Thursday, February 18, 2010

Here's what's happening in the Bay State

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 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.


Anonymous said...

Does this agency really think it will "develop an integrated health care delivery system"? What bureaucratic hubris!

What will it cost you in time and effort to answer these questions, rather than taking care of patients?

Anonymous said...

I think those questions should be posed to the Massachusetts Hospital Association. I agree with the previous comment: you have better things to do with your time.

Anonymous said...

"What types of systematic changes would be most helpful in reducing cost trends without sacrificing quality and consumer access" Please, please tell us (again) how you would answer that question.

Anonymous said...

Disclosure of payment rates between insurers and providers; transparency of clinical outcome; higher payments to primary care doctors so that they serve more than a triage function for patients en route to higher paid specialists; better state management of jointly eligible Medicare/Medicaid patients. I'd start with those. What's your list?

Barry Carol said...

“Disclosure of payment rates between insurers and providers; transparency of clinical outcome”

Paul – As you know, I’m in complete agreement with you. I wonder how your fellow MA hospital CEO’s feel about this issue, especially those whose hospitals receive the higher reimbursement rates vs. peers. Also, are the insurers still arguing that disclosure of rates could raise costs? What, if any, movement has there been toward a consensus over the past several years? Perhaps the labor unions could actually be helpful here.

Anonymous said...

All good questions, Barry. Let's see what they say in their replies to the state.

Anonymous said...

Dear Dr. Levy.

You talk about quality and costs. At BIDMC, there is an elevated number of physicians that are not board certified nor board eligible. Most of the patients at BIDMC don't know whether or not the physician that are seeing is board certified or not. This situation is understandable in an undeserved area but not acceptable at a Harvard affiliated hospital. Although board certification is a voluntary process, it demonstrates a physician's exceptional expertise in a particular specialty. I understand that the salaries of these physicians are lower and the hospital spends less money, but this is not the way to reduce health care costs. Please review this issue and make the appropriate changes.

Anonymous said...

The issue of board certification requirement is decided by the physicians themselves. It is not decided by the hospital administration. And you are incorrect in thinking that the hospital spends less money for non-board certified doctors. The hospital does not pay the doctors.

Anonymous said...

On a national or state level, is it practical/possible to try to achieve all three--lower costs, more access and high quality at the same time? Do you have to prioritize and/or stagger the outcomes? Would MA be better off now if payment reform was addressed at the beginning? I agree that primary care doctors are at the center of this. I think we should pay them more based on global outcomes related to quality, safety and preventative medicine. How to ensure that each doctor's patient population is the right mix of young/old, sick/not sick is tricky though, isn't it? or is there a solution to that?

Anonymous said...

Note that I did not include payment reform on my list of priorities. There is a lot of good stuff going on right now in some places even under the fee for service system. Implementation of global payments may produce some incremental gain, but I think the items I have mentioned will have a more immediate return. But, if the way to get primary care doctors more money is to move to a global payment system, I am fine with that. You raise the actuarial risk issue in your last questions. That definitely has to be incorporated into the global payment regime, or it will fail.

Here are my ideas for the national scene:

Anonymous said...

This post raises so many issues that it’s difficult to address all of them. In fact, I’ll split my response into two comments. First and foremost, Massachusetts should have addressed these issues before they added all those people to the insurance rolls, not later when the costs predictably skyrocketed. In terms of the state asking all these questions, I have two conflicting reactions – a) they are getting at the right issues and trying to gather the correct data, and give them credit for trying to be inclusive rather than dictatorial. (Although, “integrated health care system" – huh?)
But b) asking hospitals, especially those with the highest reimbursements, is kind of like asking the fox how many chickens he’s seen in the coop lately, and what the explanation is for those feathers hanging out of his mouth. Even asking the MHA is likely to provide biased answers. I think they should gather this data themselves, since I am sure they will hear other answers from the health care lobbyists. The only hospitals who will take the time to answer all these questions are the ones who want to defend the status quo.

nonlocal MD

Anonymous said...

Part II (warning, long) - As far as Paul’s list, I agree; except I think it is na├»ve to expect that simply paying more to primary care providers will do anything at all to change their referral patterns. I think they will just collect more money per visit and keep right on ordering too many tests and referring to specialists, for reasons of both knowledge-base deficiencies and defensive medicine. To quote from a recent article in the NEJM on this issue:

“….Although the [medical home] model calls for primary care practices to take responsibility for providing, coordinating, and integrating care across the health care continuum, it provides no direct incentives to other providers to work collaboratively with primary care providers in achieving these goals and optimizing health outcomes. [Also], although evidence suggests the increased investment in primary care can result in savings from several types of reductions – for example, inappropriate use of tests and procedures, ER utilization, and [unnecessary] hospitalizations - most primary care practices do not have financial arrangements that allow them to share in these savings.”
(NEJM 361:2301, 2009)

Putting them together with specialists in a shared-risk organization, in addition to paying them more, would do far more to promote their education by the specialists and incentivize everyone to reduce costs. In addition, such an organization could spread malpractice risk and reduce defensive medicine costs.


Anonymous said...

Fram Facebook:

Sherman: Talk about loaded and leading questions. While this form may be useful to stimulate disussion or as a directional indicator, it is no likely to produce definitive response. What is its purpose?