Patrick eyes major changes in health care payment system

Gov. Deval Patrick is considering fundamental changes to the health care system in Massachusetts, eyeing adjustments to the current fee-for-service payment system and planning cost reduction legislation by summer.

Health and Human Services Secretary JudyAnn Bigby said the administration is considering a system in which providers would receive payments related to outcomes rather than amount of care.

Patrick said he would summon health care industry leaders to his office perhaps this week for a discussion on containing premiums and rates, and to ask for their "vigorous cooperation," he told reporters after a meeting with top state regulators. Patrick called the current trend of rising costs unsustainable.

"We need to look at this systemically and look at reforms across the board," Patrick said.

Patrick said the current payment system, under which compensation is provided for services, may be ineffective.

"We will examine that and are examining it," he said.

In a press conference on Monday in his office lobby that began 45 minutes late, Patrick refrained from directly criticizing a reported deal between Partners HealthCare and Blue Cross Blue Shield that largely drove the increased costs, but praised the Boston Globe's revelation of the arrangement.

The current system, under which insurers and health care providers negotiate rates, was launched in the early 1990s when the Legislature and the Weld administration deregulated a system grounded in government rate-setting.

In 2006, the state embarked on an ambitious health care expansion, which has helped cover roughly 98 percent of the population. Last year, a new law aimed at reining in costs went into effect, and Patrick signaled an extension of that effort.

Patrick met Monday with Inspector General Gregory Sullivan, Administration and Finance Leslie Kirwan, Bigby, Health Care Finance and Policy Commissioner Sarah Iselin, Insurance Commissioner Nonnie Burnes, and David Friedman, a top aide to Attorney General Martha Coakley. Patrick said he wanted to work with their offices on cost containment.

Any reform effort will likely spark intense lobbying from the different corners of the health care industry, as payers and providers battle to preserve or increase turf.

"Any serious discussion needs to start with how much we pay for medical care and why it costs so much," said Marylou Buyse, president of the Massachusetts Association of Health Plans.

Buyse said that nearly 90 cents of every premium dollar directly funds medical services. She said the cost-control effort should focus on three principles: more efficient and better care with publicly available results, evidence-based care to prevent misuse of care, and reducing cost-shifting between public and private payers.

A spokeswoman for the Massachusetts Hospital Association, Catherine Bromberg, said, "We look forward to hearing more from the governor and trust that any ideas that get floated on cost-saving initiatives will be fully vetted with insurers, providers and policymakers."

Health care consumes about 45 percent of the $28 billion state budget, a Patrick budget aide said, and health care spending is projected to grow at 6.7 percent annually, according to a federal estimate released earlier this year.

Patrick said he wants the state to receive the same latitude in use of federal Medicare dollars as it enjoys in directing federal Medicaid funding.

The annual operating budget is unlikely to serve as a venue for the types of changes Patrick will seek. Non-budget policies, including the rates charged by providers to state-run programs, could be negotiated, and the state's insurance commissioner's authority to regulate rates could serve as another outlet, Patrick said.