New Concerns About Coakley-Partners Deal

There are new concerns about an agreement Attorney General Martha Coakley negotiated to try and control the prices and market power of Partners HealthCare. The implication, from a commission created to help reduce health spending, is that the deal does not go far enough.

“Without lasting change to the market structures,” the Health Policy Commission (HPC) writes in comments to be filed in court, “price caps may not be effective in keeping costs down.”

Price caps?

The commission dug in on a portion of the deal Coakley reached with Partners — the part that says network prices could not rise faster than inflation for six and a half years.

“Prices themselves, they are important,” said commission chairman Stuart Altman, “but they’re not the end of the game.”

To explain why, picture a colleague, neighbor, maybe your grandmother — someone who’s had hip replacement surgery. Now picture two hospitals.

“In one place,” said Altman, “a hip costs $10,000 to replace. In another, it’s $15,000.”

Under Coakley’s deal, prices at each of these Partners hospitals would rise slowly. But there’s nothing to keep Partners from sending more patients to the $15,000 facility. If more patients have hips replaced at the higher-cost hospital, then total health care costs would go up, even if prices don’t.

“Total medical expenditures, when we finally figure it out, is going to up by a lot, but yet the price increases were fine,” Altman said.

Coakley would have someone monitoring Partners, who could, in theory, intervene if a significant number of patients shift from lower- to higher-cost hospitals. But that monitor would only have access to spending for patients covered by a global budget, which Partners says is about 25 percent of its business.

Parts of the deal needs more study, “such as potential price caps that are only in place for a few years,” said Rick Lord, a commission member who is CEO at Associated Industries of Massachusetts. We need to know, Lord said, “whether those types of things are effective enough to control the potential price increases that the commission has raised.”

Coakley’s spokesman, Brad Puffer, says the attorney general considered prior comments from the commission in her lengthy negotiations with Partners.

“The proposed consent judgment will help control health costs and alter Partners’ business practices for the next 10 years, accomplishing more than a lawsuit would have done,” Puffer said.

Coakley chose to negotiate with Partners rather than suing to block its acquisition of South Shore Hospital. She initially asked a judge for a speedy review of the agreement. But Thursday Coakley sought to delay a hearing until the commission’s final report on another proposed Partners’ acquisition, of Hallmark Health, is complete.

“Our office always retained the option to seek to renegotiate portions of this agreement as it relates to Hallmark following a final report by the Health Policy Commission,” Puffer said.

The attorney general’s request was approved with a hearing now set for Sept. 29, when Coakley will either be in the final stage of a campaign for governor, or out of the running after a primary election a few weeks earlier.

Partners did not oppose the delay, but some communities that are ready for a final deal may be frustrated.

“We appreciate the patience of the South Shore Hospital and Hallmark Health System communities who strongly support these affiliations,” Partners’ Copp said. “We look forward to working with them to deliver high quality care that is affordable and accessible to patients in those communities.”

Some of Partners’ competitors in those communities say the issues raised by the Health Policy Commission are further proof that the Partners-AG deal should not be approved. That decision is up to Suffolk Superior Court Judge Janet Sanders.

Attorneys who handle anti-trust cases say it would be unusual for Sanders to intervene. But much of this process is new, a test of the state’s health care costs containment law of 2012.