"A Level of Self-Interest Here That is Unusual"

We recently posted about the seeming inability of US managed care organizations to effectively bargain down the prices of drugs. Although the whole point of basing health care funding on managed care was to control costs, managed care has not been very successful in keeping down the costs of drugs, devices, or hospitalization. The health care research literature has provided few explanations of these failings.

The Boston Globe reported on an "unusual alignment of forces," as one friend used to say, in the regional health care scene that may help explain this phenomenon.

In a scene right out of the days of the Vault, the secretive group of Boston business executives that for decades influenced public policy, Jack Connors, chairman of Partners HealthCare, convened a March 1 meeting of local powerbrokers to deal with a crisis in the healthcare industry.

Sweeping legislation to expand health coverage and set aside hundreds of millions of dollars in new payments for Massachusetts hospitals appeared near death, a casualty of conflicting agendas and egos on Beacon Hill. It was up to these business leaders to forge a compromise.

"There were a number of us in the business community and in the healthcare field who wanted to be sure that we didn't miss this opportunity," said Peter Meade, executive vice president of Blue Cross and Blue Shield of Massachusetts, and one of the select few invited to the meeting at Connors's advertising agency, Hill Holliday.

''This reflects the transformation of Boston's economy. The biggest players are not the banks and insurance companies, but the hospitals," said Jeffrey M. Berry, a professor of political science at Tufts University.

Business groups say the healthcare executives' intervention in the bill was not a one-time show of muscle. The industry is deeply embedded in the state's economic structure and its political influence probably will continue, they said.

Formally called the Coordinating Committee, the Vault, which disbanded in 1997, consisted of 25 powerful executives who operated in secret and developed a policy agenda for the business community. It first met in a basement vault of Boston Safe Deposit & Trust Co.

But the healthcare power brokers differ from the Vault executives in important ways, Berry said. First, they represent enormous nonprofit institutions instead of for-profit companies. Second, he said, their focus in this case was on complex legislation to benefit their industry -- not on charting broader overall growth and employment strategies.

"There was a level of self-interest here that is unusual in Massachusetts politics," Berry said.

Partners and Blue Cross executives denied their interest in healthcare legislation was motivated exclusively by business concerns. They said they have for years urged expanded access to healthcare through universal insurance coverage.

To make their case, Partners and Blue Cross together spent $850,000 on lobbying and advocacy advertising in 2005. Leading the squad of lobbyists for Partners and Blue Cross is John R. Sasso, who was chief of staff in the administration of governor Michael S. Dukakis. The $109,200 in fees paid last year to Sasso's firm, Advanced Strategies, were split down the middle by the two nonprofits, according to state disclosure reports.

Business groups that were not in on the deal had mixed reactions. For instance, the Massachusetts High Technology Council accused healthcare executives of cutting a deal to enhance their own revenues.

"It appears that the motivation, for certain segments of the healthcare industry, was all about increasing reimbursement," said Christopher Anderson, the council's president.

The US now depends on the managed care model to control health care costs. Managed care is expected to control costs by limiting utilization of services, and the prices paid for particular goods and services. Doing so effectively requires that managed care organizations stay at arm's length from providers and supplies.

Many physicians will attest that their relationships with managed care organizations are certainly at arm's length, if not downright hostile.

Yet this article documents a very cozy relationship between one state's dominant not-for-profit insurer and managed care organization, and its largest and most powerful hospital system.

So how likely is it that Blue Cross will really pressure Partners to reduce utilization or prices?

And if these two organizations are so comfortable, what other organizations that our pseudo-competitive health care system expects to be at arm's length are actually much cozier with each other? Once again, inquiring minds want to know.