And let me be clear — no one wants the company to fail. Back when the deal initially went down, I said that Curt Schilling has every right to find the most lucrative deal for his company but that the state of Rhode Island was making a mistake. What the state did was make a big, concentrated, and multi-layered bet.

Big — $75m big. Concentrated – $75m of a $125m initiative in a single company. Multi-layered — the return on investment rests on the assumptions that 38 Studios has picked the right content, put it through the right distribution channel, and picked the right revenue model. Oh, and you’ve got to spend most of your money upfront to develop the content and build the distribution platform, before any customers show up.

Now, I know nothing about online gaming. Maybe Schilling’s on to something, maybe he isn’t. Do you think the folks working for the state of Rhode Island knew what they were getting into? An investment in a company like 38 Studios should be the domain of industry experts (risking private capital) or private investor with a high tolerance for risk and an interest in the field (like Schilling) not government bureaucrats using public funds.

And as an aside, nice work by Greg Bialecki and the rest of the Massachusetts economic development team in not responding to RI’s offer with one of their own.

I sincerely hope 38 Studios makes it. But the ongoing inability of the public sector to make investment decisions in volatile and complex markets should encourage us to get it out of the business of picking winners and losers.

Crossposted at Boston Daily.

New Hampshire lawmakers have a long history of jeering Massachusetts over taxes, but it looks like they have moved to a much bigger sacred cow, health care.

The Boston Globe ($)recently reported that in New Hampshire there is a bill, “eliminating a state review process and exempting it [specialty destination hospitals] from a tax that New Hampshire’s nonprofit hospitals pay.”

By contrast, the two recently proposed payment reform bills on Beacon Hill move in the opposite direction. The bills “reform” the determination of need process to make it more government-centered and will severely limit any future expansion of similar facilities in the Commonwealth. Massachusetts policymakers should be watching our borders closely as they aim to significantly alter our local payment methods for health care.

The diametrically opposed directions being debated in these two states could have long-term implications for where patients receive their health care. As more health care institutions are forced to compete on price and quality, Massachusetts providers may lose out.

Not only will some patients living in Massachusetts go to these out-of-state practices, but the Commonwealth could also lose patients traveling to our state for medical tourism reasons. Companies like Patient advocates in Maine run on a business model of finding the lowest-cost highest-quality providers, and Massachusetts providers may soon have lots of new competition in our region.

Find me on twitter: @josharchambault

Suddenly, everyone is in a rush. The House rushed their bill out the door at an oddly-timed late Friday afternoon press conference on Friday, May 4th. They plan on debating the bill in a month or so.

The Senate is in even a bigger rush — their bill came out on Wednesday, May 9th. Amendments are due by 5 PM on Friday. And debate begins on Tuesday of next week. Hope Senators can digest all 268 pages in time.

And all this activity will result in a final piece of legislation by the end of July if legislative leaders stick to their stated calendar.

Contrast this highly compressed round of healthcare reform with the 2006 effort — Both the Senate and the Governor had released their bills by April of 2005. The House put forward their bill in October 2005. Then the conference process and negotiations resulted in a bill signing on April 12, 2006, roughly a year after two versions were public and over five months after all versions were public.

This time around there will be dramatic changes to one of our state’s most important industries, healthcare (which accounts for close to 10% of gross state product), in less than three months. And the Legislature will have other major bills dealing with the budget, crime, and economic development (just name a few) to deal with over the same period.

That’s ripe environment for unintended consequences, mischief, and leaving hard decisions to the regulatory or administrative process. Keep a close eye.

Crossposted at Boston Daily.

Are the House and Senate giving us a false choice for how to control health care costs in Massachusetts? Aren’t there other options?

A few major themes have emerged from the two payment reform proposals and highlight the fact that they fail to align incentives for patients to be more involved in the purchase of their health insurance and their health care.

For example, even with full transparency of cost and quality (which is a huge lift on its own) for many patients, high-cost still correlates with higher quality in medicine. A recent report from Attorney General Coakley proved this theory wrong, but simply providing patients with cost data without placing the right incentives in their health plan to choose the low-cost high-quality provider will result in many selecting the most expensive care. As a result, these proposals will fall short of sustainably bending the cost curve. There is another way for the Commonwealth- patient-centered health plans, see Health Affairs($) for national savings estimates. The impact would be significant in Massachusetts as less than 3% of residents are on a form of these plans, compared to 13% nationally.

Any reform of payment methods must be aware of limits on the state’s power to regulate the 53% of Massachusetts companies that are self-insured (and are therefore regulated by the federal government), and of course Medicare beneficiaries in the state. The bills do not touch long term care, prescription drugs, hospital fixed costs, health plan reserves, medical devices or insurance overhead. So what does that leave us, an awfully small pool out of the roughly $60B to cut from. From a practical standpoint, are we looking to “fix” our health care problems by laying off workers or severely reducing their pay? That is one of the few options left. Is that a long-term sustainable and innovative approach?

The media and most stakeholders have missed this point completely. Instead of debating what arbitrary reduction in growth we would like to see, we need to be realistic and have a debate about how these proposals will play out in implementation, the unintended consequences,  and how stakeholders will react to the incentives in the bill. (For example, how do we deal with those living in Massachusetts but receiving their care in another state. Or the other way around.)

My concern is that both houses of the legislature will pass their versions with some minor tweaks, and then in conference committee, behind closed doors and with lots of industry lobbying, a “compromise” will be struck taxing both insurers and providers.

From a consumer and long-term health sector perspective, this will be a raw deal.

It is built on two flawed assumptions. First that new taxes, assessments, and surcharges will not be passed onto consumers in some form. Second, that the answer to our health care problem is chasing previous flawed government intervention with more flawed government intervention. These two assumptions should not be the terms of debate for payment reform in Massachusetts. Is there a third pill to consider?

You can find me on twitter at: @josharchambault