As the federal government and the various states consider what to do about health care costs, Massachusetts is proceeding along its own path. I thought my readers would be interested in a summary of those events.
Following the creation of the Massachusetts universal health care legislation in 2006, the state expanded its focus from providing access to the issues of quality and cost. The Legislature passed Chapter 305 of the Acts of 2008 in August of that year. A provision of that law requires the Division of Health Care Finance & Policy, in collaboration with the Attorney General’s Office, to hold annual public hearings concerning health care provider and insurer costs trends.
In preparation for those hearings, the Division prepared three preliminary reports, found here, on health insurance trends and the structure of the industry. Also, the Attorney General issued her own report on related topics.
In its letter of invitation to the hearing, the Division has set forth its agenda:
"The Division seeks to understand to what extent - if any - your organization’s experience varies from the agency’s findings, to solicit additional information that explains the premium and cost increases, to gather your perspective on the dynamics driving the trends observed, and to obtain your recommendations for short and long term solutions to such dynamics."
"With your assistance and active participation, the Division seeks to develop tangible policy recommendations to mitigate health care cost growth and to develop an integrated health care delivery system in a final report to the Legislature. "
I thought you would find it interesting to read some of the questions that hospitals have been asked to answer in advance of the hearing.
After reviewing the preliminary reports located at www.mass.gov/dhcfp/costtrends please provide commentary on any data, or finding that differs from your organization’s experience and the potential reasons therefore.
Do you see trends in your revenues, from 2006 to 2008 or more recently, that differ materially from these aggregate trends with respect to:
--The rate of change in outpatient facility prices and faster revenue growth compared with inpatient revenues;
--The growth of revenues for outpatient imaging services;
--Price changes versus other sources of growth in revenues, for inpatient and outpatient services.
What are the one or two most important underlying causes of your experience, as described above? Provide any information you have that will support your assertions.
What accounts for the growth in inpatient facility prices? What accounts for the growth of hospital outpatient facility price per service?
What accounts for the growth in utilization of outpatient hospital facility services? Do you foresee the same factors continuing to drive the growth in total facility revenues in future years?
How does your relative market position or market share affect your cost or revenue trends?
The concentration of teaching hospitals in Boston means that tertiary hospitals effectively serve as the “community hospital” for many patients. If your hospital is located in Boston, what reasonable solutions could your organization develop to provide routine care in less expensive – but appropriate - settings? If your hospital competes for patients with a teaching hospital outpatient facility, how has this impacted your revenues, costs and service mix?
Overall, we found an increase in the proportion of services being provided in more expensive settings. Is this trend occurring in your market area? What is driving this trend and what solutions would moderate this trend without impacting quality?
From 2006-2008, what was your average annual increase in labor costs compared with your average annual increase in patient revenue? What are the major factors driving change in labor costs? What are the major factors driving change in patient revenues?
Are the costs of acquiring medical equipment and technologies increasing, decreasing, or staying the same? Why and how do you think this is the case? What contribution is this having on your overall costs?
The following questions relate specifically to your experience in service prices and mix of services provided:
What factors do you consider when negotiating payment rates for inpatient care and outpatient services?
Do you generally negotiate contracts with carriers as part of a larger system or as an individual facility? Is there a material difference in how you approach contracts when you are contracting as part of a system vs. as an individual facility?
If applicable, do the services provided in your outpatient facilities in suburban areas differ from those in Boston? If so, how? For those services offered in both locations, do you charge the same or similar rates for all locations? If not, how do the rates – or price paid per person - differ and based on what factors? Are these facilities competing with community physicians or hospitals, or both for the same patients?
How has the expansion of outpatient facilities impacted the composition of surgical and medical admissions to your institution? How has the expansion of outpatient facilities impacted the price or cost paid per person of your institution?
How does the variation in prices among different providers in your peer group (e.g., teaching/community hospitals, providers in your geographic area, your key competitors) affect the payment rate increase you seek in negotiations with health plans? Please provide an explanation of how you define your “peer group”.
What specific actions has your organization taken already to address these trends in the short term or long term? What current factors limit the ability of your organization to execute these strategies effectively?
What types of systemic changes would be most helpful in reducing cost trends without sacrificing quality and consumer access? What other systemic or policy changes do you think would encourage or help health care providers to operate more efficiently? What changes would you suggest to encourage treatment of routine care at less expensive, but appropriate settings?
Could enhanced competition or government intervention or a combination of both mitigate the cost trends found in the Division's report? Please describe the nature of the changes you would recommend.
What would be the impact on your organization of making data public regarding quality and the reimbursement rates paid by each carrier to each hospital or system in a manner that identifies all relevant organizations? What is the advantage or disadvantage to your organization of the current confidential system?
Please identify any additional cost drivers that you believe should be examined in subsequent years and explain your reasoning.
Please provide any additional comments or observations you believe will help to inform our hearing and our final recommendations.