SB628, HB2218, HB591, HB617, HB618, HB619, SB650, HB2211, HB2217, HB2990, HB609/SB659, SB632, SB657, SB655, Market Performance & Oversight and Health Funds & Assessments

Joint Committee on Health Care Financing

The Massachusetts Health & Hospital Association, on behalf of its member hospitals, health systems, physician organizations, and allied health care providers, appreciates this opportunity to offer comments on bills that address market performance and oversight of the health care entities and the assessment of funding to provide financial support for the healthcare system. Chapter 224, the foundation of our state’s healthcare oversight and market performance evaluation, is working the way that it was intended to. Therefore, MHA questions the motives behind many of the bills below that would fundamentally upend the system that is currently in place. 

Chapter 224 of the Acts of 2012 established health care cost growth goals for the commonwealth. For calendar years 2013-2017, the health care cost growth benchmark is set equal to the growth rate of the “potential gross state product” (PGSP). For calendar years 2018-2022, the benchmark is set at the PGSP growth rate minus 0.5 percent and for calendar years 2023 and beyond, the benchmark is set at the PGSP growth rate. For the first time since the inception of Chapter 224, the statewide spending target for calendar year 2018 will be set at a benchmark equal to potential gross state product minus 0.5 percent, or 3.1% a change supported by MHA and its members. Further, CHIA has finalized a proposal to expand the criteria for a health care entity to be referred to the HPC beyond those entities whose health status adjusted total medical expense growth (HSA TME growth) exceeds the cost growth benchmark to also include those that have HSA-TME growth within 15% below the benchmark; along with other criteria. This could increase the number of providers that could be subject to Performance Improvement Plans (PIPs) since entities with HSA-TME growth rates above 2.6% could be subject to PIPs.  

SB628 seeks to reduce the benchmark further than that established in Ch. 224 to the PGSP growth rate minus 2%. MHA strongly opposes this proposal. Lowering the benchmark further would recklessly discard the deliberate, well-vetted and carefully balanced cost growth goals created by Chapter 224. The original Ch. 224 benchmarks were established to strike a responsible balance between bending the cost curve while maintaining access and quality in our health care system. These benchmarks should be given a chance to work, while the “health” of the healthcare system is carefully monitored to ensure sustainability. 

All hospitals, health systems and the physicians that work with them are committed to the goals of more affordable, accessible and high quality care. The challenge of lowering the cost growth trend is daunting and complex, and Massachusetts hospitals and other care providers are making real progress in lowering the healthcare cost growth trend. Hospitals have consistently performed better than the benchmark: according to the Center for Health Information and Analysis (CHIA) 2016 Annual Report on the Performance of the Massachusetts Health Care System, the rates of growth for commercially insured members on a per member per month basis for hospital inpatient (2.2%) hospital outpatient (2.9%) and physician services (1.9%) all fell well below the 3.6% benchmark. 

Hospitals have managed to meet this target in a rapidly evolving landscape of changing payment-and-delivery structures necessary to move hospitals toward risk-based arrangements with both public and private payers, and at a time when the industry is facing unprecedented challenges.  
The evolution to a more integrated, value- based healthcare system continues and providers are focused on redesigning care delivery, providing care in the most appropriate setting, maximizing efficiency, all while maintaining quality. Labor costs represent approximately 71 percent of hospitals' budgets and many hospitals have been forced to make significant cuts in these costs over the past few years, including the elimination of programs, as they increasingly focus on cost growth thresholds. They have aggressively negotiated contracts with vendors, standardized products and made other changes for leaner operations. 

Making the health expenditure growth decline steeper would have negative consequences for access and delivery of safe patient care as well as for the state’s leadership in medical education and research. As demonstrated by the closure of two hospitals recently we clearly cannot afford a reckless approach to transforming our healthcare delivery system.

MHA also stands in strong opposition to HB2218, which would increase the authority granted to the Health Policy Commission (HPC) with respect to the review of material changes to operations or the governance structure of healthcare providers. 

Under the current law, as adopted pursuant to Chapter 224 of the Acts of 2012 after extensive debate about the role and authority of the Health Policy Commission (HPC), healthcare providers and provider organizations must submit notice to the HPC no less than 60 days before the proposed effective date of any proposed material change to its operations and governance structure. A “material change” is not confined to just mergers and acquisitions, but is instead broadly defined and ranges from clinical affiliations to partnerships and joint ventures to mergers and acquisitions. Following a preliminary review of the planned material change, the HPC can choose, in some cases, to carry out a more comprehensive review by conducting a Cost and Market Impact Review (CMIR), after which the HPC is required to issue a public report. During the development of the CMIR, which can be up to 6 months after the initial notice was filed by the provider, the material change is prohibited from going forward. After the CMIR is complete, if three statutorily defined criteria are met, the case can then be referred to the Attorney General’s office (AGO). Current law states that the HPC report “may be evidence” in any action brought by the AG with regard to the material change. So there is already considerable delay built into the system and the HPC’s CMIR can already be used as evidence by the Attorney General in any action that that office brings. 

