Massachusetts Attorney General Martha Coakley has launched her third salvo against high-priced healthcare providers, coming out more strongly than ever in favor of aggressive regulation to minimize price disparities.

After issuing reports in 2010 and 2011 laying the blame for healthcare cost escalation on elite providers with hefty market clout, Coakley's Nov. 18 speech laid out three pillars of action to curb costs.

The first is greater transparency regarding costs combined with efforts to increase healthcare literacy by requiring providers to give patients cost estimates for procedures, as car mechanics or roofers do.

The second pillar is ensuring competition by monitoring the current surge in consolidation and taking antitrust action when systems become too large. Coakley suggests a market impact review when a provider reaches a certain level of market clout, but acknowledges that there is no reporting mechanism currently in place to effectively monitor provider market size or clout.
Finally, the third pillar: Starting in 2015, if the market has not corrected unwarranted price variation, the administration should be able to reject health plan contracts with excessive or inadequate provider price variations, Coakley said.

She suggests banning cost variance greater than 20 percent above or below the system's average costs in the preceding year.

In order to truly rein in rising costs that are hurting our consumers and businesses, we must address the flawed foundation caused by this dysfunctional market, Coakley said. There are many ideas to fix this problem and these are just a few. But the one thing we can't accept is to do nothing.

These recommendations largely dovetail with those of the Governor's Special Commission on Provider Price Reform, which includes a recommendation that calls on the state to regulate provider prices. Of course, this is hardly the earth-shattering proposal it might be in other states. Massachusetts is one of the most regulation-friendly states in the nation and the birthplace of healthcare reform's individual mandate.

Providers support price transparency and voluntary steps to curb price inflation, but fault state and federal government for failing to reimburse adequately for Medicare and Medicaid, creating cost-shifting.

Taking the extreme and administratively burdensome step of regulating payment in the complex private system is assuming power that government cannot exercise effectively or fairly, Lynn Nicholas, Massachusetts Hospital Association president and CEO said in a response to the commission's recommendations.

Since Coakley's first report on healthcare price inflation, Massachusetts providers have stepped up consolidation both with mergers and acquisitions and by leaping straight into the health plan arena.

The new for-profit player in the Boston market, Steward Health Care System, is now working with Tufts Health Plans to create its own narrow network health plan to drive patients to its community hospitals. Market titan Partners HealthCare System has also entered the insurance market with its acquisition of Neighborhood Health Plan, which gives it a firm toehold in the Medicaid market.

So if Coakley wants to curb market consolidation, she's already getting left in the dust.

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