Health pay reform accord ties industry cost
growth to economic growth
By Matt Murphy
July 30, 2012 ... House and Senate negotiators filed an agreement on a health care cost containment bill Monday night that would seek to limit the growth in health care costs over the next 10 years to equal or below the overall rate of growth of the state's economy.
The health care system overhaul, which legislative leaders said suggested could trim $200 billion over the next 15 years from health care expenses, encourages providers and insurers to adopt alternative payment and care delivery models focused on preventative care and patient health rather than the quantity of services offered.
The compromise guarantees that over the next decade, health care costs will not be allowed to grow faster than the overall rate of the economy, a goal pressed by both the House and Gov. Deval Patrick.
The final cost growth target would appear to fall within the parameters of what Patrick told business leaders in May he would be willing to accept, when said to the Greater Boston Chamber Commerce, "I certainly could not imagine accepting GSP plus anything."
On Monday before the bill was filed, Patrick told reporters he was confident that he would like the final proposal: "We have been working very closely with the conferees on a health care bill, which we expect later today. We haven't actually seen the language yet, but the principles seem to reflect the objectives that we had going into the bill," he said.
Both Rep. Steven Walsh, a Lynn Democrat and the lead House conferee, and House Majority Leader Ronald Mariano said they were confident the governor would sign the bill.
While health care costs have been growing on average in recent years at 6.8 percent, gross state product has averaged closer to 3.6 percent. The cost of health care for Massachusetts residents is roughly 15 percent higher per person then elsewhere in the country, accounting for more than 40 percent of annual state spending.
The bill drops a House-backed surcharge on high-priced providers, commonly referred to as a "luxury tax," in favor of measures Walsh said would accomplish the same goals - providing financial assistance to community hospitals and limiting the impact market power can hold over pricing.
The deal, reached over the weekend and finalized on Monday, could have broad implications for one of the state's major economic sectors and employers, not to mention the thousands of patients seeking care at Massachusetts hospitals every day.
"I think it's a great bill that protects patients and does not inhibit hospitals' ability to continue to provide high quality care," Walsh said Monday morning, after the four Democrats on the conference committee signed the report. Senate Minority Leader Bruce Tarr and Rep. Jay Barrows eventually signed on the report as well.
After the bill was filed, Walsh said the bill will also guarantee that patients have easy access to electronic medical records, and transparent pricing by providers and insurers. "We think patients should know the cost, quality and risk of the services provided to them," Walsh said.
If approved by the Legislature and signed by Patrick, the bill would mark the biggest overhaul of the health care marketplace since former Gov. Mitt Romney signed a law in 2006 requiring most residents to purchase health insurance. Backers of the 2006 law immediately identified cost control as the next issue to be tackled.
Mariano said this bill was more complicated, with more moving parts than the 2006 reform law.
Almost two years in the making, the effort to control cost has been considered the second major phase of health care reform in Massachusetts, where the state has been a national leader on access, but has continued to see premiums rise, putting a burden on consumers and businesses.
Walsh and Sen. Richard Moore, the lead Senate conferee, met Monday morning with Mariano and Sen. Anthony Petruccelli to sign the compromise. Barrows and Tarr did not attend the meeting.
"I think it's a great bill. We're certainly optimistic that what we put in place will work well," Moore said.
Under the deal, health care costs would be limited to the growth rate of the state's economy, or gross state product, for the first five years, according to those briefed on the compromise.
Starting in 2018, the benchmark would be reduced for five years to one-half a percentage point below GSP, though a newly created Health Policy Commission would have the authority to adjust the target back to GSP after public hearings, a two-thirds vote of its board, and legislative approval. After 2022, the target would revert back to GSP, subject to modification by the commission and the Legislature.
Providers who fail to meet cost benchmarks would be required under the proposed legislation to present improvement plans to the commission, and repeated failures to provide a plan to implement it would trigger the eventual possibility of a $500,000 fine.
