Five takeaways from the Health Policy Commission hearing

Is the state’s cost benchmark in danger of breach?

THERE HAVE BEEN SEVEN Health Policy Commission cost trend hearings since 2013, but the one that took place recently was the most interesting. Part of it was timing – Gov. Charlie Baker is pushing major health care legislation and national health care policy is in flux – but part of it was also the players involved. Here are my five takeaways.

State’s health care benchmark is in danger of being breached

Ray Campbell, director of the Center for Health Information and Analysis, said the annual growth in per capita total health care expenditures in 2018 came in right at the state’s benchmark – 3.1 percent. Marylou Sudders, the state secretary of health and human services, noted that the overall state growth rate would have been higher but for flat Medicaid spending driven by membership decline. Experts are now predicting that the growth rates for Medicare are starting to ratchet up.  And on the commercial health care spending side, Peter Markell, the chief financial officer of Partners HealthCare, warned us last May that wage growth pressure could fuel demand for higher price increases.

Campbell also noted that the continued higher rate of growth of consumer out-of-pocket spending – 5.6 percent – remains worrisome.  The increase is likely driven by the increased proportion of individuals in high deductible commercial insurance plans – now over 30 percent of the total population with commercial insurance.

Another issue to watch is “attributable total medical expense” from physician groups.  Commissioner David Cutler asked if it’s possible to take a physician group’s measured total medical expenditures per person and separate out how much comes from care provided by specialists and hospitals connected to the primary care providers and how much comes from care delivered outside of the system. The information could help analysts determine whether a physician group’s total medical expense is being driven more by internal forces, which could be addressed, or external forces, which may be beyond the group’s control.

Finally, Campbell presented data showing that premiums grew 5.6 percent last year at our state health insurers, up from 4.8 percent the previous year.  The portion of premiums retained for administrative costs and profits increased about 17 percent over the last two years, with the profit portion being the fastest growing component.

Putting these trends together, it seems that our ability to maintain total per capita spending growth on health care at or below the benchmark of 3.1 percent is going to be a real challenge in the upcoming years.

Governor mentions market dysfunction

It was Baker’s fifth time speaking at the annual cost trends hearings, but the first time he overtly acknowledged the market dysfunction that exists in Massachusetts. Even so, his mention was very cautious. “While many would argue that the fundamental problems with our health care system are rooted in some provider organizations being paid too much, and some being paid too little, we would argue the problem is more fundamental than that,” he said.

Baker pushed his legislative package, which, among other things, calls for greater proportionate spending (30 percent more after three years) on primary and behavioral health care while still requiring that overall spending remain under the benchmark. The bill also penalizes pharmaceutical companies that sharply raise drug prices over a certain threshold increase, and makes those pharma companies who sell drugs costing more than $50,000 annually subject to some Health Policy Commission oversight.  Baker’s proposal also prohibits certain surprise bills for out-of-network care, limits the use of hospital facility fees, makes it more difficult for providers to avoid participation in tiered or limited network plans, and requires urgent care centers to take all comers.

Baker’s proposal seemed to be very well received by those who appeared before the commissioners to testify. (Naysayer pharma representatives were not panel participants, and so their opposition was not verbally present.)

The governor’s proposal over time may result in some sort of redistribution of dollars away from our group of most overpaid and over-resourced providers to more financially challenged providers serving vulnerable populations. Yet I tend to be more in the camp of Dr. Michael Apkon, the CEO of Tufts Medical Center, and Dr. Steve Strongwater, CEO of Atrius Health, who both suggested the Legislature needs to pass a law that more directly regulates provider prices.

Complexity and waste

The title of the first panel at the cost-trend hearings was “Confronting Complexity in the Health Care System.” But anyone listening would have thought that the charge to the panel was “Why we need single payer health care in Massachusetts to reduce waste.”

One of the reasons the panel went off in this direction was because of the questioning of commissioner Don Berwick, a former Democratic Party candidate for governor who advocated for a single-payer system. Berwick has recently written about health care waste, and engaged in an interesting discussion with Dr. Apkon of Tufts, who previously was the CEO of a children’s hospital in Toronto and has experience working in the Canadian single-payer system.

Apkon said the best way to reduce complexity and waste from a hospital perspective would be to adopt a single fee schedule across all payers.  He said Tufts Medical Center spends over $50 million on administrative costs to obtain its hospital revenues through multiple payment sources, while his similarly sized hospital in Canada spent only $1.4 million.

