Press Release  GROWTH IN OVERALL SPENDING LOWEST SINCE PASSAGE OF 2012 LANDMARK HEALTH CARE BILL

BOSTON – Thursday, December 13, 2018 — Today, the Massachusetts Health Policy Commission (HPC) issued key findings from its upcoming 2018 Cost Trends Report. The analysis presented at today’s meeting of the HPC’s Board (available here) provides insight into trends in the Massachusetts’ health care system, including an identification of 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 findings will be incorporated into the annual report set for release in February 2019. The final report will include a full analysis of the areas highlighted today, as well as recommendations for further policy action by the legislature, the HPC, other state agencies, and other actors in the health care system.

“The findings highlighted today, and the trends identified over the past few years, show that the Commonwealth is making progress in its goal of reducing overall health care spending,” said David Seltz, Executive Director. “However, significant challenges remain, and we must continue to focus on opportunities to reduce unnecessary care that does not provide value to patients or that has unnecessarily high costs. These new findings indicate that, in particular, pharmaceutical prices and the utilization of higher-cost hospital outpatient settings continues to be a driver of health care costs in Massachusetts. Solving these problems will take the nonstop effort and commitment of all stakeholders. The HPC looks forward to working with its partners to increase transparency and create an affordable, high-quality health care system.”

2018 Health Care Cost Trends Report: Key Findings

Overview of Spending and the Delivery System

The HPC set the 2017 target growth rate in per-capita health care spending at 3.6 percent. Overall growth in 2017 was 1.6 percent; a full 2 percentage points below the benchmark target.

The HPC examined growth trends and focused on key areas of research that present the Commonwealth with both long-term challenges and opportunities. These key areas focus specifically on the utilization of care, including the extent of unnecessary (“low-value”) care provided to Massachusetts residents, and variation in hospital admissions from the emergency department (ED); prices of care, including changes over time and comparisons to Medicare prices by category of service; and variation in spending among provider organizations, broken down by both utilization and price.

Below are key findings from the primary research areas outlined above:

Trends in spending, premiums, affordability, and payment methods

• In 2017, total health care spending growth in Massachusetts was well below the national rate, continuing a multi-year trend.
• Hospital outpatient and pharmacy spending were the fastest-growing categories in 2017, with 4.9% and 4.1% growth respectively.
• Since 2013, commercial spending growth in Massachusetts has been below national trends since 2013, avoiding $5.5 billion in projected additional spending.
• Nearly a third (32%) of total income for lower-income, commercially insured residents is consumed by health care costs, leading to higher rates of outstanding medical debt.
• Commercially insured residents reported a sharp increase (23%) in out-of-pocket spending between 2015 and 2017; one-in-five reported annual out-of-pocket costs in excess of $3,000.

Trends in utilization

• Overall Massachusetts inpatient hospital use is unchanged since 2014 and continues to exceed the U.S. average; however, hospital use among commercially insured residents is down 8% since 2014.
• After the formation of Beth Israel Lahey Health, the top five health systems will account for 70% of all commercial inpatient stays statewide, continuing a multi-year trend of increasing concentration.
• Massachusetts readmission rates showed no improvement in 2016, and continue to far exceed the national average.

Provision of unnecessary (“low-value”) care in the Commonwealth:

• Approximately 20% of commercially insured Massachusetts residents received at least one “low-value” service in a 2 year period.
• These services resulted in $80 million in spending among Massachusetts patients – more than $12 million in out-of-pocket spending – and likely resulted in additional follow-up testing, costs, and lost time for patients.
• The likelihood of a patient receiving “low-value” services varied nearly 2 to 1 by the medical group affiliation of their primary care provider, with the highest rates (nearly 33%) among patients of Lahey Health System and the lowest (approximately 15%) among patients of Atrius Health and Baystate Health.

Variation in hospital admissions from the emergency department (ED):

• In 2016, 23% of all medical ED visits in Massachusetts resulted in a transfer, long observation stay, or inpatient admission.
• Certain conditions, such as chest pain and COPD, had significant variation, with some hospitals admitting patients at more than three times the rate of others, indicating that there may be more discretion in admitting practices or other unobserved factors.
• Some hospitals systematically admit a higher proportion of patients from the ED.
• Hospitals with low admission rates for a given condition did not see frequent revisit rates among those patients.

Levels and trends in commercial prices compared to Medicare prices:

• MA has much higher utilization of teaching hospitals, contributing to average Medicare hospital prices that are among the highest in the country:
  • MA is the 6^th highest state for average inpatient Medicare prices, 20% above the U.S. average
  • MA is the 4^th highest state for average outpatient Medicare prices, 12% above the U.S. average
• Massachusetts commercial prices were typically 50% to more than 100% higher than Medicare prices for comparable services across a variety of service lines and settings.
• Variation in commercial prices across providers is substantially greater than variation in Medicare prices for comparable services.
• Commercial prices are increasing over time at a rate that is faster than Medicare and general inflation, and have risen roughly 12% between 2014 and 2016 for ED visits.
• Commercial price increases are a key driver in overall health care spending, preventing the Commonwealth from realizing net savings as a result of declining inpatient utilization.

Variation in provider organization spending and utilization by patient cohort:

• Spending remains roughly 20% higher in provider organizations anchored by an Academic Medical Center (AMC) compared to those in physician-led organizations.
• Hospital outpatient spending continues to be the largest driver of spending differences.
• In the cohorts examined, spending differences by provider group are driven more by price than utilization.
  • Patients in AMC-anchored groups often paid 30-60% more for the same services
• With regard to utilization, patients in AMC-anchored groups had more ED visits and more office visits to non-PCPs, and fewer visits to PCPs than patients in physician-led organizations.

• Where it was possible to examine quality of care, quality was no better in AMC-led organizations despite higher spending.

State Oversight of Health Care Spending Growth and Cost Trends

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 1.6 percent per resident, a full 2 percent below the 2017 benchmark of 3.6 percent. The HPC interprets these data through its Annual Cost Trends Hearing and Cost Trends Report to create an evidence base for health care reform in the Commonwealth, supported by actionable policy recommendations.

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