massachusetts: health care reform
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FINDINGS FROM ATTORNEY GENERAL’S EXAMINATIONS OF HEALTH CARE COST TRENDS AND COST DRIVERS PURSUANT TO G.L. c. 118G, § 6½(b) OFFICE OF ATTORNEY GENERAL MARTHA COAKLEY ONE ASHBURTON PLACE • BOSTON, MA 02108 February 13, 2012. Massachusetts: Health Care Reform. EXAMINATION APPROACH . - PowerPoint PPT PresentationTRANSCRIPT
FINDINGS FROM ATTORNEY GENERAL’S EXAMINATIONS OF HEALTH CARE COST TRENDS AND COST DRIVERS PURSUANT TO G.L. c. 118G, § 6½(b)
OFFICE OF ATTORNEY GENERAL MARTHA COAKLEYONE ASHBURTON PLACE • BOSTON, MA 02108
February 13, 2012
Massachusetts: Health Care ReformYear Massachusetts Health Care Reform Federal Reform
1990’s Insurance Market Reforms•Guaranteed Issue•Modified Community Rating•Pre-existing Condition Limitations
2006 Expansion of Insurance Coverage•Individual Mandate•Employer responsibility•Medicaid Expansion•Insurance exchange (Connector)
2008 Chapter 305 – Cost Containment I•AG Authority to Examine Cost Trends
2010 Chapter 288 – Cost Containment II •Transparency, Rate review, and Tiered Products
22/13/2012
EXAMINATION APPROACH • We issued dozens of subpoenas for data, documents, and
testimony to major health plans and many different types of providers.
• We conducted dozens of interviews and meetings with providers, insurers, health care experts, consumer advocates, employers, and other key stakeholders.
• We engaged experts with extensive experience in the Massachusetts health care market.
• We greatly appreciate the courtesy and cooperation of payers and providers who provided information for these examinations.
32/13/2012
MEASURING HEALTH CARE COSTS
• TOTAL MEDICAL EXPENSES (TME): The total cost of all the care that a patient receives, including the payments by the health plan for the care of the patient, and any copayment or deductible for which the patient is responsible. TME reflects both price of services and volume of services.
• PRICE: The contractually negotiated amount that an insurance company pays a health care provider for providing health care services; we reviewed relative price information, which shows the prices paid by health plans to providers for all services in aggregate as compared to other providers in the health plan network.
42/13/2012
2010 and 2011 EXAMINATION HIGHLIGHTS1. Prices paid by health insurers to hospitals and
physician groups vary significantly.
2. Variations in prices are not adequately explained by value-based differences in the services provided.
3. Variations in prices are correlated to provider and insurer market leverage.
4. Global budgets vary significantly and globally paid providers do not have consistently lower TME.
