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Press Release NEW HPC REPORT IDENTIFIES KEY HEALTH CARE COST DRIVERS AND CALLS FOR IMMEDIATE ACTION TO CONFRONT PRESSING AFFORDABILITY CHALLENGES FACING THE COMMONWEALTH

Recommendations take aim at excessive provider prices, health plan affordability, and persistent health inequities
For immediate release:
9/15/2021
  • Massachusetts Health Policy Commission

Media Contact for NEW HPC REPORT IDENTIFIES KEY HEALTH CARE COST DRIVERS AND CALLS FOR IMMEDIATE ACTION TO CONFRONT PRESSING AFFORDABILITY CHALLENGES FACING THE COMMONWEALTH

Matthew Kitsos, Press Secretary

BOSTONToday, the Massachusetts Health Policy Commission (HPC) released its 2021 Health Care Cost Trends Report (available here; accompanying chartpack here) examining health care spending and the state’s performance against the health care cost growth benchmark. An Executive Summary of the report is available here.

The report identifies factors contributing to the state’s performance relative to the benchmark, highlights opportunities to increase quality and efficiency, and recommends policies to address the continued high cost of health care in the Commonwealth. The Center for Health Information and Analysis (CHIA)’s Annual Report, released earlier this year, showed that health care spending accelerated in the years prior to the COVID-19 pandemic, and the state exceeded the benchmark for the second year in a row with an increase of 4.3% from 2018 to 2019.

“We have major concerns this year about the rising trends in health care costs in Massachusetts. We must address the issues behind this growth by implementing the policies we recommended today,” said Dr. Stuart Altman, HPC Board Chair and health economist. “Without further action to enhance the state’s oversight tools, improve health care market functioning, and increase affordability, we will lose any progress made to lower health care cost growth and making health care more affordable for families and businesses in the Commonwealth.”

The recommendations outline immediate action needed by market participants, policymakers, and government agencies to accelerate efficiency in health care spending in Massachusetts and improve the quality of care. Many of the recommendations align with the principles and goals contained in comprehensive legislation previously filed by the Baker-Polito Administration, as well as recent legislative initiatives.

“The policy recommendations issued today are a blueprint for the Commonwealth to address the most important challenges facing our health care system today, including provider price growth, drug spending, health equity, and affordability of care,” said David Seltz, HPC Executive Director. “The HPC stands ready to work with our Legislative and interagency partners to support these efforts with data insights and independent policy leadership.” 

2021 HEALTH CARE COST TRENDS REPORT: KEY FINDINGS

Key drivers of spending growth leading to Massachusetts exceeding the benchmark

  • Total health care spending per capita grew 4.3% in 2019 and 3.6% in 2018 (after revision), exceeding the benchmark rate of 3.1% in those years. Health care spending per enrollee grew 4.1% for those with commercial coverage.
  • In recent years, commercial spending growth has been driven mostly by growth in prices, although growth in utilization has also contributed.
  • Overall, hospital spending (inpatient and outpatient) in Massachusetts comprised 43% of total spending in 2019 but accounted for 54% of spending growth. Hospital outpatient was the category of service with the largest spending growth in 2019, increasing 7.6% from 2018 to 2019.
  • In addition to growing prices, the number of hospital outpatient visits grew by 3.7% in 2019, including a substantial shift in visits from community hospitals to academic medical centers (AMCs).
  • Hospital outpatient prices among hospitals ranged from being on par with Medicare prices to nearly triple Medicare prices, with the highest prices generally found at AMCs.
  • Hospital outpatient spending in Massachusetts is far higher than the U.S. average: the number of visits per capita is 40% higher in Massachusetts than in the U.S. overall, and Medicare spending per enrollee on hospital outpatient care is 29% above the U.S. average.

The high cost of care leads residents with lower income to avoid care and face increasing medical debt.

  • Commercially-insured Massachusetts residents living in lower-income areas had higher proportions of spending for emergency care, inpatient use and prescription drugs, while residents living in higher-income areas had higher proportions of spending for professional services and hospital outpatient care.
  • 59% of commercially-insured residents with lower incomes experienced an affordability issue (e.g., problems paying medical bills and unmet health care needs) compared to 38% of commercially-insured residents with higher incomes. For those who experienced problems paying family medical bills, medical tests and surgical procedures were the most common source of those bills.
  • Residents with lower incomes were much more likely to go without needed care and prescription drugs because of cost, and those with high deductible health plans were twice as likely to do so compared to those with conventional plans.
  • Residents with lower incomes reported that a key factor in going without care was that cost-sharing was unaffordable. Another reported factor was uncertainty that care would be covered, which can affect the choice to seek needed care and even lead to choosing higher-cost settings of care (e.g., the ED over an urgent care center).

