Pioneering health reform state enacts cost controls

A long-awaited bill to restrain health spending and implement new payment reforms in Massachusetts has obtained its final stamp of approval. But while they hailed the inclusion of provisions designed to reduce medical liability lawsuits, physicians and other health care professionals have lingering concerns about how the state will meet the legislation’s ambitious cost-containment goals.

Long viewed as the next logical step in health system reform after the state’s enactment of a landmark near-universal coverage expansion in 2006, the cost-control bill easily cleared the state Legislature, passing the Senate by a vote of 38-0, and the House by a vote of 132-20. “Just as Massachusetts leads the way in establishing health coverage for its residents, it will now lead the nation in finding a responsible way to curb health costs,” House Speaker Robert DeLeo said in a statement. Massachusetts Gov. Deval Patrick signed the bill into law on Aug. 6.

To save a projected $200 billion over the next 15 years, the law establishes cost-control targets that will keep health care spending rates at or below the growth in the state’s overall economy. From 2013 to 2017, the benchmark for health spending would be set at the potential growth rate of the gross state product, or GSP, drop to 0.5% below potential GSP from 2018 to 2022, then go back up to GSP for 2023 and future years.

The Massachusetts Medical Society had advocated for higher benchmarks that wouldn’t have restricted cost growth as sharply. Richard Aghababian, MD, the society’s president, expressed doubts about the state’s ability to sustain these benchmarks but noted that the measure allows the targets to be adjusted in future years.

Under the legislation, all health care systems will be required to register with the state and report regularly on cost trends, quality measures, market share and financial performance. Physicians and other health care professionals in particular will be encouraged to transition away from fee-for-service payment and place more emphasis on quality. The legislation calls for the adoption of alternative payment methodologies, such as global and bundled payments for chronic and acute conditions, and the certification of accountable care organizations and patient-centered medical homes.

In helping to meet the cost-control targets, physicians are going to have to make tough practice decisions, Dr. Aghababian said. Even if a practice is doing everything it can to find efficiencies and maximize savings, such as cutting back on unnecessary tests, it’s possible that shortening staff hours or laying off staff members may come into play as well, he said.

“If you have a CT scanner that you now operate 24 hours a day, you might drop the night shift, and [as a result] someone may have to wait longer for a test. I don’t know if that would mean a layoff or a cutback in hours, but it might lead to having fewer people employed. It’s an unintended consequence, but it could occur,” he said.

As for the alternative payment model strategies in the measure, Dr. Aghababian said the medical society was pleased that physician participation would be voluntary. “Global payments aren’t for everyone, and fee for service still has a vital role to play in our system.”

Physicians weren’t the only ones in the state’s health system expressing concerns about meeting the cost-containment goals set by the legislation. “While hospitals will do their part to get health care cost growth to the level of the economy, with increasing demands on health care such as the aging population and obesity epidemic, doing so by 2013 will be daunting,” the Massachusetts Hospital Assn. said in a statement.

The hospital association had particular concerns about additional costs certain hospitals will take on through surcharge assessments. Lynn Nicholas, the group’s president and CEO, said the legislation imposes a one-time assessment of $225 million to support other health care initiatives. Health plans will incur most of this surcharge assessment, but $60 million will come from a small group of larger hospitals, she said.

Nicholas acknowledged that the money from the assessments was being earmarked for a worthy cause — to support a wellness and prevention trust fund, an electronic health initiative and a $135 million aid package to distressed community hospitals. “However, we remain opposed to the imposition of surcharge assessments on [larger] hospitals,” she said.

The final package did contain medical liability provisions that physicians actively were lobbying for, including a disclosure, apology and offer initiative developed by Massachusetts physicians and trial attorneys. A 182-day “cooling-off” period is designed to allow time to negotiate settlements, and a health care professional can admit an error and offer compensation to a patient without the apology being used in court as an admission of liability. The language “will encourage transparency and honesty, protect the rights of patients who have been harmed by avoidable events, improve patient safety, reduce litigation and ultimately cut health care costs,” said Alan Woodward, MD, chair of the state medical society’s professional liability committee.

The society also supported the measure’s use of corrective action plans to hold health care professionals accountable for their costs, as opposed to more punitive measures that previously had been discussed, Dr. Aghababian said. “If it turns out that you’re too expensive, you can come up with a corrective action plan and you’re not fined right away. You’re given a chance to come back in line with everyone else.”