Massachusetts’ Health Care Reform: Chapter 2

Today’s Managing Health Care Costs Indicator is 52

Governor Deval Patrick of Massachusetts announced the state’s plans to move from fee for service to bundled payments for accountable care organizations (ACOs) last week.   The initiative could be a bold reshaping of health care in the Commonwealth It could be the opening volley in a battle to reintroduce rate regulation.  Or it could be an interesting idea that doesn’t make any legislative headway. 

Here’s my outline of the 52 page proposed legislation

·      * The Attorney General is instructed to:
o   Evaluate potential provider mergers and accountable care organizations (ACOs) to be sure these are not anticompetitive
o   Help arrange necessary federal waivers
o   Develop an enforcement mechanism to prohibit providers from shifting costs from one payer to another.
·      * The Division of Insurance will
o   Collect data on provider contracts and determine if they are consistent with legislation, including increases below certain thresholds.
o   Disapprove rate hikes that are based on provider contracts inconsistent with this legislation
·      * The Executive Office of Health and Human Services will
o   Help arrange necessary waivers
o   Establish an ACO pilot with early-adopter provider organizations
o   Report on progress
·      * The Division of Health Care Finance and Policy (DHCFP) gets substantial new responsibilities:
o   Evaluate alternative payment methods
o   Determine how to share reporting on payments with the public
o   Examine terms of health plan contracts with providers, and require annual reporting on these, including an inventory of payment methods to be completed by March, 2012
o   Figure out how to apply the state’s preferred payment methodology to self-funded employers
o   Study best practices from other states and other countries
·      * Establishes a Health System and Payment Reform Coordinating Council with responsibilities including:
o   Collects data and report on quality and cost
o   Determines what entities qualify as an ACO
o   Monitors and reports on ACO performance
·      *Establishes a Health Care Information Technology Council and a Behavioral Health Task Force
·      *Mandates that primary care physicians participate in only a single ACO
·      *Establishes a mandatory self-funding reinsurance plan for ACOs 
·      *Standardizes and enforcesuniform risk adjustment so that ACOs and health plans will not “win” by failing to serve those with serious illness.
o   Risk adjustment is supposed to include socioeconomic status, which is notoriously difficult
·      *Malpractice reforms include
o   “Cooling off” period before malpractice claims can be filed, to allow for settlement talks.
o   Disallows apologies from being used against providers in malpractice claims.
o   Protects peer review privilege within ACOs

This is a big bill – and will be changed significantly as it winds its way through the legislative process.

Here are some key observations about factors which will determine this bill’s success.

  •  There are many new responsibilities, especially for DHCFP.   Will there be staff to complete these requirements? Will there be adequate budget to hire independent actuaries and analysts for what the department cannot do within its own staff?
  • Providers and health plans feel proprietary about their contractual arrangements, and have spent years developing the expertise to maximize returns.  The contracts are complex and often not easily comparable
  • It isn’t easy to compare provider prices
    • It’s easiest to compare cost using relative discount rates.  But the ‘chargemaster’ used by most providers is hopelessly irrational.
    • It’s also possible to compare charges for high volume units of service (such as medium intensity office visits.) 
    • However, it’s more appropriate to compare the cost of risk-adjusted episodes of care, so that the provider who uses more units of service doesn’t inappropriately appear to be offering a better “deal.” 
    • Risk adjusting episodes of care is doable- but it’s not for the faint of heart.
  •  The current bill appears to target rate of increase, which would not address existing disparities in allowable fee schedules.
  • A substantial portion of Massachusetts residents get coverage through ERISA eligible plans, where an employer self-funds the health insurance benefit.  These plans are not subject to Massachusetts regulations.   If these plans continue to be fully committed to fee for service, it might be hard to get traction with the provider community
    • On the other hand, Patrick has announced that he expects full participation of 1.7 million beneficiaries who have state-funded health care (state employees, many municipal employees, and Medicaid recipients).

This proposed legislation is ambitious and groundbreaking – a fitting followup to the health care reform that has led to insurance coverage for 98% of Massachusetts residents.