Massachusetts health care payment reform hearings set to begin this week

For the health wonk going through legislative hearing withdrawal now that the Senate Finance Committee has wrapped up hearings on its bill, there is hope: The Massachusetts legislature will turn to global payment legislation later this week. 

The Massachusetts health reform legislation enacted last year tasked a special commission with coming up with a recommendation on payment reform (earlier health reform legislation brought near-universal coverage to Massachusetts but did not directly address cost or quality), the commission issued its report over the summer, and legislation based on its recommendations is now coming up for hearing.  The press release accompanying the July 2009 report of the Special Commission on the Health Care Payment System reads in part as follows:

The Commission recommended phasing in a global payment system statewide over five years and anticipates that, when fully implemented, global payments in Massachusetts would include the following key features:

• A global payment system in which providers would receive a payment per person, adjusted for patients' health status and other factors to ensure that they are compensated fairly for their patients' health care needs.  Payments would also be based on meeting common core performance measures to ensure high quality care.
• An emphasis on patient-centered medicine, with doctors and other providers providing coordinated, evidence-based, high-quality care for patients.  In addition to providing more effective care for patients, this approach will also help to reduce health care costs in the longer term.
• A careful transition to global payment within five years, during which "shared savings" would serve as an interim payment model to help some providers become more familiar with global payment with no or reduced exposure to risk.  There would also be infrastructure support for providers to facilitate the transition to global payments, including technical assistance and training and information technology. 

Lynn Nicholas, Executive Director of the Massachusetts Hospital Association, served on the Commission and voted in favor of the recommendations, with the caveat that implementation had to be examined more closely.  This week, Nicholas highlighted several areas of concern that MHA membership would like to see addressed in legislation, and suggested that five years would not be enough time to design and fully phase in the new payment system.  The Boston Globe reports:

The hospital association wants legislators to include health care providers on the oversight board; shield providers from financial risks they can’t control and don’t have reserves to cover, such as a swine flu outbreak; change insurance plans so that patients are encouraged to stay within their accountable care organizations for all of their medical needs; provide extra compensation for providers who treat low-income patients and for teaching hospitals that have extra costs associated with training residents, research, and 24-hour trauma services; and offer incentives for providers to jump in and test the global payment system.

The full report linked to above is worth reading.  It lays out an approach to paying for health care services that could potentially "bend the cost curve" and improve quality — and not by simply paying providers less to do more.  The idea is to pay providers for the services to be used by patients — not to saddle providers with "insurance risk."  Providers do, however, have "performance risk."  In other words, the providers are held to a standard of quality.  For example, a preventable hospital readmission does not generate another payment if it was within the provider's power to prevent the readmission.  There's a great deal more packed into the report and, as always, the devil's in the details.

The reaction of the provider community is both unsurprising and surprising.  On the one hand, it is natural to seek to prolong the life of what is perceived as a more beneficial reimbursement scheme for as long as possible.  On the other hand, I would expect to see hospitals and other health care providers, as a group, working proactively to implement new systems and approaches, including for example the medical home.  Why?  Because significant — if not radical — change is inevitable, and providers and "accountable care organizations" that are ahead of the curve will be well-positioned to benefit from the changes to come.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting