Partners Healthcare, competition, regulation, and the redeeming virtues of robust quality and cost data

The Boston Globe Spotlight Team had another installment of its Partners Healthcare saga in Sunday's paper.  The general gist: Partners horning in on community hospitals in their home commmunities, Jack Connors (board chair at Partners) extolling the virtues of the free market (with some less-than-kind words for the competition), community hospital execs and other partisans questioning the appropriateness of Partners' expansion.  See Kevin, M.D.'s cogent summary and commentary as well.  As some have noted, this isn't exactly news, but I'll take it as an opportunity to make a couple of points.

Beverly Hospital, complaining about Partners horning in, did the same on a smaller scale, competing against smaller North Shore facilities.  So it may not be Beverly's place to complain at this stage of the game.

Nevertheless, the question is raised: should health care resources be developed in an unregulated manner?  Is this really an enterprise appropriate for the free market?

As an unreconstructed former certificate of need lawyer for the Commonwealth, I would have to answer: Not yet.

Frankly, we have all seen quite recently and quite vividly the havoc wreaked by the private sector let loose in the until recently unregulated, or under-regulated, banking, financial services and auto industries.

Viewed from the health care system level, it is apparent that there is an appropriate level of health care resources that ought to be made available to the residents of the Commonwealth, and that if more are made available (in a certain specialty or in a certain geographic area), we enter the Field of Dreams school of health care planning ("if you build it, they will come") — and we will all, collectively, get socked with the bill, because most, if not all, of these services come with a whole host of fixed costs that are added into the cost of health care in Massachusetts whether they are fully utilized or not.  Thus, the costs of the "old" service as well as the cost of the "new" facility built across town end up dragging us down.  As I never tire of saying: in a perfect world, I'd rather see excess health care dollars spent on childhood vaccines and other primary and preventive care.

Massachusetts'  legislature and Department of Public Health have responded to the latest rash of providers with an edifice complex by reinstituting determination of need jurisdiction for certain outpatient facilities (those with a price tag of $25 million or more), but the regulations are too little, too late; the facilities described in the Globe article (and others) all predate the new law or are grandfathered by its provisions.

Is there a role for competition in health care markets?  I would agree with Kevin Pho (see link above) and say that there is, but that the currency on this field of play (to mix metaphors) should be cost and quality, not economic market power.  Massachusetts is taking some baby steps in this direction, with the recent launch of the Massachusetts Health Care Quality and Cost Council website, MyHealthCareOptions.  That site is a work in progress, but it shows promise.

If health care purchasing decisions may be de-linked from brand-name marketing and linked instead to cost and quality indicators, I would have to believe that all players would be reasonably satisfied.  Teaching hospitals need not compete on cost for routine procedures, and community hospitals need not compete on quality for procedures on the bleeding edge.  For a time, the thinking was that third-party payors would be able to incorporate cost and quality factors into the calculus to such a degree that CON jurisdiction could be cut back appropriately.  The legislature has recently expanded that jursidiction (as discussed above), judging that we aren't there yet.  In the presence of a robust market with providers competing on the basis of cost and quality, and ultimate health care payors having sufficient information on which to base purchasing decisions, CON (or as we say here in Massachusetts, DON) wouldn't be necessary, and we'd hear less crowing and whining.  

Update 12/29/08:  The Boston Globe comes back for more, alleging an antitrust violation in an unwritten agreement between Partners and Blue Cross Blue Shield of MA.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting