WORCESTER — Joseph F. Coggans Jr., 67, had never been hospitalized before he was rushed to St. Vincent Hospital in March after experiencing chest pains. The longtime Millbury selectman underwent insertion of five stents into his arteries.
According to federal Medicare data, the local hospital charged Medicare $63,328 to perform the surgery. Had Mr. Coggans been taken to UMass Memorial Medical Center, however, his surgery would have cost $78,139 — a $14,811 difference.
Mr. Coggans had no say in selecting St. Vincent; his doctor is affiliated with the hospital. He noted last week that the operation went very well and described the care he received as “excellent,” although his description of the food served there was much less charitable.
Asked what the surgery cost, he responded with a laugh, “I don’t know … and I don’t care.”
He paid his usual monthly fee to his insurer, and that was it.
What Mr. Coggans, indeed what many area residents don’t know, is that the nonprofit UMass Memorial Medical Center — namely its University Campus — charges an additional 50 percent or more for some of the same inpatient and outpatient procedures than its cross-town rival, for-profit St. Vincent, according to public and private health care rate data obtained by the Telegram & Gazette.
Bolstered by a long-held local perception that UMass Memorial is superior, one might assume that quality accounts for the cost differences. There is little evidence, though, supporting that view. In fact, several programs that evaluate hospitals’ patient outcomes and safety of procedures rate them fairly equally.
As a polarized nation heatedly argues over its ailing health care system, T&G reporters spent the past month examining reams of data and interviewing providers, insurers, doctors, patients, quality monitors and others for answers to how and why rates differ so markedly at two Worcester hospitals located less than three miles apart.
The breadth of cost discrepancies between the two facilities can be found in their contracts with Blue Cross & Blue Shield of Massachusetts, the largest health care insurer in the state. The rates contained in those contracts, which cover hundreds of tests and treatments, historically have been hidden behind a wall of confidentiality and fiercely protected by both insurance companies and medical providers.
(Note: For its analysis, the T&G used data for St. Vincent and UMass Memorial Medical Center — University Campus, both of which have about 300 inpatient beds. The entire UMass Memorial network, which includes its flagship University Campus and Memorial and Hahnemann campuses in Worcester, as well as affiliated hospitals in Leominster, Fitchburg, Marlboro, Clinton and Palmer, is considerably bigger. The University and Memorial campuses provide many of the same procedures, for which they charge identical fees.)
Two sources familiar with the Blue Cross contracts told the T&G that as late as December 2008, the insurer paid UMass Memorial roughly 40 percent more across the board than St. Vincent for inpatient hospitalizations, and about 35 percent more for outpatient work.
Another set of Blue Cross rates obtained by the newspaper put the differences at nearly 50 percent for inpatient procedures and about 40 percent for inpatient hospitalizations.
Told that T&G reporters had those figures, Blue Cross spokesman Jay McQuaide canceled an interview scheduled with Andrew Dreyfus, the company’s executive vice president for health care services, to discuss the rate discrepancies.
Joseph J. Mullany, president of Vanguard Health Systems’ New England market, whose parent company owns St. Vincent, also declined an interview request after learning the newspaper had obtained the Blue Cross rates.
Mr. McQuaide told the T&G that the percentage differences between UMass Memorial and St. Vincent are somewhat lower than the 40 percent inpatient and 50 percent outpatient figures, but declined to provide precise figures. Gary N. Lapidas, a UMass Memorial senior vice president, said he could not confirm the percentages because UMass Memorial does not know what St. Vincent charges.
The T&G’s sources acknowledged that the numbers are based on an assumption that 60 percent of revenue from each hospital comes from inpatient care and 40 percent from outpatient care — a commonly accepted breakdown for large hospitals — and may be off slightly, depending on the actual inpatient/outpatient breakdown.
While avoiding specifics, Mr. McQuaide did acknowledge that “the system is broken” when asked about health insurance reimbursement disparities in Massachusetts.
“Over the years, hospitals have been paid on the basis of their market clout, their brand, and their geographic advantage,” Mr. McQuaide said. “In the future, we’d like to see hospitals being paid on the quality of the clinical care they deliver.”
An analysis released last month by the Commonwealth Fund, a nonprofit health care foundation, reported that Massachusetts has the highest family health insurance premiums in the country.
The relationship between Blue Cross and Partners HealthCare, parent company of Massachusetts General and Brigham and Women’s hospitals in Boston, was brought to light last winter in a series of Boston Globe stories. The stories detailed how a handshake agreement in 2000 between Partners and Blue Cross officials led to sizable increases in rates paid by the insurer to Partners and how other insurers were compelled to pay similar increases or lose access for their subscribers to the prestigious hospitals.
That agreement currently is under investigation by Attorney General Martha Coakley’s office.
The Globe series documented considerably higher rates paid to doctors who perform procedures at Mass. General and Brigham and Women’s; so much higher, in fact, that many doctors must enter lotteries to perform their work at the two facilities. In Worcester, however, doctors who practice at both St. Vincent and UMass Memorial say they are paid the same rates.
Why then is the median cost of gallbladder removal surgery, according to one state agency, $9,200 at UMass Memorial and $4,500 at St. Vincent?
“The cost of taking care of a premature baby is taken up in the rates (UMass Memorial) charges for gallbladders and hernias,” explained Dr. Wayne Glazier, a Worcester urologist who is president of the 200-member Central Massachusetts Independent Physicians Association.
UMass Memorial officials don’t disagree.
Dr. Walter H. Ettinger Jr., president of UMass Memorial Medical Center, said there are legitimate reasons why tests and procedures done at the hospital cost more than at St. Vincent.
UMass Memorial is a teaching hospital with a public medical school, a huge research component, and expensive medical services provided nowhere else in Worcester County. St. Vincent is a community hospital that offers many of the same medical procedures but doesn’t offer expensive specialties such as a Level 1 trauma center or a neonatal intensive care unit. He also said the region’s biotechnology industry — often an offshoot of research and technology conducted at UMass — is subsidized to some extent by the rates the facility commands.
“Those costs are all included in the rates that we get,” Dr. Ettinger said. “Teaching doctors is expensive. Some of these specialties lose money. One thing that the country and the commonwealth are going to have to deal with is, these are real costs.”
UMass Memorial has commanded higher rates, in part, because it receives inflated federal Medicare rates to help offset the cost of hosting a public medical school. But UMass Memorial also has used its brand — and its sheer size — to demand higher rates from private insurers.
“To a large part, St. V’s and UMass are comparable,” said Dr. George Abraham, a Worcester internist who also is medical director for the region’s Independent Physicians Association. “On quality, they can stand together.”
Despite the higher rates charged by hospitals such as UMass Memorial, health insurers have had little luck moving patients to less costly facilities.
Massachusetts patients historically have had a strong preference for teaching hospitals for any and all medical procedures. When insurers attempt to play hardball in rate negotiations, the teaching hospitals can threaten to pull its physicians from the insurer’s network, which generally opts for the higher rates over alienating its members.
UMass Memorial, in its position as the largest hospital in Worcester County offering several specialties available nowhere else in the region, has been able to parlay its advantages into higher rates.
In 2000, Fallon Community Health Plan attempted to stand up to UMass Memorial. The Worcester-based insurer tried to change its existing contract with UMass Memorial from a fee-for-services model to one that paid a flat monthly rate per member.
UMass Memorial, maintaining it already was losing $3 million a year on the Fallon plan, refused to tack on an estimated $1 million more in losses.
Fallon was forced to notify 11,500 of its members that they could no longer be treated at UMass Memorial or use any UMass-affiliated doctors. The situation lasted for two years until Fallon finally agreed to pay UMass Memorial’s higher rates.
“By their nature, contract negotiations are sometimes difficult, even between entities that have a good working relationship,” said Christine Cassidy, director of corporate communications for Fallon Community Health Plan. “We’ve had, for many years now, a collaborative relationship with UMass Memorial Health Care that ensures our members continue to have access to and receive high-quality care.”
Further confirmation of cost discrepancies between the two institutions can be found on two relatively unknown but publicly available Web sites.
