recommendations of the special commission on the health care payment system

1. Recommendations of the Special Commission on the Health Care Payment System July 16, 2009

2. The next stage of health care reform requires the Commonwealth to contain the growth of health care spending, expand access to coordinated care, and improve the quality of care delivered. Most experts view FFS payment as a primary reason for the rate of increase in health care costs as well as fragmented, ineffective care. The next stage of health care reform requires the Commonwealth to contain the growth of health care spending, expand access to coordinated care, and improve the quality of care delivered. Most experts view FFS payment as a primary reason for the rate of increase in health care costs as well as fragmented, ineffective care.

4. While the U.S. has the highest health care expenditures per capita among other industrialized countries, MA has among the highest health care costs in the U.S.

5. With no intervention, per capita health care spending in Massachusetts is projected to nearly double by 2020 While health care reform has achieved great success in providing health insurance coverage to Massachusetts residents, continued cost growth threatens its sustainability. In 2004, health care costs per capita in Massachusetts reached $6,683. The highest in the nation and 26 percent higher than the U.S. average. Between 2004 and 2017, health care costs in Massachusetts are projected to grow more rapidly than for the U.S. as a whole. 1991-2000: MA 5.0% (US 4.8%) 2000-2004: MA 7.4% (US 6.9%) 2004-2010: MA 7.4% (US 5.7%) 2010-2020:MA 5.7% (2010-2017:US 5.9%) While health care reform has achieved great success in providing health insurance coverage to Massachusetts residents, continued cost growth threatens its sustainability. In 2004, health care costs per capita in Massachusetts reached $6,683. The highest in the nation and 26 percent higher than the U.S. average. Between 2004 and 2017, health care costs in Massachusetts are projected to grow more rapidly than for the U.S. as a whole. 1991-2000: MA 5.0% (US 4.8%) 2000-2004: MA 7.4% (US 6.9%) 2004-2010: MA 7.4% (US 5.7%) 2010-2020:MA 5.7% (2010-2017:US 5.9%)

6. Though the quality of our health care is among the best in the U.S., even we can improve Research on health care in Massachusetts highlights the problems of preventable illness and insufficient emphasis on primary and preventive care.

7. Specific potential savings opportunities in MA Estimates of hospital costs incurred for conditions which may have been prevented or treated in a more cost effective setting. These costs represent opportunities for improved coordination of care throughout the health care system, rather than hospital-specific issues. TO DOTO DO

8. FFS payment drives health care cost growth and overuse of services Incentives for increased volume. Providers have a financial incentive to increase the number of services they produce. Incentives to deliver more costly services. Providers have a financial incentive to deliver services with higher financial margins – often more costly services. Little or no incentive for achieving positive results or for care coordination. Providers have no financial incentive to deliver the most effective care or to coordinate care. Little or no incentive to deliver preventive services and or other services with low financial margins. Providers have little incentive to provide services with low financial margins—including preventive care and behavioral health care. Low payment to primary care providers contributes to a shortage of primary care providers, insufficient primary care, and an emphasis on specialty care. Behavioral health care is undervalued, and therefore too little is provided. Many lower-cost community hospitals are losing money—portending potential problems of access and escalating hospital costs. Low payment to primary care providers contributes to a shortage of primary care providers, insufficient primary care, and an emphasis on specialty care. Behavioral health care is undervalued, and therefore too little is provided. Many lower-cost community hospitals are losing money—portending potential problems of access and escalating hospital costs.

9. A Vision of Higher Quality, More Cost-Effective Care The Commission defined its vision for: “fundamental reform of the Massachusetts health care payment system that will support safe, timely, efficient, effective, equitable, patient-centered care and both reduce per capita health care spending and significantly and sustainably slow future health care spending growth”

10. Special Commission Process Examine payment methodologies and purchasing strategies, including, but not limited to alternatives to fee-for-service models; Recommend a common transparent payment methodology; and Recommend a plan for the implementation of the common payment methodology across all public and private payers in the Commonwealth, including discussing seeking a waiver from federal Medicare rules to facilitate implementation.

11. Stakeholder Engagement The Special Commission was committed to engaging stakeholders and the larger community during the process of evaluating the current health care payment system in Massachusetts and developing recommendations. A public input session was held on February 6, 2009. Three structured rounds of meetings were also convened with nine groups of stakeholders: physician specialty societies and large independent physician groups, physician groups affiliated with hospitals, community hospitals, large teaching hospitals and major safety-net hospitals, consumer advocates, organized labor groups, employers and employer organizations, health plans, and community health centers. Additional meetings and calls were conducted with the Health Care Quality and Cost Council, the Commonwealth Health Insurance Connector, and the Office of Medicaid.

12. Special Commission’s Recommendation The Special Commission recommends that global payments with adjustments to reward provision of accessible and high quality care become the predominant form of payment to providers in Massachusetts within a period of five years. Government, payers and providers will be required to share responsibility for providing infrastructure, legal and technical support to providers in making this transition.

15. Transition Oversight The oversight entity will: Define parameters for a standard global payment methodology—but the market will determine global payment amounts. Establish transition milestones and monitor progress, with a focus on the progress to global payments, progress to greater payment equity, and per capita health care costs. Make decisions in an open and transparent manner and seek broad stakeholder input from providers, health plans, government, employers, and consumers. The oversight entity will have authority to assist and intervene, and make mid-course corrections if needed. Board composed of subject-matter expertsBoard composed of subject-matter experts

16. Complementary Strategies and Issues Requiring Further Consideration The Commission recognizes that there are a number of strategies that are not payment models in their own right, but that are important complements to payment reform or issues requiring further consideration: Health plan design and coverage policy Consumer engagement Review of existing statutory framework Administrative simplification Medical malpractice reform Primary care workforce development End-of-life care Payment for provider teaching and standby capacity

17. Careful transition period with extensive provider supports Robust monitoring activities to guard against unintended consequences Linked to performance measures with emphasis on patient-centered care Improved risk adjustment models Health information technology infrastructure support

18. Why Payment Reform, Why Now? Just as Massachusetts led the nation in expanding health insurance coverage to virtually all of its residents, it can and should lead the nation in promoting high-quality, cost-effective care through payment reform. By showing leadership on payment reform, we can improve how health care is delivered to over 6 million Massachusetts residents and once again serve as a model for the nation. The Special Commission believes that a careful, thoughtful, and transparent transition to global payment is the best solution for Massachusetts.

19. Members of the Special Commission