Trends in use of hospital care

  • The average commercial payment (excluding professional fees) per inpatient hospital stay rose from $15,100 in 2013 to $20,900 in 2019, or an average 5.5% per year.
  • Between 2010 and 2019, the share of total commercial discharges and newborn deliveries that took place at community hospitals continued to decline. In 2019, while community hospitals accounted for 52.4% of all hospital stays, they accounted for 49.7% of newborn stays and 44.7% of commercially-insured stays.
  • In Massachusetts, inpatient and outpatient hospital care is increasingly provided by a few large provider systems. Beth Israel Lahey Health and Mass General Brigham together provide 41% of hospital-based care, with other to systems representing far smaller shares.

Variation and growth in prices of care

  • From 2016 to 2018, prices for common procedures and services grew by an average 4.4% in physician offices, 6.1% in hospital outpatient departments (HOPDs) and 9.0% in hospital inpatient settings. Many individual services saw price increases of more than 20%.
  • Prices at HOPDs for common procedures and labs were often double the amount paid for the same services performed in physician offices. Prices for common HOPD services such as mammography, GI endoscopy and colonoscopy tended to vary substantially by hospital, in some cases by a factor of more than two, with the highest prices generally occurring at AMCs and geographically isolated hospitals (e.g. Cape Cod).
  • Payments for cesarean section deliveries varied from $15,600 (Mount Auburn) to $24,000 (Massachusetts General) in 2018. For major joint replacement, payments varied from $22,000 (Lowell General) to $42,000 (Massachusetts General).

Variation by provider organization

  • Patients attributed to Mass General Brigham (MGB) had the highest unadjusted ($6,506) and adjusted ($6,131) medical claims spending in 2018, which were 49% and 30% higher than the lowest spending organizations based on unadjusted (Reliant, $4,352) or adjusted spending (Atrius, $4,709), respectively.
  • Among broad categories of spending, hospital outpatient spending varies the most by provider organization. Per member per year (PMPY) spending for hospital outpatient services was highest for patients attributed to MGB ($2,481), 43% above the average ($1,737) and double that of patients attributed to Atrius ($1,176).
  • Patients attributed to Boston Medical Center providers had the highest rate of ED utilization (298 visits per 1,000 patients per year) and potentially avoidable ED visits (92), which was 68% more ED visits (178) and 144% more potentially avoidable ED visits (38) than patients attributed to Atrius providers.
  • A study of seven low value care services identified more than 130,000 instances of low value care provided to over 80,000 patients in 2018. Rates of low value care generally varied two-fold or more across provider organizations.

2021 HEALTH CARE COST TRENDS REPORT: POLICY RECOMMENDATIONS

As the Commonwealth approaches the ten year anniversary of its benchmark-anchored cost containment effort, the HPC recommends the Commonwealth take immediate action to strengthen and enhance the state’s strategy for addressing the intersecting challenges of cost containment, affordability, and health equity to improve outcomes and lower costs for all. In addition to implementing the following items, this includes sustaining the successful innovations made during the COVID-19 pandemic, such as expanded access to telehealth, workforce flexibilities, and new care models.

