With Rate-Setting Proposal, MA Leads Pricing Race to the Bottom

Philip Betbeze, November 18, 2011

Based on what I saw out of Massachusetts last week, the future of healthcare looks increasingly like a race to the bottom on pricing. It comes from a short story in the Boston Herald, and if you blinked, you probably missed it. It was a local story, describing how state officials would be empowered to reject certain rates charged by hospitals for medical services. That is, if the recommendations of a blue ribbon panel 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. In fact, the only person on the 10-person panel to vote against the measure was Lynn Nicholas, president 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.

That panel would be empowered to force an insurer to accept a hospital's price or to force the hospital to accept a lower price, according to the newspaper. Given the pressure on governments and just about everyone else from high healthcare costs, which of the two outcomes do you think is likely to occur in most cases? It sounds like an idea that should work, but then again—and I concede that this is probably an unfair comparison—so does communism.

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.

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