5. Variations in prices impact the increase in overall health care costs.
52/13/2012
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Atho
l Mem
oria
l Hos
pita
l 0
.77
Sain
ts M
edic
al C
ente
r 0
.95
Cam
brid
ge H
ealth
Alli
ance
0.8
3 Ne
w E
ngla
nd B
aptis
t Ho
spita
l 1
.54
Law
renc
e Ge
nera
l Hos
pita
l 0
.73
Esse
nt -
Mer
rimac
k Va
lley
0.9
4 Q
uinc
y Med
ical
Cen
ter
0.9
5 No
rth
Adam
s Re
gion
al H
ospi
tal
0.9
5 Va
ngua
rd -
Sain
t Vin
cent
Hos
pita
l 1
.06
Mor
ton
Hosp
ital a
nd M
edic
al C
ente
r 0
.87
UMAS
S -H
ealth
Alli
ance
0.8
4 No
ble
Hosp
ital
1.0
3 M
ilton
Hos
pita
l 0
.92
Sign
atur
e HC
-Br
ockt
on H
ospi
tal
0.8
3 Ca
ritas
-Ca
rney
Hos
pita
l 1
.02
Anna
Jaqu
es H
ospi
tal
0.8
6 UM
ASS
-Mar
lbor
ough
Hos
pita
l 0
.99
Carit
as H
oly
Fam
ily H
ospi
tal
0.8
8 Lo
wel
l Gen
eral
Hos
pita
l 0
.74
Part
ners
-Fa
ulkn
er H
ospi
tal
0.8
9 Bo
ston
Med
ical
Cen
ter
1.0
6 M
ount
Aub
urn
Hosp
ital
0.9
0 M
assa
chus
etts
Eye
and
Ear I
nfirm
ary
1.0
7 M
ercy
Med
ical
Cen
ter
0.9
3 Ca
ritas
-Go
od S
amar
itan
0.8
0 Ho
lyok
e M
edic
al C
ente
r 0
.94
CCHS
-Ca
pe C
od H
ospi
tal
1.0
4 Ca
ritas
-No
rwoo
d Ho
spita
l 0
.90
Esse
nt -
Nash
oba
Valle
y 0
.85
PHS -
Emer
son
Hosp
ital
0.7
8 Va
ngua
rd -
Met
roW
est M
edCt
r 0
.87
Heyw
ood
Hosp
ital
0.8
4 Ba
ysta
te M
edic
al C
ente
r 1
.10
Jord
an H
ospi
tal
0.8
1 So
uthc
oast
-To
bey
Hosp
ital
0.7
9 M
ilfor
d Re
gion
al M
edic
al C
ente
r 0
.82
Sout
hcoa
st -
Char
lton
Mem
oria
l 1
.00
Tufts
Med
ical
Cen
ter
1.4
1 Ba
ysta
te -
Mar
y La
ne H
ospi
tal
0.7
5 W
inch
este
r Hos
pita
l 0
.75
Sout
hcoa
st -
St. L
uke'
s 0
.86
CCHS
-Fa
lmou
th H
ospi
tal
0.8
9 BI
Dea
cone
ss M
edic
al C
ente
r 1
.21
Nort
heas
t Hea
lth S
yste
m
0.82
BI
D -N
eedh
am/G
love
r 0
.82
UMAS
S -C
linto
n Ho
spita
l 0
.87
Carit
as -
St. E
lizab
eth'
s 1
.04
Hubb
ard
Regi
onal
Hos
pita
l 0
.80
PHS -
Hallm
ark
Heal
th
0.85
W
ing M
emor
ial H
ospi
tal
0.8
6 Pa
rtne
rs -
BWH
1.3
1 Pa
rtne
rs -
New
ton-
Wel
lesle
y Ho
spita
l 0
.77
UMas
s M
emor
ial M
edic
al C
ente
r 1
.17
Sout
h Sh
ore
Hosp
ital
0.8
3 La
hey C
linic
1.
33
Part
ners
-No
rth
Shor
e M
ed C
tr
0.98
Pa
rtne
rs -
MGH
1.
35
Bays
tate
-Fr
ankl
in M
edic
al C
ente
r 0
.81
Harr
ingt
on M
emor
ial H
ospi
tal
0.7
5 St
urdy
Mem
oria
l Hos
pita
l 0
.82
Cool
ey D
icki
nson
Hos
pita
l 0
.87
Carit
as -
Sain
t Ann
e's H
ospi
tal
0.8
4 Bk
HS -
Berk
shire
Med
ical
Cen
ter
1.0
0 Pa
rtne
rs -
Mar
tha'
s Vi
neya
rd
0.71
Ch
ildre
n's H
ospi
tal B
osto
n 1
.33
Part
ners
-Na
ntuc
ket C
ottag
e 0
.56
Dana
-Far
ber C
ance
r Ins
titut
e 1
.96
BkHS
-Fa
irvie
w H
ospi
tal
0.7
1
Rela
tive
Paym
ents
to H
ospi
tals
Hospitals from Low to High Payments
HIGHER PRICES ARE NOT TIED TO INCREASED COMPLEXITY OF SERVICES
HIGHER PRICES ARE NOT TIED TO TEACHING STATUS
