Press Release  HPC ISSUES NEW RESEARCH ON TRENDS IN THE PEDIATRIC PROVIDER MARKET AND USE OF RISK ADJUSTMENT METHODS

BOSTON — Today, the Massachusetts Health Policy Commission (HPC) held its last public meeting of 2022 and released new data and analyses on trends in the pediatric provider market in Massachusetts and the use and implications of risk adjustment in the Commonwealth. An Executive Director’s report ended the meeting and included a recap discussion of the 2022 Health Care Cost Trends Hearing.

Trends in the Pediatric Provider Market in Massachusetts

For the past 10 years, the HPC has evaluated the potential impacts of provider market changes in the Commonwealth, including both clinical and network affiliations, acquisitions, expansions, and closures of services, as a part of its mission to advance a more transparent, accountable, and equitable health care system. Many changes over this time period have involved pediatric services and have resulted in a substantially changed pediatric services landscape, with an increasing share of pediatric services being provided by a few provider organizations. While the HPC findings examined the pediatric provider market in Massachusetts, similar trends are occurring nationwide.

Key Findings

The HPC described key trends in the pediatrics provider market, including:

• Declining Inpatient Volume
  • Between 2011 and 2019, the total volume of pediatric discharges for Massachusetts residents, excluding deliveries, at general acute care hospitals statewide declined 30%.
  • Between 2011 and 2019, pediatric inpatient bed days for Massachusetts residents at general acute care hospitals also declined 17%, though somewhat less than the decline in discharges because average length-of-stay for pediatric admissions has increased.
  • Many hospitals have substantially reduced their pediatric inpatient services in recent years, while the top two hospital systems have grown through clinical affiliations, expansions, and acquisitions.
• Increasing Consolidation at Larger Provider Systems
  • The five hospitals with the highest volume of commercial pediatric discharges accounted for 74.1% of commercial pediatric discharges in 2019, up from 64.2% in 2011.
  • Hospitals owned by or clinically affiliated with the top two hospital systems accounted for 77.3% of commercial pediatric discharges in 2019.
  • Pediatric care will likely continue to consolidate as a result of recent market changes, including Tufts Medical Center’s closure of 41 pediatric beds.
• Provider Price Variation
  • The larger pediatric providers, which have also been growing, tend to have higher commercial prices for inpatient, outpatient and physician services.
  • These largest pediatrics providers serve many medically complex children but also have higher annual spending per patient for non-medically complex pediatric patients.
• Improving Access and Quality
  • The changing pediatrics market creates opportunities for improving access and quality, but also poses challenges, including both for access and affordability.

“The Commonwealth must promote access to affordable, high-quality pediatric care,” said Deborah Devaux, HPC Chair. “The HPC will continue to develop our analyses to enhance understanding of the pediatric market, and we are eager for the policy recommendations put forward by the HPC in the 2022 Cost Trends Report to be considered by our health care and legislative partners.”

Use and Implications of Risk Adjustment in Massachusetts

The HPC released new findings on the use and implications of risk adjustment in Massachusetts, in a presentation aligned with the Office of the Attorney General, whose staff joined to share key points from the Attorney General’s 2022 Cost Trends Report. The report explores how risk scores based on population’s history of health care utilization fail to account for access barriers and other measures of health burden, and how the risk adjustment program in the merged market may entrench and exacerbate existing resource disparities. More information on the Attorney General’s report can be found here.

Risk scores, which are used to estimate how much it will cost to care for a patient based on their underlying characteristics, have been used for decades by private insurers to help set future premiums.

Key Findings

The HPC found that payment based on diagnosis-based risk adjustment as currently implemented increases both administrative and total spending, impairs accountability, and perpetuates health inequities.

• Added Costs for Patients and Payers
  • • • Due to increases in inpatient acuity between 2013 and 2019, Massachusetts incurred $250 million more in inpatient spending per year. An increase in coded diagnoses contributes to this added cost.
      • Because of the return-on-investment opportunity, coding efforts can take precedence over efforts to reduce spending through alternative payment models (APMs).
    • Persistent Health Inequity
      • Better-resourced providers are able to invest more in increasing risk scores.
      • Poor access to care can result in lower risk scores, and risk adjustment can reinforce this disparity.
    • Impaired Accountability
      • To the extent that risk scores reflect coding efforts rather than true patient acuity, risk adjusted performance metrics are flawed (e.g., readmission rates, health-status adjusted TME, mortality, or other quality or process measures).
    • Added Administrative Waste
      • Clinician and leadership time, money, and effort is redirected away from clinical care and toward coding. This added administrative burden can increase clinician burnout.

Policy Considerations

​The HPC urged those using risk adjustment to consider:

• How risk adjustment is used in payment. Spending for members attributed to large Massachusetts provider groups does not increase proportionally with risk score growth, suggesting overpayment for risk scores. There are numerous examples of payers and governments using payment formulas that can moderate the impact of diagnosis coding such as capping payments for increasing risk scores and blending diagnosis-based risk scores with non-diagnosis-based factors.
• Modifying the methodologies used to predict health care need. Initiatives could include identifying diagnoses based on prescriptions to discriminate between diagnoses under active treatment and those that are less clinically relevant, and deliberately increasing risk scores for patients facing adverse social determinants of health to ensure that risk adjustment improves health equity.

Executive Director’s Report

An Executive Director’s report ended the meeting and included a recap discussion of the 2022 Health Care Cost Trends Hearing, held in November 2022. Discussion included highlights and key themes from the two witness panels, Implications of Persistent Health Care Affordability Challenges in the Commonwealth and Health System Leaders: What is the Path Forward for Massachusetts? More information on the 2022 Health Care Cost Trends Hearing, including presentations and a full recording, can be found here.

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