the advocacy groups have told us for months that health reform is supposed to produce tighter regulation of insurance companies and better medical care. But corporate America has never taken kindly to any regulation that would lower profits. So when people die because insurers deny their claims or when patients die because of poor hospital care, regulators too often look the other way. That leads to the real question: Will health reform alter the business of regulation? In recent years, the media hasn’t been keen on scrutinizing the regulators and their cozy relationships with the regulated. Health reform gives them a chance to redeem themselves. Today begins the first post in a new series that will look at how news outlets are keeping tabs on the regulators and those they regulate.

It has been apparent for some time that Massachusetts health reform is the model for the rest of the country. And it has been apparent, as Campaign Desk has pointed out, that the nation’s news media have shown little enthusiasm for reporting the good, the bad, and the ugly in the Bay State. But two stories by Boston Globe reporter Kay Lazar, who has worked hard to tell her readers what’s going on, show another side of the model—the regulatory side. They reveal how the big health-care stakeholders still rule the roost, no matter what regulators seem to do. A cautionary tale for the rest of the country, perhaps?

About a month ago, Massachusetts’s insurance regulator called a public hearing to ask insurance company bigwigs some tough questions about why they pay some doctors and hospitals three times more than others for the same services. Late in 2008, a fine series by the Globe’s Spotlight Team detailed the costly (for patients) fallout from the infamous handshake between Partners HealthCare, the state’s largest medical system and Blue Cross Blue Shield, the state’s biggest insurer. Lazar’s article captured a contentious exchange in which insurers refused to answer questions or otherwise reveal much about what they do. How many times have you heard that reform will let more light shine on the operations of the big health care stakeholders?

The Massachusetts Division of Insurance wanted to know why small businesses in the state were paying such high premiums, with increases now in the 20 to 45 percent range. Lazar reported that insurance company officials admitted that affordability of coverage for both employers and their workers was not a priority when they negotiated contracts with health care providers. Surprise, surprise! From the insurers’ point of view, why should it be? They testified that payments to doctors and hospitals is based on “fierce competition” among providers along with employer demands that certain health care systems are included in their networks—ah, the high-priced folks at Mass General whom everyone wants to use. Is this the kind of competition that reformers and their acolytes have in mind for the country?

Lazar then reported that execs from the second and third biggest carriers, Harvard Pilgrim and Tufts Health Plan, simply wouldn’t answer the regulators’ questions. Company honchos hid behind what the Tufts vice president called “confidentiality constraints.” The transparency thing again! What the regulators were after, Lazar said, were details about the power balance between insurers and providers in contract negotiations. Those are the relevant questions, and they unlock the secret to making insurance premiums affordable—not only in Massachusetts, but in other states too.

Lazar’s second piece, published last week, reported that hospital officials weren’t talking, either. Many of them didn’t even bother coming to another set of hearings that regulators had called. Of the seventeen hospitals invited to one hearing, only two showed up. Lazar wrote:

With rising health care costs burdening the country, Governor Deval Patrick’s attempt to find out what can be done about them is being met with resounding silence from many of the state’s health care executives. Leaders of some of the state’s largest hospitals failed to show up at a public hearing yesterday to answer regulators’ questions about what is driving up costs.

At a second hearing last Friday, two more came. Mum’s the word from media-savvy hospital officials? Shocking! What made Massachusetts regulators think they would spill their guts about their role in keeping premiums so high? The state’s undersecretary of consumer affairs and business administration whined that the state was disappointed by the no-shows, and said they would encourage hospitals to provide written testimony. She conceded her agency couldn’t make the hospitals cooperate, because it lacked regulatory authority.

Some of the hospitals Lazar contacted gave excuses, ranging from scheduling conflicts to the appointment of a new CEO. Some hospitals did agree to send written testimony, an easier way to spin things positively than subjecting your executives to hard questions on the spot.

On Monday, the state held another hearing. This time the biggie, Partners HealthCare, came to give its opinion on the state’s skyrocketing health care costs, and it fell to Lazar’s colleague, Liz Kowalczyk, to report what Partners had to say. It didn’t say much except that it was not to blame. Partners vice president David McGuire told regulators that rising insurance costs were a national phenomenon, not solely a state problem caused by higher rates paid to Partners hospitals. He fingered inadequate rates paid by Medicare and Medicaid, explaining that “we have no other way to make up these low payments than to charge more to private insurers.” These days, most hospitals blame Medicare and Medicaid for their troubles.

To its credit, the Globe editorialized on the subject, arguing that “hospitals must play a role in controlling costs, and they cannot duck that responsibility,” and it let its reporters show how hospitals and insurers were ducking the regulators’ questions. Lazar noted that the hearing with insurance execs was held in a drab conference room at the insurance agency’s headquarters, and was sparsely attended. That detail is important. It made clear that we need the press to tell us why such hearings are relevant to the public—and, in this case, how they are relevant to the success or failure of national health reform.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.