Navigating Healthcare Price Variations

Opinion

By Brendan Abel

The Mass. Medical Society (MMS) has been closely monitoring developments at the state legislative and regulatory levels related to healthcare costs.

The first issue being debated is provider price variation. This refers to differing levels of reimbursement between providers that are not justified by warranted factors, such as quality, patient acuity, or teaching services. This provider price-variation issue came to the forefront a year ago when a ballot initiative was proposed that would limit hospital contracts above a certain percentage of the median contracting price, with the intended goal of driving high and low variants toward the average price. Those proposing the ballot initiative envisioned this would aid some providers, such as community hospitals, while constraining the growth for those providers who yield the highest relative price.

The proposal never made it to the ballot. Instead, part of the negotiated agreement that removed it from the ballot created a Special Commission on Provider Price Variation. Comprising legislators, health plans, hospitals, and business representatives (though not the MMS), it has taken up the price-variation issue — primarily among hospitals — in part by establishing factors they deem warranted in driving variation. Additionally, it has also discussed how certain health-plan insurance designs can promote care at lower-cost providers. It has also taken up the issue of out-of-network billing.

The MMS has testified to the commission supporting solutions that remove patients from receiving these bills. The MMS has urged them to leave the details of such a proposal for the Legislature, a venue inclusive of all parties affected — including physicians.

The second issue is a series of polices contained in Gov. Charlie Baker’s proposed budget aimed at healthcare cost-containment strategies. The budget included a proposal for a growth cap on physician reimbursement based upon cost tiering, and an overall reimbursement cap tied to 160% of Medicare rates for Group Insurance Commission plans. The MMS wrote a letter in strong opposition to both of these proposals, and will work with both the House and Senate Ways and Means Committees to promote better solutions.

In February, the Health Policy Commission’s (HPC) annual Cost Trends Report publication provided a comprehensive analysis of the state healthcare system’s cost and quality performance.

The HPC noted that overall growth in 2015 exceeded the 3.6% benchmark by 0.5%, at a level of 4.1%. The HPC noted the main contributors to exceeding the benchmark in Massachusetts were prescription-drug costs, hospital spending, health-insurance enrollment changes, and spending on long-term services and supports.

With all of the attention to increased total medical expenditures and increased variation in pricing, the MMS has been engaged in strong advocacy to promote the most evidence-based approaches to cost containment that limit interference in clinical care. Indeed, medical costs must be contained to ensure access and affordability for all patients in Massachusetts.

Brendan Abel is legislative counsel for the Mass. Medical Society. This article first appeared in the MMS publication Vital Signs.

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