Center for Studying Health System Change

Financial Troubles, Contract Disputes Unsettle Boston Health Care Market

Media Advisories
August 2001

FURTHER INFORMATION, CONTACT:
Alwyn Cassil: 202/264-3484 or
Richard Sorian: 202/484-3475

s many Boston hospitals and health plans struggled to regain sound financial footing, policy makers stepped in to shield consumers from the fallout, according to a new Community Report from the Center for Studying Health System Change (HSC). Boston is one of 12 communities across the country tracked intensively by HSC researchers through site visits and surveys.

Two of Boston’s largest plans—Harvard Pilgrim Health Care and Tufts Health Plan—weathered severe financial problems that caused uncertainty for 1.8 million consumers. Community hospitals continued to struggle with reduced payments and higher labor and drug costs, with two hospitals closing and others threatening to reduce services. Additionally, plan-provider contract disputes have disrupted the market. Other key findings of the report, Financial Woes and Contract Disputes Disrupt Market, which is based on HSC’s third visit to Boston include:

• Responding to plans and hospitals’ financial problems, the state Legislature passed the HMO Insolvency Act to allow government oversight of failing plans to ensure consumer access to services and passed a law requiring providers to notify the state and hold a public hearing before closing essential community services. Policy makers also are exploring ways to inprove community hospitals’ financial condition.
• Boston’s two premier academic medical systems’ consolidation efforts have produced strikingly different results. CareGroup continues to falter financially, while Partners HealthCare has amassed the bargaining clout needed to win significant payment increases from plans.
• Employers have accepted double-digit premium increases but are starting to demand that plans stress patient-safety and care-management initiatives. To control costs, plans have restructured benefits to include higher copayments for physician office visits and three-tier pharmacy benefits, where consumers pay more for non-preferred drugs.
• Strong state support and sound management have strengthened Boston’s safety net providers, and coverage expansions through Medicaid and the State Children’s Health Insurance Plan have reduced the number of uninsured people considerably.

All of these developments raise important questions about the future of Boston’s health care market. Will threats of care disruptions from health plan-provider contract disputes become routine? How will employers react to rising premiums? How will a slowing economy affect the safety net?

HSC researchers are available to discuss the findings and put them into a national context. To arrange interviews, please contact HSC Public Affairs. The new report is based on a February 2001 site visit and interviews with more than 95 Boston health care leaders, representing providers, plans, employers, policy makers and consumers.