Apkon told the commission that the American health care system may be more innovative at the micro level – as in using some new technology for diagnosis or treatment.  But he said it’s actually much easier to be innovative in Canada at the macro level, with the ability of government to implement systemwide payment reform or in mandating that all providers’ health records are available to each other electronically.  He also said the Canadian system offers the same level of timeliness for urgent or emergent care as the American system.

Lessons from Rhode Island

Dr. Marie Ganim, the health insurance commissioner in Rhode Island, and Chris Koller, president of Milbank Memorial Fund, outlined how the state doubled primary care spending between 2010 and 2015. The goal was not just to spend more on primary care by paying higher fee-for-service rates, but to transform the structure of Rhode Island health care by giving primary care doctors more authority and more incentives to deliver a more comprehensive, coordinated and patient-centered form of primary care.

About 70 percent of Rhode Island primary care practices have transformed in some way since 2010, and many now are trying to incorporate behavioral health within the practices. Koller emphasized that it was important to bring affected clinicians and even the public into the planning and discussion of primary care transformation—and to avoid having a model shaped primarily by those whose interests are to maintain more of a procedural medicine orientation.

The Rhode Island redistribution to primary care has received a lot of attention and likely affected the thinking of Baker and Sudders as they put forward their proposal to boost spending on primary care and behavioral health services by 30 percent, or a redistribution of about $1.3 billion in present-day dollars.

But Ganim and Koller also said that a rate cap was imposed on the growth of Rhode Island hospital payments shortly after the primary care redistribution effort began. They said recent studies suggest the rate cap has contributed much more to health care savings than the primary care transformation effort—something that Baker and the Massachusetts Legislature ought to pay attention to.

Who really calls the shots?

The last session of the cost trends hearing featured six top executives — Tom Croswell,  CEO of Tufts Health Plan (and the named CEO of the proposed Tufts Health Plan-Harvard Pilgrim entity if the merger goes forward); Dr. Steven Strongwater, CEO of Atrius, the largest non-hospital controlled physician group in New England; Kim Hollan, CEO of Signature Healthcare in Brockton and the most knowledgeable hospital executive in our state when it comes to understanding and working to advance hospital patient safety and quality; and the three CEOs of Boston Children’s Hospital, Beth Israel-Lahey Health, and Partners Health Care system.

CommonWealth magazine and the Boston Business Journal both covered this panel discussion, so I won’t repeat the lengthy discussion.  But I would point out that the CEOs of Children’s, Beth-Israel Lahey, and Partners had little to say when asked if their organizations will succeed in lowering their costs.

“The silence when (asked) if (your organizations will) reduce costs is deafening,” said Berwick. “Not 3.1 percent increase per year. That’s not cost reduction. That’s cost increase at a multiple of the rate of inflation. If the leaders of the most prestigious (health care delivery) groups in the commonwealth won’t say ‘We will reduce costs,’ … I don’t see a solution.”

Berwick’s sobering comments underscore who really has the power and control to decide how much each of us—businesses and consumers– will spend on health care each year. The governor, attorney general, the Senate president, and Speaker of the House all appeared at the hearings, but the elected officials are not the ones in charge.

The reality is that along with their cozy pharma and medical device industry colleagues, these large, nonprofit health care organizations, their boards and leaders—people we did not elect—are the ones who hold the “taxing power” tied to our health care spending.

Sandra Fenwick, the CEO of Boston Children’s Hospital, said “I just think we need to keep at it,” when she was confronted by a question noting the litany of statistics indicating that real progress in addressing the core issues behind wasteful health care spending is not materializing. In fairness, I think she was trying to say that, despite the failure to fundamentally bend the cost curve in our very complex health care system, she and her organization were still on board for at least trying to be part of the solution.

But what does “keeping at it” really mean when you are running a health care organization that made a half-billion dollars in total profits in its last reporting year, sitting on $6 billion in net assets which can cover multiple years of her hospital’s operating expense, charging the highest relative prices of any health care organization in the state, and now building a replacement hospital building with added beds which the Health Policy Commission has predicted will raise Massachusetts health care spending even more. In that context, the notion of “keeping at it” could scare some listeners into thinking the continued financial growth of her organization is more important to her than health care affordability for our state residents.

Meet the Author

Paul A. Hattis

Associate professor, Tufts University Medical School
Yes, that final panel could have taken place in any state or in front of Congress for that matter.  But Massachusetts prides itself on leading the way on health policy and its willingness to use governmental powers to protect the well-being of the public when necessary. (The governor’s vaping ban is a good example.) When it comes to health care spending and affordability, our state government and its oversight still have a very long way to go.

Paul A. Hattis is an associate professor at Tufts University Medical School.