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Mass. medical leaders wary of healthcare overhaul’s cost

By Robert Weisman, Globe Staff | July 28, 2009

If you want to know how the proposed overhaul of the US healthcare system may play out nationally, talk to top executives at the biggest medical and life sciences companies in Massachusetts.

As the heads of leading hospitals, insurers, and biotechnology companies, they have dealt with the complexities of near-universal healthcare since 2006, when Massachusetts became the first state to mandate insurance coverage. That gives them a unique perspective on the national effort to overhaul healthcare.

As the debate in Washington heats up, local executives warn that two goals of the Obama administration - expanding insurance coverage and controlling spending - may prove incompatible. And as Massachusetts strains to deal with the increasing costs of its successful healthcare program, they raise questions about who will pay for the projected $1 trillion cost on the federal level.

“Healthcare isn’t free, and if more people want an MRI on demand, that isn’t going to reduce costs or improve care,’’ said Ellen M. Zane, president of Tufts Medical Center in Boston. To make reform work on such a big scale, Zane said, the burden will have to be shared by providers, insurers, employers, and patients.

Most Massachusetts business leaders agree the healthcare system needs major surgery. But they have their own particular concerns about the impact of proposed healthcare changes on their organizations’ health, underscoring how difficult it will be to reach consensus.

Hospitals and doctors say that lower federal reimbursements could hurt the quality of medical care, while insurers chafe at a proposed government-run health plan they argue would put them at a competitive disadvantage.

At the same time, biotech and medical-device makers say the focus on cost savings could hinder their ability to develop life-saving drugs and innovative devices.

Details have yet to emerge on the healthcare plan, but some provisions, especially coverage of an estimated 47 million uninsured US citizens, are likely to mirror steps already taken here.

Cost is a proven issue. Nationwide, hospitals have committed themselves to forgoing $155 billion in government reimbursements over 10 years, but even that may not be enough. James J. Mongan, chief executive of Partners HealthCare, which operates Brigham and Women’s and Massachusetts General hospitals, said providers must find ways to deliver top care for less money.

“The hospitals understand they’re going to have to give up something, but believe there’s room for more efficiency over the coming decade,’’ said Mongan. He said Partners hospitals are working to cut costs, through methods such as improved disease management and electronic medical records.

Hospital executives said those steps may eventually pare expenses, as will preventive care if more people sign up with primary care doctors. But a wave of newly insured patients will almost certainly drive up short-term costs for insurers and employers, executives said.

That has happened in Massachusetts. The stress of paying for universal coverage is showing, too; last month, the Connector Authority, which oversees the state’s healthcare program, cut $155 million, or about 12 percent, from Commonwealth Care, which subsidizes insurance for low-income residents.

With the federal government proposing to decrease reimbursement payments to hospitals at the same time they are forced to take on more patients, “what you could get is a gradual degradation in the ability of hospitals to deliver services,’’ said Paul Levy, president of Beth Israel Deaconess Medical Center in Boston.

Ralph de la Torre, chief executive of Caritas Christi Health Care, a six-hospital chain, said hospitals will have to make smarter choices about care. “It needs to be more based on quality and less based on the number of procedures,’’ said de la Torre, who suggested doctors can be too quick to order tests.

For insurers, the biggest stumbling block is a government insurance plan, proposed by President Obama as an alternative to private insurers.

“Proponents say it will add a level of competition,’’ said Cleve L. Killingsworth, chairman of Blue Cross and Blue Shield of Massachusetts, based in Boston. “But when you’re introducing a plan that doesn’t have to make a [profit] and can go to the Treasury to get bailed out, you’re creating an unlevel playing field.’’

James Roosevelt Jr., president of Tufts Health Plan in Watertown, said the national overhaul effort is taking aim at some problems - such as the exclusion of patients with pre-existing conditions - that are more prevalent nationally than in Massachusetts. The government could set lower prices, forcing insurers to follow suit, Roosevelt said, possibly limiting care for many people. “Providers would get less money and fewer conditions would be covered,’’ he said.

Massachusetts life sciences companies worry about unintended consequences. Trimming budgets at teaching hospitals could crimp their ability to collaborate with researchers on medical devices and biotech drugs, executives said. For medical-device makers, there is the added concern that expanded healthcare could be financed partly by taxing their products.

“We have to make sure that, in making changes, we don’t damage patient outcomes or innovation,’’ said Ray Elliott, who took over this month as president of Boston Scientific Corp., a Natick maker of stents, defibrillators, and other medical equipment.

US drug companies have pledged $80 billion in cost savings to help build a new healthcare system. But deliberations on Capitol Hill have left industry leaders wary about price controls on drugs. Companies say they depend on high profits to cover research and development. That’s especially true of biologic drugs - costly treatments made from living cells that have allowed Massachusetts’ biotech sector to grow. “If they do this in a way that interrupts the innovation cycle, that would be a very high cost,’’ said Henri A. Termeer, chief executive of the Cambridge-based biotech Genzyme Corp.
http://www.boston.com/business/healthcare/articles/2009/07/28/mass_executives_wary_of_healthcare_overhauls_cost?mode=PF