For Immediate Release - December 12, 2017


Growth in overall health spending is below both the state’s 3.6% benchmark and the U.S. average; however, affordability challenges remain and growth in spending for pharmaceuticals and hospital outpatient care present challenges for the Commonwealth.

BOSTON – Tuesday, December 12, 2017 – Today, the Massachusetts Health Policy Commission (HPC) issued select findings from its 2017 Annual Cost Trends Report. The data and analysis presented at today’s Board meeting (available here) provide insight into trends in Massachusetts’ health care system, including an identification of key factors that contributed to the state’s performance relative to the growth benchmark; an assessment of opportunities to increase quality and efficiency; and an update on progress in critical areas of health care reform.

Today’s select findings will be incorporated into a final Annual Report set for consideration by the Board and to be released in February 2018. The HPC anticipates the final report will include expanded discussion of key areas and recommendations for further policy action by the HPC, other state agencies, and other actors in the health care system.

“The findings released today highlight areas for both optimism and concern,” said David Seltz, Executive Director. “The Commonwealth overall was below the benchmark, however, challenges remain in controlling health care costs, including hospital outpatient and pharmaceutical spending. The HPC will remain focused on making policy recommendations to increase transparency and ensure the system is competitive and efficient.”

2017 Health Care Cost Trends Report: Select Findings
Overview of Spending and the Delivery System

The HPC set the 2016 target growth rate in per-capita health care spending at 3.6 percent. Overall growth in 2016 was 2.8 percent; nearly 1 percentage point below the benchmark target. The HPC examined growth trends and also focused on two areas of research that present the Commonwealth with both long-term challenges and opportunities: 1) hospital outpatient spending, a high-growth area partly due to the use of facility-based care when the same services could be provided in a lower-cost office setting; and 2) variation among provider organizations in spending and potentially avoidable utilization.

  1. Trends in Private Commercial Spending and Premiums
  • Private commercial spending continued to grow at a relatively low rate (3.4 percent per member) between 2015 and 2016, below the U.S. average for the fourth year in a row.
  • Massachusetts would have seen an additional $5.9 billion in healthcare spending if its commercial healthcare spending rate had grown at the U.S. rate during that same time period.
  • Slower growth in commercial spending in Massachusetts has narrowed the premium gap with the nation as a whole since 2012. Nonetheless, individuals with employer-sponsored health care continue to face high premiums, as Massachusetts premiums are 9 percent higher than the U.S. average and fourth highest in the country.
  • Families across the Commonwealth are paying, on average, more than $21,000 a year in premiums, copays and deductibles.
  • Since 2014, the number of Massachusetts residents with health insurance through smaller employers has dropped by approximately 10 percent, while enrollment in the Massachusetts Health Connector has grown.
  • In 2017, the Health Connector’s benchmark premiums were 31 percent below the U.S. average and were the second lowest among the nation’s state-based ACA marketplaces.
  1. Variations in Spending and Utilization among Provider Organizations
  • The HPC also examined the significant variation in commercial spending and utilization for patients attributed to the 14 largest provider organizations through the state’s all-payer claims database and the Registration of Provider Organizations (RPO) data.
  • Even accounting for differing health needs, spending for patients in the highest-cost organization was 36% higher than in the lowest-cost organization, mostly driven by hospital outpatient spending.
  • Similarly, average annual cost-sharing (e.g. co-pays, co-insurance, and deductibles) for patients in the highest-cost organization was 30% higher than in the lowest-cost organization. 
  • Patients in provider organizations anchored by academic medical centers had higher spending, on average, than those anchored by other hospitals or that were not hospital-based.
  • Avoidable emergency department visits among patients receiving care from different provider organizations also varied widely, even when adjusted for differences in patient characteristics beyond health status (e.g. community income).

