Health Policy Commission identifies 3 troubling cost trends

Patient migration to high-cost Partners is major concern

THE STATE’S HEALTH POLICY COMMISSION identified three industry trends on Tuesday that are driving up commercial health care costs in surprising ways, and two of the trends have a direct link to the state’s most expensive health care provider, Partners HealthCare.

One major trend is that more and more surgeries are being done on an outpatient basis, meaning the patient checks in for the procedure and then leaves later that day. Outpatient procedures, as long as they can be done safely, are good in a policy sense because they cost a lot less than the same procedure done on an inpatient basis.

But what the commission discovered in analyzing new data was that a growing number of patients are not shifting to outpatient procedures at their own hospital, but instead gravitating toward the higher-priced Partners hospitals. The end result is the money-saving shift to outpatient procedures ends up costing more than if the setting for the procedure had remained the same.

The Health Policy Commission illustrated the nature of the problem by comparing hysterectomies done at Good Samaritan Medical Center in Brockton and Brigham and Women’s Hospital in Boston. Between 2015 and 2017, Good Samaritan saw a big dropoff in inpatient hysterectomies and a small increase in outpatient hysterectomies. Brigham and Women’s, by contrast, saw a moderate dropoff in inpatient hysterectomies and a huge increase in outpatient hysterectomies, suggesting the hospital was drawing patients from other facilities.

It’s not clear Good Samaritan patients were migrating to Partners, but the financial implications are stark. At Brigham and Woman’s, an outpatient hysterectomy costs 22 percent less than an inpatient hysterectomy. But the Brigham’s $20,144 cost for an outpatient hysterectomy was still $5,000 more than the price of Good Samaritan inpatient hysterectomy and $10,000 more than the hospital’s outpatient hysterectomy, according to the commission.

As more outpatient procedures shift to Partners hospitals, costs overall go up. The trend could accelerate, as Partners recently announced that it intends to spend $400 million opening or expanding four new outpatient centers in Westwood, Woburn, Westborough, and Salem, New Hampshire.

Partners accounted for 20 percent of all major outpatient surgeries in 2017 and 27 percent of all outpatient surgery spending. As its market share grows, the state’s overall health care costs are likely to rise. The Brigham and Women’s hysterectomy price tag of $20,144 was nearly twice the median price of $11,343 for all hospitals in the state.

The same pattern is occurring with minor outpatient surgeries, but the cost differential is much narrower. Partners hospitals snared 25 percent of minor outpatient surgeries in 2017 and 30 percent of the overall spending on minor outpatient surgeries. A colonoscopy with a biopsy cost $3,469 at the Partners-owned Massachusetts General Hospital, compared to the median price statewide of $2,571.

David Cutler, a Harvard University economics professor who heads the Health Policy Commission’s market oversight and transparency committee, said he didn’t know why so many patients are gravitating to Partners.

“Some amount of it is probably patient demand, but some of it could also be the referring physicians and where they choose to go, and some of it may be … the Partners outpatient facilities may be more convenient,” he said.

“The prices at Partners are obviously higher than at other places and that’s something we’ve known for a while,” Cutler said. “It has been a longstanding concern of the commission.”

A second major trend in the Massachusetts health care market is that commercial insurance spending on inpatient care rose 11 percent between 2013 and 2018 even as the number of patients being treated at hospitals declined by 14 percent. The Health Policy Commission attributes a large part of the spending increase to upcoding by hospitals – the practice of increasing the severity of a patient diagnoses to take advantage of higher insurance payments to deal with more complicated health care problems.

The commission said inpatient acuity – the term used for the severity of a diagnosis – increased 10 percent between 2013 and 2018 while other indicators of disease severity did not budge. The number of patients discharged with septicemia, a bloodstream infection, increased 180 percent between 2010 and 2018, while other diagnoses that are normally precursors of septicemia, such as pneumonia, increased only 17 percent. The commission concluded health care providers are upcoding to the more serious septicemia diagnosis to take advantage of the higher treatment costs. Septicemia costs $22,618 to treat, nearly twice as much as the treatment for pneumonia.

The commission did not single out Partners for the coding problem, but it noted that teaching hospitals and academic medical centers appear to be faring better amid the decline in hospital admissions. For maternity admissions, for example, teaching hospitals and academic medical centers saw a single-digit drop in admissions between 2014 and 2018, while the falloff was double digits at community hospitals.

The commission staff repeatedly documented how the higher prices charged by Partners hospitals are making it difficult to rein in health care costs. The commission noted, for example, that risk-adjusted medical spending by patients affiliated with Partners primary care physicians was $6,028 in 2017 – the highest in the state and $1,500, or 33 percent higher, than patients affiliated with physicians at Atrius Health.

The commission also reviewed seven services it believes are therapeutically unnecessary yet still authorized at health care systems largely because of “organizational inertia.” Baseline lab tests before surgeries, for example, are done on 27 of every 100 patients, on average, even though the tests are unnecessary. Similarly, thyroid screenings are done on 11 of every 100 patients even though the test has little or no value.

Partners hospitals were not the worst offenders in any of the seven categories of unnecessary services, but because Partners facilities charge more than their competitors for the tests the impact was greater.  More than $1,300 was spent on the seven low value services per 100 eligible Partners commercial patients in 2017, according to the commission. By contrast, the dollar impact was less than $600 at Atrius, Boston Medical Center, and Reliant.

While commercial insurance medical spending in Massachusetts has grown at less than the national rate since 2013, the Health Policy Commission raised concerns about how much Bay State employers and employees are spending on premiums. Massachusetts, for example, has the third highest average family premium in the United States at just over $20,000, trailing only Alaska and New York. Commission officials said premiums for one of every 10 commercially insured Massachusetts families in the state exceed $30,000 a year.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

And then there was the news that employees at firms that pay relatively low wages pay much higher premiums than other workers. According to the commission, the lowest-wage employees paid roughly the same amount in premiums as others until 2014, when their premiums skyrocketed. In 2018, according to the commission, the premiums paid by low-wage workers averaged
$8,196, while the premiums paid by all other workers hovered between $5,377 and $5,692.

“We don’t know exactly why that is, but it’s kind of a counterintuitive finding,” said David Auerbach, senior director of research and cost trends at the Health Policy Commission.