Commission hears worries on health cost trends

STUART ALTMAN, the chair of the Health Policy Commission, summed up two days of hearings on cost trends in the state’s health care market by highlighting what was and what was not said.

Altman said Massachusetts has had some success in slowing the growth in health care spending and the state is no longer the most expensive for health care in the nation. But he noted many of the hearing participants, particularly state leaders, said a lot about the devastating impact of rising health care costs on the state budget, individual consumers, and businesses. Even so, he said, many witnesses talked about the need to funnel more resources into behavioral health and social determinants of health such as housing and food.

The Brandeis University professor said he also heard that many of the mechanisms the commission has been counting on to reduce health care costs are trending in the wrong direction. Care isn’t shifting from high-cost teaching hospitals to lower-cost community hospitals. The growth of alternative payment methods, which tend to offer health care providers a set fee for patient care, is slowing and may even be slipping backward toward the traditional fee-for-service model.

What Altman said he didn’t hear during the two days of hearings was talk about fundamental change. If officials are serious about spending less on health care, Altman said, the health care delivery system needs to change and the size of the health care system needs to shrink. But he sounded skeptical that was going to happen.

“These hospitals are the largest employers in their communities,” he said.

Dr. Rushika Fernandopulle, the cofounder and CEO of Iora Health, was the one hearing participant who is promoting a fundamental change in approach. Iora is a Boston-based company that is literally betting on a new model of health care, one that demands higher, fixed payments for team-based primary care with the payoff coming in the form of a reduction in more expensive hospitalizations.

“We have the advantage of starting from scratch,” said Fernandopulle, who noted other health care firms are locked in mindsets and business models that require them to fill empty hospital beds and conceal costs from patients.

Fernandopulle said his company focuses exclusively on the needs of patients – whatever is needed to keep them out of health trouble.  He said his company will pay for an Uber if that will get a patient to needed care in a timely fashion. He said the firm paid for an iPod shuffle for a dialysis patient who regularly became restless during treatment, walked away, and often ended up in an emergency room. With the iPod, Fernandopulle said, the patient would listen to music and remain calm. (For more on Iora and Fernandopulle, check out this CommonWealth feature story from 2014.)

Iora’s approach is so unconventional that one member of the Health Policy Commission suggested it was  a “utopian vision” and one of Fernandopulle’s fellow panelists, Kevin Tabb, the president and CEO of Beth Israel Deaconess Medical Center, questioned whether it could be brought to scale.

Tabb is moving in the opposite direction from Fernandopulle. Instead of starting over from scratch, he is doubling down on the existing system, proposing a merger of his hospital system with the Lahey Health system, New England Baptist Hospital in Boston, Mount Auburn Hospital in Cambridge, and Anna Jaques Hospital in Newburyport.

The proposed megamerger, which is slated for review by the Health Policy Commission, wasn’t discussed at the cost trends hearing. But Tabb and other health care executives did discuss the challenges facing more traditional health care providers. For example, they said, their systems are investing in programs designed to keep patients out of hospitals and emergency rooms, investments that pay off if the providers are compensated based on how well they manage health care spending. But Tabb and others said the market appears to be backpedaling on that approach, sticking with so-called fee-for-service models which reward providers for the number of services they provide.

“That makes it very, very difficult for us,” said Tabb. He said operating under two different types of payment systems is akin to trying to remain standing with one foot on land and the other in a canoe.

Eric Schultz, the president and CEO of Harvard Pilgrim Health Care, and Steven Strongwater, president and CEO of Atrius Health, said they were seeing the same trend toward fee-for-service.

Schultz said he is very concerned about the rising cost of pharmaceuticals. He said the first gene therapy for blindness is scheduled to be released soon. Pricing hasn’t been set yet, he said, but it’s expected the cost will range between $1 million and $1.5 million per dose. “The insurance model doesn’t support it,” he said.

Schultz is also troubled that health care providers are starting to hire “coders” who figure out ways to characterize services using code numbers for compensation that bring in more revenue. Schultz said his insurance company is now hiring the same sort of coders to keep an eye on the coders being used by the health providers. He said his coders are starting to uncover services coded as emergency room visits that should be coded as office visits.

Ron Mastrogiovanni, a member of the Health Policy Commission, said he’s not surprised that health care providers are trying to find ways to boost their bottom lines. “They may be nonprofits, but the reality is these businesses are in business to boost their margins,” he said.