The state’s Health Care Quality and Cost Council Web site (http://hcqcc.hcf.state.ma.us/) lists more than 20 outpatient diagnostic tests and surgeries and breaks down their median costs at all Bay State hospitals, as well as comparing them to a statewide average. There are 17 procedures listed comparing St. Vincent and UMass Memorial and, on average, the latter’s median rates are about 26 percent higher.
Another Web site, the American Hospital Directory ( http://www.ahd.com), which provides some information for free but charges a fee for in-depth data, provides exhaustive information on the patient population covered by the federal Medicare plan. Both UMass Memorial and St. Vincent say that half of their patients are covered by Medicare.
The directory shows that, on average, UMass Memorial charges Medicare 42 percent more than St. Vincent for inpatient hospitalizations, and between 25 and 40 percent more for various outpatient procedures performed at both hospitals.
UMass Memorial officials say the higher rates charged to Medicare reflect the federal government’s commitment to funding medical education. A total of 38 percent is added onto Medicare bills by UMass Memorial to pay for indirect and direct medical education, the hospital said.
As UMass Memorial representatives were asked about their higher rates, a fair question also can be asked as to why St. Vincent’s rates are so low, not just in comparison to UMass Memorial but to state and national averages.
Dennis L. Irish, vice president of marketing, government and community relations for Vanguard’s New England and Chicago markets, said the hospital is “extremely well-managed” and efficient. Although on a smaller scale, he noted that St. Vincent also functions as a teaching facility, hosting more than 100 medical residents and fellows; 249 nursing students; and osteopathic and physician assistant school students.
Mr. Irish said St. Vincent has been handicapped in its rate negotiations with private health insurance companies because of its previous affiliation with Fallon Community Health Plan.
In the early 1990s, Fallon Community Health Plan had an ownership stake in St. Vincent Hospital. In 1996, the then-new owner of the hospital, OrNda HealthCorp., signed a 10-year preferred provider contract with the insurer that provided Fallon more favorable rates than other health insurance companies.
Other insurers, including Blue Cross, Harvard-Pilgrim, and Tufts, chafed at the higher rates.
“Private payers didn’t want to subsidize their competition,” Mr. Irish said. That situation exists in part to this day, he added.
The current situation, according to the Vanguard official, is frustrating.
“As a matter of principle,” he said, “we believe, as does the Commonwealth’s Special Commission on the Health Care Payment System, that health care payments ‘should promote greater equity of payments across payers and providers’ and be based upon ‘measurable differences in value (cost and quality).’
“Services of comparable quality should be reimbursed comparably within the same market,” he added. “… This is not the case in the Massachusetts health care marketplace at this time.”
Most of those interviewed for this story agreed that more and better “transparency” is needed in how rates are set and what those rates are, and most also acknowledged that the current system effectively prevents patients from seeking the lowest cost option.
“There is no other industry in the U.S. where consumers can’t find out about cost and quality,” said Dr. Marylou Buyse, a primary care doctor and president of the Massachusetts Association of Health Plans. “All these cost increases have not led to better quality … And unless patients have a reason to ask about cost, they don’t ask.”
Dr. Glazier, the Worcester urologist, said doctors are frustrated by the lack of cost data as well.
“You can’t shop around for the best cost. If you call them, they’ll tell you it’s proprietary information,” he said. Until, he notes, the patient receives the bill.
Dr. Abraham pointed out that health insurance plans do offer a small bonus, perhaps 1 percent of their contract, if they steer a certain percentage of patients to a lower cost facility, he said. But it’s rarely enough to change the habits of a physician, he said.
“Doctors are creatures of habit,” he said. “Every surgeon wants a block of time for surgeries, in the morning. They want the team of nurses and anesthesiologists that they know.”
Hospitals will “play hardball” with doctors who do not perform enough surgeries at the hospital, by giving them operating room openings later in the day. A surgery block from 3 p.m. onward is seen as highly undesirable, he said, because that means the physician won’t be done until late into the night.
“You tend to gravitate to one hospital or the other. The last thing a surgeon wants is bits and pieces (of time),” he said. “It’s not quality that drives that decision. It’s comfort, it’s convenience.”
Contact Aaron Nicodemus by e-mail at anicodemus@telegram.com. Contact Jay Whearley at jwhearley@telegram.com.
“
