For Immediate Release - January 08, 2014

HPC Releases 2013 Annual Cost Trends Report

Examination of key health care cost drivers: hospital operating expenses, wasteful spending, and high-cost patients

BOSTON – January 8, 2014 – The Health Policy Commission (HPC) will discuss findings from its first annual cost trends report at its board meeting this afternoon. The report profiles the Commonwealth’s health care delivery system and examines specific cost drivers: hospital operating expenses, wasteful spending, and high-cost patients. The report adds to the evidence base the HPC is building to inform its cost containment and quality improvement policy work.

“This report leverages new, state-specific data to enhance our understanding of and approach to health care cost trends and drivers,” said Dr. David Cutler, HPC Commissioner and Chair of the Cost Trends and Market Performance (CTMP) Committee. “We are committed to identifying challenges and opportunities to improve our current system, and our first cost trends report sets an important baseline for collective efforts in 2014 and beyond.”

For the first time, the HPC used medical claims data from the state’s All-Payer Claims Database (APCD) to analyze trends in health care spending by public and commercial payers. The report also breaks new ground by calculating a statewide estimate for wasteful spending in the Massachusetts health care delivery system, offers specific examples of waste that can be targeted for improvement, and approximates the percentage of Massachusetts patients that contribute to more than half of all health care spending in the state.

Key Findings: Hospital Operating Expenses

  • Improving hospital efficiency represents an opportunity to save on costs without reducing quality. 
  • Operating efficiency varies greatly from one hospital to another. The operating expenses that Massachusetts acute hospitals incur for inpatient care differ by thousands of dollars per patient discharge, even after adjusting for regional wages and the complexity of care provided.
  • Some hospitals deliver high-quality care with lower operating expenses, while many higher-expense hospitals achieve lower quality performance.

Key Findings: Wasteful Spending

  • Wasteful spending is health care spending that could be eliminated without harming consumers or reducing the quality of care people receive. In fact, wasteful spending often results in poorer outcomes for patients.
  • Based on methodologies used to develop national figures, the HPC developed a Massachusetts-specific estimate for system waste.
  • In 2012, an estimated 21% to 39% ($14.7 billion to $26.9 billion) of health care expenditures in Massachusetts could be considered wasteful.
  • Specific examples of waste include $700 million in preventable acute hospital readmissions, $550 million in unnecessary emergency department visits, $10 million to $18 million in health care-associated infections, $3 million to $8 million in early elective inductions, and $1 million to $2 million in inappropriate imaging for lower back pain.

Key Findings: High-Cost Patients

  • Five percent of patients account for nearly half of all spending among the Medicare and commercial populations in Massachusetts.
  • The presence of multiple conditions, such as behavioral health and chronic medical conditions, increases spending more than the combined effects of individual conditions, and illustrates the complexity of managing multiple conditions simultaneously.
  • Persistently high-cost patients – those who remain high-cost over multiple years – represent 29% of high-cost patients and make up 15% to 20% of Medicare and commercial spending in Massachusetts.

Key Findings: Delivery System Profile

  • Last month, the HPC released preliminary cost trends findings regarding the state’s delivery system. Those findings – per capita health care spending in Massachusetts is the highest of any state in the United States; Massachusetts devoted 16.6% of its economy to personal health care expenditures in 2012, compared with 15.1% for the nation; and over the past decade, Massachusetts health care spending has grown much faster than the national average – are also detailed in full in today’s report.

“I look forward to the conversations and policies this report will generate as we continue to strive to make the Massachusetts health care system more efficient and effective,” said HPC Executive Director David Seltz.

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The HPC is an independent state agency that monitors health care delivery and payment systems reforms and develops policies to reduce overall cost growth while improving the quality of patient care. To learn more, please visit www.mass.gov/hpc or follow us on Twitter @Mass_HPC.