6
0.00
0.20
0.40
0.60
0.80
1.00
1.20
MA
Hosp
ital 1
MA
Hosp
ital 2
MA
Hosp
ital 3
MA
Hosp
ital 4
MA
Hosp
ital 5
MA
Hosp
ital 6
MA
Hosp
ital 7
MA
Hosp
ital 8
MA
Hosp
ital 9
MA
Hosp
ital 1
0M
A Ho
spita
l 11
MA
Hosp
ital 1
2M
A Ho
spita
l 13
MA
Hosp
ital 1
4M
A Ho
spita
l 15
MA
Hosp
ital 1
6M
A Ho
spita
l 17
MA
Hosp
ital 1
8M
A Ho
spita
l 19
MA
Hosp
ital 2
0M
A Ho
spita
l 21
MA
Hosp
ital 2
2M
A Ho
spita
l 23
MA
Hosp
ital 2
4M
A Ho
spita
l 25
MA
Hosp
ital 2
6M
A Ho
spita
l 27
MA
Hosp
ital 2
8M
A Ho
spita
l 29
MA
Hosp
ital 3
0M
A Ho
spita
l 31
MA
Hosp
ital 3
2M
A Ho
spita
l 33
MA
Hosp
ital 3
4M
A Ho
spita
l 35
MA
Hosp
ital 3
6M
A Ho
spita
l 37
MA
Hosp
ital 3
8M
A Ho
spita
l 39
MA
Hosp
ital 4
0M
A Ho
spita
l 41
MA
Hosp
ital 4
2M
A Ho
spita
l 43
MA
Hosp
ital 4
4M
A Ho
spita
l 45
MA
Hosp
ital 4
6M
A Ho
spita
l 47
MA
Hosp
ital 4
8M
A Ho
spita
l 49
MA
Hosp
ital 5
0M
A Ho
spita
l 51
MA
Hosp
ital 5
2M
A Ho
spita
l 53
MA
Hosp
ital 5
4M
A Ho
spita
l 55
MA
Hosp
ital 5
6M
A Ho
spita
l 57
MA
Hosp
ital 5
8M
A Ho
spita
l 59
MA
Hosp
ital 6
0M
A Ho
spita
l 61
MA Hospital Performance on CMS Process MeasuresCompared to National Average Performance
DIFFERENCES IN PRICES ARE NOT ADEQUATELY EXPLAINED BY VALUE-BASED FACTORS
72/13/2012
$0
$50
$100
$150
$200
$250
$300
0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50
Acad
emic
Med
ical
Cen
ter's
Sys
tem
-Wid
e Ho
spita
l Rev
enue
from
Hea
lth P
lan
(in m
illio
ns)
Health Plan's Relative Payment to Academic Medical Center
MGH (1.35)BWH (1.31)
BIDMC(1.21)
UMMC(1.17)
TMC(1.41)
BMC(1.06)
HIGHER PRICES ARE EXPLAINED BY MARKET LEVERAGE
82/13/2012
Hospital Commercial Payer Margin
Government Payer Margin
Other Margin
Academic Medical Center 1
3.7% -3% -20.1%
Academic Medical Center 2
15% -6.9% -7.6%
Academic Medical Center 3
21.4% -33% -10.7
9
TESTIMONY IN DHCFP HEARINGS SHOW SIGNIFICANT DIFFERENCES IN HOSPITAL REPORTED MARGINS
“[U]nusually high hospital margins on private-payor patients can lead to more construction, higher hospital cost, and lower Medicare margins. The data suggest that when non-Medicare margins are high, hospitals face less pressure to constrain costs, costs rise, and Medicare margins tend to be low.”- MedPAC, Report to Congress, March 2009, page xiv.
2/13/2012
VARIATIONS IN PRICES PAID TO PROVIDERS EXIST IN GLOBAL RISK BUDGETS AS WELL AS IN FEE-FOR-SERVICE ARRANGEMENTS
• We found wide variations in the health status adjusted global payments made by health plans to at-risk providers.
• For example, in one health plan’s network in 2009, one globally paid provider had a health status adjusted budget of approximately $428 per member, per month, while another had a health status adjusted budget of only $276 per member per month.
102/13/2012
GLOBALLY PAID PROVIDERS DO NOT HAVE CONSISTENTLY LOWER TOTAL MEDICAL EXPENSES
0.800
0.900
1.000
1.100
1.200
1.300
1.400
1.500
1.600
MAR
LBO
ROU
GH
/ASS
ABET
East
Bos
ton
Nei
ghbo
rhoo
d H
ealth
Ctr
Nep
onse
t Val
ley
Hea
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re A
ssoc
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MAN
AGEM
ENT
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ICES
MET
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ANN
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QU
ES/M
ERRI
MAC
K/W
HITT
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UP
-N.E
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TIST
Low
ell G
ener
al P
HO
Sign
atur
e H
ealth
care
Bro
ckto
n
Law
renc
e G
ener
al IP
AFa
llon
Clin
ic
New
Eng
land
Qua
lity
Care
Alli
ance
HEN
RY H
EYW
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DM
ORT
ON
HO
SPIT
AL
Carit
as C
hris
tiBa
ysta
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ealth
WIN
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HIG
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H A
LLIA
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Atriu
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lthBe
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rael
Dea
cone
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Sout
hcoa
stM
ount
Aub
urn
Cam
brid
ge IP
AVA
LLEY
MED
ICAL
GRO
UP
Nor
thea
st H
ealth
Sys
tem
s
Lahe
y Cl
inic
Cent
ral M
assa
chus
etts I
PAAc
ton
Med
ical
Ass
ocia
tes
UM
ASS
MEM
ORI
AL M
ED. C
TR.
COO
LEY
-DIC
KIN
SON
PH
O
STU
RDY
MEM
ORI
AL H
OSP
ITAL
Sout
h Sh
ore
PHO
Part
ners
HAR
RIN
GTO
N P
HO
Child
rens
Rela
tive
Hea
lth St
atus
Adj
uste
d TM
E
Provider Groups from Low to High TME
Variation by Payment Method in one Major Health Plan's Health Status Adjusted Total Medical Expenses (2009)
112/13/2012
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010
% o
f Inc
reas
e in
Cos
ts D
ue to
∆ in
Pric
e v.
Mix
v. U
tiliz
ation
BCBS'S COST DRIVERS FROM 2005-2010
UTILIZATION
PROVIDER MIX AND SERVICE MIX
UNIT PRICE
PRICE INCREASES CAUSED THE MAJORITY OF THE INCREASES IN HEALTH CARE COSTS IN THE LAST SIX YEARS
122/13/2012
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
$335 $367 $388 $410 $448
1st 2nd 3rd 4th 5th
Prop
ortio
n of
Mem
bers
at E
ach
Spen
ding
Leve
l with
Low
v. H
igh
Inco
me
Members of Major Health Plan by Spending Quintile (As Measured by PMPM Health Status Adjusted TME)
$120,149
$54,827
$42,850
$36,390
$27,802
TOTAL MEDICAL SPENDING IS HIGHER FOR THE CARE OF COMMERCIAL PATIENTS FROM HIGHER-INCOME COMMUNITIES
132/13/2012
TIERED AND LIMITED NETWORK PRODUCTS HAVE INCREASED CONSUMER ENGAGEMENT IN VALUE-BASED PURCHASING
• Health insurance products that do not differentiate among providers based on value do not give consumers an incentive to seek out more efficient providers, because consumers are not rewarded with the cost savings associated with that choice.
• As a result: (1) consumers are de-sensitized from value-based purchasing decisions and (2) providers are not rewarded for competing on value.
• There have been recent developments in tiered and limited network products; these types of innovative products should be encouraged.
142/13/2012
1. Price transparency and consumer health care literacy: consumers should be able to get accurate information on coverage and costs from both providers and health plans.
2. Ensure a more effective and competitive market: employers and consumers should have viable competitive options for health care coverage and delivery.
3. Balanced approach to address historic market disparities: we need to set goals to control future growth and to reduce unwarranted price variations, and we should give the market time to meet those goals before temporary market corrections are made.
Three Pillars to Shore Up the Market
152/13/2012
RESOURCES & CONTACT INFORMATION
16
• Report of MA Attorney General’s Examination of Health Care Cost Trends and Cost Drivers: http://www.mass.gov/Cago/docs/healthcare/final_report_w_cover_appendices_glossary.pdf• MA legislation (Chapter 288 of Acts of 2010) to control costs and increase transparency in health care market:http://www.malegislature.gov/Laws/SessionLaws/Acts/2010/Chapter288• MA Division of Health Care Finance and Policy cost trend hearing materials:http://www.mass.gov/dhcfp/costtrends
2/13/2012