  1. Strengthen Accountability for Excessive Spending. Strengthen the mechanisms for holding providers, payers, and other health care actors responsible for spending performance by improving the metrics used in the annual performance improvement plan (PIP) process, increasing financial penalties for above-benchmark spending or non-compliance, and considering additional tools to reflect and respond to underlying variation in the relative level of provider prices.
  2. Constrain Excessive Provider Prices. Since prices continue to be a primary driver of health care spending growth in Massachusetts and divert resources away from smaller, community providers, the HPC recommends the following actions:
    1. Establish Price Caps for the Highest Priced Providers in Massachusetts. As a complement to the statewide benchmark, cap prices for the highest priced providers (i.e., limiting the highest, service-specific commercial prices with the greatest impact on spending) and limit price growth (e.g., limiting annual service-, insurer-, and provider-specific price growth) to reduce unwarranted price variation and promote equity.
    2. Limit Facility Fees. Require site-neutral payments for certain common ambulatory services (e.g., basic office visits) and limit the cases in which both newly licensed and existing sites can bill as hospital outpatient departments and require clear disclosure of facility fees to patients, prior to delivering care.
    3. Enhance Scrutiny and Monitoring of Provider Expansions and Ambulatory Care. Improve data collection on ambulatory care and continue to closely examine the impact of plans for major expansions of services or new facilities, particularly for outpatient services and for higher-priced providers, on health care costs, quality, access, and market competition, and ensure that any such expansions are well informed by health equity considerations. 
    4. Adopt Default Out-of-Network Payment Rate. As a constraint on the spending and market impact of excessive prices charged by out-of-network providers, the Legislature should enact the default out-of-network payment rate for “surprise billing” situations recommended by the Executive Office of Health and Human Services in its Report to the Massachusetts Legislature: Out-of-Network Rate Recommendations.
  3. Make Health Plans Accountable for Affordability. Require greater accountability of health plans for delivering value for consumers and ensure that any savings that accrue to health plans (e.g., from provider price caps as described above) are passed along to consumers.
    1. Set New Affordability Targets and Affordability Standards. Set measurable goals that identify and track improvement on indicators of affordability, including measures that capture the differential impact of both health plan premiums and consumer out-of-pocket spending by income, geography, market segment and other factors, and develop new health plan affordability standards.
    2. Improve Health Plan Rate Approval Process. Require greater transparency and public participation in the Division of Insurance health plan rate approval process and require that new health plan affordability standards be a key factor in the approval of health plan rate filings.
    3. Reduce Administrative Complexity. Require greater cross-payer standardization of policies, programs and processes to reduce administrative complexity, enhance affordability, and improve equity.
    4. Improve Benefit Design and Cost-Sharing. Develop alternatives to high deductible health plans and other benefit designs that can impede access and perpetuate inequities, such co-payments and deductibles for high value medical care and structure premium contributions to reflect different employee wage levels.
    5. Alternative Payment Methods. Increase adoption and effectiveness of APMs, especially in the commercial market where expansion has stalled (e.g., increased use of primary care capitation, APMs for preferred provider organization (PPO) populations, episode bundles and two-sided risk models).
  4. Advance Health Equity for All.  The Commonwealth and all actors in the health care system should be accountable in efforts to achieve health equity for all. 
    1. Set New Health Equity Targets. Set measurable goals to advance health equity. Such goals should focus on eliminating disparities that manifest in both health and health care and be developed through a collaborative approach that is guided by the perspectives of individuals and communities most affected by these disparities.
    2. Address Social Determinants of Health. Examine and address the social determinants of health (SDOH) that can lead to poor health outcomes for individuals and communities by making and supporting key community investments and enhancing provider efforts to address the health-related social needs of individual patients by collaborative relationships with community-based social service agencies.
    3. Improve Data Collection.  Collaborate to improve the collection of reliable patient data on race, ethnicity, language, disability status, sexual orientation, and gender identity to inform the integration of equity considerations into quality improvement, cost-control, and affordability efforts.
  5. Implement Targeted Strategies and Policies. To further advance cost containment, affordability, and health equity, the Commonwealth should adopt the following additional strategies and policies.
    1. Examine Increases in Medical Coding Intensity and Improve Patient Risk Adjustment. Continue to investigate medical coding and risk adjustment trends and incentives and take action to mitigate the impact of changes in clinical documentation practices on spending and performance measurement and support the development of alternative risk adjustment methods and performance metrics.
    2. Reduce Drug Spending, Align Pricing with Value, and Improve Affordability. Increase oversight and transparency for the full drug distribution chain, such as by authorizing the expansion of the HPC’s drug pricing review authority to include drugs with a financial impact on the commercial market in Massachusetts and by increasing state oversight of pharmacy benefit managers’ (PBMs) practices and pursuing strategies to maximize value and enhance access.
    3. Improve Primary and Behavioral Health Care. Specific areas of focus should include:
      1. Focus Investment in Primary Care and Behavioral Health Care. Hold entities accountable for increasing spending devoted to primary care and behavioral health while adhering to the Commonwealth’s total health care spending benchmark, prioritizing non-claims-based spending such as capitation, infrastructure, and workforce investments.
      2. Improve Access to Behavioral Health Services. Increase access to behavioral health services and provide resources and support to individuals and families suffering from the effects of the opioid epidemic, by implementing the EOHHS Roadmap for Behavioral Health Reform.
    4. Support Efforts to Reduce Low-Value Care. Develop strategies, incentives and action steps to eliminate low-value care and provide patients access to information useful in making high-value treatment decisions.

The complete set of recommendations can be found here.

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Media Contact for NEW HPC REPORT IDENTIFIES KEY HEALTH CARE COST DRIVERS AND CALLS FOR IMMEDIATE ACTION TO CONFRONT PRESSING AFFORDABILITY CHALLENGES FACING THE COMMONWEALTH

Massachusetts Health Policy Commission 

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 equitable health care system through its independent policy leadership and innovative investment programs. The HPC’s goal is better health and better care – at a lower cost – for all residents across the Commonwealth.
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