All that money you pay into Medicare? Not enough for Partners

The state held hearings this week to explore the possibility of setting up a global payments system, which the Globe describes this way: …(Plans)  that put doctors and hospitals on an annual budget for each patient’s care. Another is to create a regulatory framework for how health care providers can form partnerships, called accountable care organizations, to coordinate care and distribute payments.

The idea is to replace the fee-for-service system, which encourages over-treament by paying for each procedure. It also rewards incompetence — Treat a patient…Something goes wrong …Back to the hospital and a bigger bill for all of us. 

Under global payments, hospitals would have to stay within a budget. 

This also from the Globe story on the hearings : “We’re going to all have to give up a lot,’’ conceded Gary L. Gottlieb, president and chief executive of Partners HealthCare System Inc., the state’s largest hospital system. “Hospitals throughout the area have made very substantial cuts. Clearly we’re going to have to go forward with fewer resources. . . . The autonomy of decision-making is going to be diminished on an individual level’’ and moved to teams. 

(Bring on the death panels!?}

So,  Partners is forced to live with fewer resources. Somehow that doesn’t jive with today’s news, also in the Globe.

The results topped the $164 million gain Partners reported on revenue of $7.6 billion for fiscal year 2009. Its margin — operating revenue minus expenses — climbed to 2.4 percent, up from 2.2 percent last year.

In the same story, Partners claims that it lost $815 million on Medicare and Medicaid patients. We wonder what those numbers mean. If they mean Medicare paid $800 million less that what Partners charges, maybe Partners’ charges are too high. If they pay $800 million less that what it cost Partners to deliver cares, them maybe Partners costs are too.

Medicare does not make up these payment rates  to be stingy.  Every year, a panel reviews how much it should cost to treat Medicare patients and comes up with “payment rates are intended to cover the costs that reasonably efficient providers would incur in furnishing high quality care.”

Jargon alert: Here’s how the feds calculate payments to hospitals:

To account for the patient’s needs, Medicare assigns discharges to Medicare severity diagnosis related groups (MS– DRGs), which group patients with similar clinical problems that are expected to require similar amounts of hospital resources. Each MS–DRG has a relative weight that reflects the expected relative costliness of inpatient treatment for patients in that group. To account for local  market conditions, the payment rates for MS–DRGs in each local market are determined by adjusting the base payment rates to reflect the input-price level in the local market, and then multiplying by the relative weight for each MS–DRG. In addition to these two factors, the operating and capital payment rates are increased for facilities that operate an approved resident training program or that treat a disproportionate share of low-income patients. Conversely, rates are reduced for certain transfer cases, and outlier payments are added for cases that are extraordinarily costly

Can reasonably efficient providers have artriums that look like 4-star hotels? Seven figure salaries? Drug that costs thousand of dollar per injection? Medical equipment from companies making a killing on the stock market? Should their costs eat up 30 percent of a family’s incomes and cause medical bankruptcies?  

Something has got to give.

Here’s what economist Robert Reich has been proposing all over the place. Many people think Bush made a mistake when he made a deal with pharma not to negotiate drug prices for Medicare Part D. Might be time to reconsider, Reich says.  
 The best outcome would be an agreement to contain future health-care costs by allowing Medicare to use its bargaining power with drug companies and medical suppliers to reduce rates; by allowing Americans to buy drugs from Canada; by applying the antitrust laws to health insurers; and by giving the public an option to buy their health care from a government-run public option.



 But, as he points out: Likelihood of any of this happening…is zero

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