Harvard Pilgrim's CEO uses blog to get advice on rate increases

Some say he already has all the information he needs.

By Carolina Procter — Posted July 2, 2007

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The CEO of Harvard Pilgrim Health Care is publicly asking for suggestions on how much would be a fair increase in rates for hospital and physician services in 2008. The request has some physician leaders and consultants trying to figure out what motivated him.

On his blog (link), CEO Charlie Baker wrote in a May 23 posting, "So, 'viewing audience,' what's a 'reasonable' rate increase ... ? 3%? 5%? 7%? 10%? More? Less? ... Let me know what you think it should be."

Baker, who guided the New England-area nonprofit plan out of receivership in 2000, said he posed the question because he was "curious to see what the breadth of expectation would be." Some physicians responded that 2% or 3% would suffice, while others said "pay me my cost, which would've been 10% to 12%," Baker said in an interview with AMNews.

Harvard Pilgrim's annual rate increases over the last three years have been around 8%, Baker said. Numbers he provided showed physician payments going from around $640 million in 2004, to $692 million in 2005, to $742 million in 2006.

Baker said he posed the question knowing full well that "most people have no idea what goes on year over year with rates. Most employers couldn't tell you. Policymakers couldn't answer. If you ask providers, most would guess, and you'd end up with a wide range of answers."

Yet, he said, "there's nothing that swings a budget more than a percentage point difference in what we pay providers. I thought, what the heck, let's see what kind of answers I get."

To the physician community, Baker's inquiry doesn't seem productive, said Bruce Auerbach, MD, who is president-elect of the Massachusetts Medical Society.

"Are there shortages in the physician provider community? What's the cost of practice? It's those kinds of things that should be going into a decision as to what kinds of increases to provide rather than this nebulous inquiry of what potentially uninformed individuals [think]," Dr. Auerbach said. "I just don't think it's a reasonable way to gather information."

Many physicians might be reluctant to respond to the question for fear of sounding self-serving, he added.

"We have shortage and practice environment issues. We have geographic areas that have deficits. We have deficits in certain specialties. We need to address those rather than gather subjective data," Dr. Auerbach said.

He also said it's important to note that the numbers Baker provided are in the aggregate.

"That doesn't mean every physician gets 8%. Some may get 10 or 15, some may get zero. It's a balanced report. There may be physicians in some specialties that have been less happy with Harvard Pilgrim because they didn't get the increase they thought they needed to provide services," Dr. Auerbach said.

John Sheridan, a managed care consultant and president of Ohio-based E-Health Data Solutions, called Baker's query "a bit odd" but also logical. Baker might have posed the question so he could be armed with testimony when Harvard Pilgrim goes before the state insurance commission to ask about rate increases, Sheridan said. "This is the time of year he's got to be thinking ahead. I think the motivation is altruistic but also a little bit self-serving," he said.

As CEO of a health plan, Baker already has the resources to determine annual rate adjustments. But Baker said he wants outside input because "standards most likely to be meaningful to clinicians are standards developed by clinicians." He said he's trying to engage interested parties such as brokers, employers and policymakers and get them to think about what he calls a "big piece of what happens to health care costs every year."

Baker has been an advocate for hospitals and physicians posting their fees but said that didn't play into his decision to pose the question about rate increases. He did say he will use the blog to announce any pay increases or decreases for physician and hospital services.

"I will, once the dust settles on our 2008 negotiations," he said, estimating that will happen at the end of this year.

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