The structure established in Chapter 224 already subjects proposed material changes to provider operations and governance to an unprecedented level of scrutiny and regulation. As stated on the HPC website, “this is the first time any state has authorized a policy-oriented, prospective review of the impact of health care changes that is distinct from an administrative determination of need or law enforcement review of antitrust or consumer protection concerns”. Contrary to the current procedures, which provide for a fair and reasonable review process, HB2218, unnecessarily increases the authority of the HPC and the impact of the CMIR by granting the report heightened legal standing as presumptively true (“rebuttable presumption”) evidence that a provider has engaged in an unfair method of competition or unfair and deceptive trade practice in violation of the Massachusetts Consumer Protection Act. Under the current law, if the report makes a strong case, then it will be given the appropriate weight in any subsequent action – thus there is no necessity to artificially boost every CMIR’s credibility by granting it, in advance of the report being written, the status of presumptively true evidence. Yet that is what would happen under HB2218

The changes sought in HB2218 are unnecessary. They would result in the HPC’s findings on material changes being accepted as true unless they can be disproven. Currently, Chapter 224 appropriately allows the AGO broad discretion to make its own determinations – in fact, the Attorney General can even discard the recommendations of the HPC’s CMIR report. 

The justification for increasing the power and reach of the HPC is unclear, as the agency’s own description on its website confirms that the Commission’s current level of authority to examine provider material changes already exceeds that of any similar body nationwide. And the current process of examining material changes already appears to be working exactly as envisioned in Ch. 224 -- given that every material change thus far opposed by the HPC and referred to the Attorney General has been prevented from proceeding. 

The commonwealth is encouraging providers to increasingly enter into risk contracts, accept global and bundled payments, develop ACOs and patient centered medical homes, and develop strategies for population health management - and the HPC plays an important role in this reform effort. Within that context, the HPC has a legitimate role in reviewing actions that are defined as “material changes”. But there has to be a balance struck that does not significantly impede innovation and change without adequate cause. Chapter 224 found that balance - yet this legislation would unnecessarily change the balance by giving greater authority to HPC findings - with consequences that may be unintended, yet still problematic for the advancement of health care reform. For these reasons, we respectfully request that the committee reject this legislation.

MHA strongly opposes H591 which expands the criteria for which providers may be required by the Health Policy Commission (HPC) to submit a performance improvement plan (PIP) by including providers who may not have exceeded the benchmark but who have a relative price that exceeds the statewide average relative price.  Hospitals and physicians have consistently performed well under the benchmark.  According to the Center for Health Information and Analysis (CHIA) 2016 Annual Report, the rates of growth for commercially insured members on a per member per month basis for hospital inpatient (2.2%), hospital outpatient  (2.9%), and physician services (1.9%) are well below the 3.6% statewide cost growth benchmark.  In addition, the statewide cost growth benchmark has just been dropped to 3.1% and CHIA has expanded its logic for the confidential referral of providers to the HPC.  Both of these changes will result in more providers that will be reviewed by the HPC and may be required to file performance improvement plans.  Given these changes, combined with  the fact that providers have not exceeded the benchmark and are continuing to implement innovative approaches to managing costs and improving care, further expanding the criteria for having to file a PIP through HB591 is not only unnecessary, but will redirect scarce hospital and physician resources to satisfy a bureaucratic overreach. 

MHA strongly opposes HB617 which would give the HPC unilateral power to prevent any material change if the provider or provider organization has exceeded the cost growth benchmark or whose average relative price over the prior three years exceeds 1.0. This is a nonsensical and self-defeating provision since it would prohibit providers from initiating material changes, solely on the basis of where they stand relative to the cost growth benchmark or average relative price over an historical period. It negates the fact that the material change could, in fact, result in cost reductions and improvements to the delivery of care. It would also give the HPC unprecedented legal authority to interfere with the healthcare delivery system and completely tie providers’ hands - potentially harming smaller struggling provider organizations and resulting in a myriad of unintended consequences.

Additionally, MHA opposes HB618.  Under Chapter 224, the HPC must make factual findings and issue a preliminary report on the cost and market impact review. Should it find that the provider organization’s proposed material change would result in unfair competition as a result of dominant market share, materially higher prices, or materially higher health status adjusted total medical expense, it must refer the case to the Attorney General. The Attorney General has the authority to take appropriate action under chapter 93A and can use the HPC’s report as evidence in any such action. 