The luxury tax would have been assessed on hospitals whose costs for services were significantly higher than the median, and could not be justified.
The bill would assess a one-time $225 million fee on hospitals and insurers, with $165 million coming from health plans, and the remaining $60 million assessed through a formula to Partners HealthCare, Beth Israel Deaconess Medical Center, and Boston Children's Hospital, according to legislative sources.
Partners HealthCare, the state's largest provider group, would pay $42 million under the plan, while Beth Israel's fee would be around $10 million, and Children's $8 million, they said. Both the Beth Israel care group and Children's would also be eligible to seek a waiver of up to a third of their assessment, sources said.
The bulk of the money, or $135 million, would go toward a fund to help distressed community hospitals, while $60 million would be deposited in a wellness and prevention trust fund for program grants at the community level, and the remaining $30 million would go toward the eHealth Institute to aid the transition to electronic medical records.
The conference committee also adopted a version of Gov. Patrick's proposal to address the possible influence of market power over provider pricing, directing the new Health Policy Commission to conduct "market impact reviews" of larger-scale provider groups to determine if market power was unduly influencing pricing to the detriment of consumers.
If the commission found that a provider was engaged in unfair practices, the case would be referred to the attorney general who would have the option of using her legal authority to pursue possible anti-competitive trust violations. A special commission would also be established to review acceptable reasons for pricing variation among providers, such a hospitals serving as teaching institutions.
The bill would not require providers to organize into accountable care organizations, or ACOs, but a certification process would be established with guidelines, similar to those prescribed in the House bill, to encourage patient care coordination, chronic disease management, and other care quality metrics.
"You don't know what the market is going to come up with, so we think this will encourage creativity in the marketplace," Mariano said.
Certified ACOs would be required to accept alternative payment methods, moving away from fee-for-service, and the providers that accept alternative payments would be in line for a 2 percent increase in Medicaid rates, or up to $20 million. Mariano this would help community hospitals with the transition.
The bill would replace the Division of Health Care Finance and Policy and the Quality and Cost Council with two new entities, both organized under the umbrella of the Executive Office of Administration and Finance, instead of as completely independent authorities as proposed by the Senate.
The 11-member Health Policy Commission, with five gubernatorial appointees, would be in charge of enforcing compliance with the cost benchmarks, as well overseeing provider performance improvement plans and certifying ACOs.
A separate Center for Health Information Analysis would be organized as a date reporting agency, headed by an executive director appointed by a majority vote of the governor, attorney general and auditor.
House and Senate negotiators worked through the weekend to finalize a deal, and planned to file the bill Monday afternoon with the Senate clerk for consideration on Tuesday, the last day of formal sessions. Throughout the process, House and Senate negotiators have said they were mindful of Patrick's position on key pieces of the legislation in order to avoid a veto or amendments that the Legislature would be unlikely to deal with before it recesses from formal sessions on Tuesday night.
Patrick said the industry has already shown they can control their costs without jeopardizing the quality of care.
The final landing point for the cost control benchmark has been a point of contention in the debate over the bill because of its potential impact on the finances of the health care industry, which continues to be one of the largest employment sectors in Massachusetts.
Senate leaders had cautioned that pushing too hard, too fast could impact jobs at a time when the economic recovery has been slow and fragile, but House leaders and Gov. Patrick have been insistent that limiting costs to the overall growth rate of the economy is achievable.
Medical malpractice reforms adopted by the conference committee include a 182-day "cooling off" period, and the bill would allow a health care provider to admit a mistake without that being used against them in court, which has been proven by studies to be a deterrent to costly lawsuits.
The bill would also allow patients to choose physician assistants as their primary care providers, a provision that advocates have argued both recognizes the medical training of physician assistants and also addresses the threat of increased wait times and a shortage of primary care doctors as preventative care becomes more common.
This story appears courtesy of the State House News Service (subscription required).
2400 - Payment Reform Conference Report