Granby01033

I haven't had time to read all of the immense article the Boston Globe published today, but it's bound to be important. Here's the link and an excerpt. Expect more to come.

It was the gentleman's agreement that accelerated a health cost crisis.

And Dr. Samuel O. Thier, chief executive of Partners HealthCare, and William C. Van Faasen, chief executive of Blue Cross Blue Shield of Massachusetts, weren't about to put it in writing.

Thier's lawyers cautioned that a written agreement between the state's biggest hospital company and its biggest health insurer that would make insurance more expensive statewide might raise legal questions about anticompetitive behavior, according to officials directly involved in the talks.

And so, in May 2000, the two simply shook hands on this: Van Faasen would give Partners doctors and hospitals the biggest insurance payment increase since Massachusetts General and Brigham and Women's hospitals agreed to join forces in 1993.

In return, Thier would protect Blue Cross from Van Faasen's biggest fear: that Partners would allow other insurers to pay less. Those who helped broker the deal say Thier promised he would push for the same or bigger payment increases for everything from X-rays to brain surgery from Van Faasen's competition, ensuring that all major insurers would face tens of millions in cost increases. Blue Cross called it a "market covenant."

The deal, never before made public, marked the beginning of a period of rapid escalation in Massachusetts insurance prices, a Spotlight Team investigation has found, as Partners repeatedly used its clout to get rate increases and other hospitals tried to keep up. Individual insurance premiums have risen 8.9 percent a year ever since the "market covenant," state figures show, more than twice the annual rise in the late 1990s.

Both Partners and Blue Cross deny that they acted improperly in the 2000 payment negotiations or in their dealings since. Partners issued a statement saying that Thier pledged only that he would treat all insurers equally. Blue Cross executives have said that the big pay raise to Partners in 2000 was needed to offset years of low rates.

But plainly Thier's attorneys were wary of the legal risk of even discussing a market-setting agreement, those involved in the talks say. And soon it would be obvious why.

By spring 2001, Thier had pressured two insurers, Tufts and Harvard Pilgrim Health Care, to give Partners rate increases as large or larger than Blue Cross got. Partners' internal memos reviewed by the Globe show officials knew that insurers would have little choice but to raise prices to consumers to cover the new Partners rates.

Thus it was that a company originally launched with the promise of saving hundreds of millions of dollars by consolidating two famous hospitals instead became a driving force behind the high cost of medicine in Massachusetts. Blue Cross has increased the rate it pays Partners by 75 percent since 2000, far more than increases given to other teaching hospitals that mainly treat adults. Other insurers have boosted payments to Partners by a similar amount.

Over the last 15 years, Partners has become the state's largest private employer and its biggest healthcare provider, treating more than a third of hospital patients in the Boston metropolitan area. Partners has built a biomedical research juggernaut larger than Harvard University's and embarked on a multibillion-dollar expansion program that rivals those of all other Massachusetts hospitals combined. A doctors' magazine recently named Partners' current chief executive the most powerful physician executive in the nation.

Company officials and industry allies say Partners shouldn't be blamed for medical inflation, which is a national problem. And they say that their rise to power gave Massachusetts a needed counterforce to insurance companies that underpaid hospitals and doctors through much of the 1990s. In 2001, Thier told the Globe he wanted to "reset the prices" that insurers pay hospitals and doctors in Massachusetts, predicting that "that should help other providers as well."

Partners officials also contend that much of the criticism comes from jealous rivals, noting that several others tried but failed to build multihospital corporations like Partners, which now includes eight hospitals. "Most people will say we executed relatively well," said Peter Markell, Partners' chief financial officer. "Everybody else didn't execute well."