Select Opportunities to Improve the Mass. Health Care System and Reduce Costs

The findings released today highlight the significant challenges that the Commonwealth faces to ensure spending growth below the benchmark (which will drop to 3.1% starting in 2018) over the long term. The HPC identifies select opportunities to decrease spending in the health care system while maintaining or improving quality of care:

  • Outpatient Spending: Massachusetts hospital outpatient spending is the second-fastest growing category of spending with 5.3 percent growth in 2016. Massachusetts residents are more likely to see providers in a higher cost hospital outpatient settings as opposed to lower cost office settings, even for low-acuity, routine care For example, Medicare beneficiaries in Massachusetts visited a hospital outpatient setting for routine office visits at more than twice the national rate, resulting in roughly double the cost when compared to the U.S.
  • Readmission Rates: Readmission rates in Massachusetts increased between 2013 and 2015, while the U.S. as a whole saw readmission rates decline. The HPC has identified readmission rates as a significant challenge that is driving costs and poor quality in the Commonwealth.
  • Post-Acute Care: Statewide, the rate of use of institutional post-acute care declined in 2015 and 2016. The overall decline is partly due to a decline in post-acute care use for patients with musculoskeletal conditions of 6.1 percent between 2013 and 2016. 
  • Alternative Payment Methods: Use of Alternative Payment Methods among the state’s three major payers increased from 46 percent to 56 percent in 2016. Challenges in this area remain however, as the usage rate for APM’s among other Massachusetts-based carriers held at 36 percent and was only 2 percent among national carriers.
  • Pharmaceutical Spending: Spending on prescription pharmacy drugs grew 6.4 percent in Massachusetts in 2016 (6.1% net of rebates). Growth in Massachusetts was higher than the nation, which saw growth at 5.8 percent and 4.8 percent spending net of rebates. Massachusetts can anticipate mid-single digit growth through 2021 with expected high spending on new innovations.

Process Background

Through the process established in Chapter 224, the HPC’s Annual Report on Health Care Cost Trends seeks to analyze and understand the Commonwealth’s performance against the health care cost growth benchmark, first reported by the Center for Health Information and Analysis (CHIA) in the fall. CHIA found that Total Health Care Expenditures (THCE) increased by 2.8 percent per resident, nearly 1 percent below the 2016 benchmark of 3.6 percent. The HPC aims to interpret these data through its Annual Cost Trends Hearing and Health Care Cost Trends Report to create an evidence base for health care reform in the Commonwealth, supported by actionable policy recommendations.


Also today, the HPC Board voted to authorize the initiation of a Cost and Market Impact Review (CMIR) for the proposed merger between CareGroup, Lahey Health System (Lahey), and Seacoast Regional Health Systems (SRHS), as well as the related acquisition of the Beth Israel Deaconess Care Organization (BIDCO) by the merged entity, and the proposed contracting affiliation between the merged entity and Mount Auburn Cambridge Independent Practice Association (MACIPA).

“This proposed transaction involves the merger of two of the biggest and most well-established health systems in the Commonwealth, as well as the corporate consolidation of three previously independent hospitals. It represents the most significant change in the structure of the Massachusetts health care market in more than 20 years and will reshape the delivery of care for millions of patients,” said Dr. Stuart H. Altman, Chair, Massachusetts Health Policy Commission. “As a result, the HPC voted today to authorize a full cost and market impact review to examine the potential impact of the proposed merger on health care costs, as well as the future functioning of the health care system in Massachusetts. We anticipate the review will be completed and made public in summer 2018. Depending on its results, the HPC could recommend that the Attorney General and/or other state agencies take appropriate actions.”

Through its preliminary review, the HPC identified the potential for the transaction to result in meaningful impacts on health care costs and the competitive market, including significant increases in market concentration and potential increases to market leverage that could allow the parties to increase hospital and physician prices. However, the parties claim that their growth would improve market competition and plan to attract patients away from higher-priced competitors. The parties also claim to have plans to enhance quality and care delivery, which will lead to lower spending and improved quality.

Commissioners voted today to authorize the initiation of a cost and market impact review, which will examine all aspects of the proposed transaction in order to better understand the potential impacts on health care costs, market functioning, quality, care delivery, and access. The findings from this review will be detailed in a public report in 2018.

The HPC has completed cost and market impact reviews of seven transactions since its inception in November 2012. The HPC is also currently conducting a CMIR on the proposed acquisition of the Foundation of the Massachusetts Eye and Ear Infirmary (MEE) by Partners HealthCare System (Partners). All cost and market impact reviews and material change notices are posted on the HPC’s website here and here, respectively.


The Massachusetts Health Policy Commission (HPC) is an independent state agency that develops policy to reduce health care cost growth and improve the quality of patient care. The HPC's mission is to advance a more transparent, accountable, and innovative health care system through its independent policy leadership and investment programs. The HPC’s goal is better health and better care – at a lower cost – across the Commonwealth. 

Visit us at Tweet us @Mass_HPC.