A Race to the Bottom

This article appears in the January 2012 issue of HealthLeaders magazine.

Editor's note: This piece is based on Philip Betbeze's Nov. 18, 2011, online column, With Rate-Setting Proposal, MA Leads Pricing Race to the Bottom.

Based on what I see going on in Massachusetts, the future of healthcare looks increasingly like a race to the bottom on pricing. A Boston Herald story described how state officials would be empowered to reject certain rates charged by hospitals for medical services. That is, if the recommendations of the Governor's Special Commission on Provider Price Reform—which is composed of "healthcare stakeholders, lawmakers, and experts," as described in the story—are accepted.

I'll leave it to you to decide whether or not you agree with the paper's description of the panel, but I have my doubts as to how many healthcare stakeholders and experts backed this plan if, for example, they work in a hospital, or ever expect to be treated in one. The healthcare members represent payers, physicians, and hospitals, but the only person on the 10-person panel to vote against the recommendation "to establish a short-term process to ensure that higher prices may closely correlate to quality and thereby reduce costs" was Lynn Nicholas, president and CEO of the Massachusetts Hospital Association.

The plan, at least, works both ways in theory: If providers of healthcare services charge a price that exceeds the market norm and the insurer refuses to pay as a result, providers would be required to defend their prices before a panel of state healthcare finance officials.