Since the HPC was established, it has completed seven cost and market impact reviews. Based on this experience, there is no evidence or reason to believe that the process established by the legislature should be changed. The HPC should be allowed to continue its role of monitoring changes in the marketplace and referring cases to the AGO as required under Chapter 224. It should not be charged with the duplicative, unnecessary, and potentially disruptive legal authority to prevent a proposed change from going forward.  HB618 also removes confidentiality protections that under current law allow providers to submit nonpublic information with the assurance that it will not be subject to public records requests.  Removing these protections could result in disclosure of sensitive financial, proprietary and anti-competitive information which can be damaging to the individual providers as well as to the health care system as a whole.  For these reasons, MHA strongly opposes HB618.

Furthermore, MHA opposes HB619. This legislation would also inappropriately amend the careful balance struck by the authors of Chapter 224. Currently, the AGO is able to take legal action against unfair or deceptive conduct in the marketplace pursuant to Massachusetts General Law Chapter 93A, as well other laws, to protect consumers in the health care market. This bill proposes a new set of definitions, applicable solely to healthcare providers or provider organizations, to govern the Attorney General’s determinations. The definition of unfair methods of competition and unfair or deceptive acts or practices should remain a determination made by the Attorney General. There are federal reviews and sanctions under the Department of Justice and the Federal Trade Commission that address unfair or deceptive conduct as well as restraint of trade. Creating a definition specific to providers in Massachusetts, especially one crafted by insurers, is ill advised and will only result in conflicting standards. It should also be recognized that the health care delivery system involves payers as well as providers as parties to the same contracts, yet under this legislation, the insurance industry unsurprisingly excludes itself from any specific standards that would correspond to those it is proposing for provider organizations. For all of these reasons, MHA urges the committee to reject HB619.

MHA is strongly opposed to SB650. This bill would require the HPC to conduct an annual review with specified action steps for all approved material changes. This would be done as part of the annual cost trend hearings. Witnesses would be required to provide testimony subject to public examination and cross examination. Specific sanctions are spelled out, including prohibitions on further material changes.  If the HPC finds that an approved material change has resulted in exceeding the cost growth benchmark, CHIA will calculate by how much and that amount will be used to either reduce the HSN payments to that provider or require that provider to increase payments to the HSN or both.

Material changes may take multiple years to display an impact or they may often be just one part of a larger systemic plan to achieve cost efficiencies. It is important to note that under HPC definitions, material changes can be as simple as one hospital loaning a physician to another hospital or two providers choosing to share equipment and space. The bureaucratic and prosecutorial approach of SB650 is a vastly improper overreach. It would serve only to add multiple new layers of red tape and further inhibit the willingness of providers to make the systemic changes needed to meet the ideals of Chapter 224.  More importantly, by tying this to the Health Safety Net, it punishes providers without giving them sufficient time to implement material changes and will have a chilling effect on the willingness of providers to think out of the box and form affiliations that will benefit patients by potentially improving care coordination and reducing costs. 

HB2211 proposes the elimination of the current acute hospital assessment and shifts the cost of the Health Safety Net (HSN) shortfall to surcharge payors – largely health insurers. MHA supports the intent of this bill since it more appropriately balances the funding responsibility of low-income patient care given that hospitals currently face the dual challenge of funding the HSN and a significant Medicaid underpayment gap.  However, as drafted, HB2211 presents a number of complications.  First, the HSN hospital assessment was increased in FY2016 by $257.5 million to support funding for the MassHealth Waiver Accountable Care Organization (ACO) program Delivery System Reform Incentive Payments (DSRIP).  The increased assessment supports the state share for the DSRIP payments as well as new hospital supplemental payments in recognition of the assessment increase.  This issue would need to be addressed.  Also, for the funding to support HSN services, HB2211 would create a larger shortfall in the HSN given the elimination of the hospital assessment.   MHA would recommend that the surcharge be increased to address this loss so that federal matching revenue could still be obtained on the payments whereas the shortfall does not receive a federal match.

HB2217 proposes to introduce reporting requirements of MassHealth ACO regarding services provided prior to the ACO program and after, as well services provided by community partners.  Through the contract between the ACO and the state, ACOs face a deluge of reporting requirements to the MassHealth program as well as Managed Care Organization (MCO) contractors.   For example, the ACO contract reporting requirements contain at least 120 reports related to finances, contract management, quality, behavioral health, operations, and pharmacy services.   Each report varies in length and detail, and the reports range from monthly, quarterly, annually, to ad-hoc.  This level of reporting is already unprecedented for providers and will be very time consuming for ACOs.   Also, the information that HB2217 is seeking is data that MassHealth itself would be in a better position to evaluate and report, where appropriate, since it has the claims data that are used to compare actual reimbursement versus benchmark spending, as well as any comparison to the general MassHealth program.  Most of the ACOs are also newly formed and, therefore, would not be an appropriate source for gathering information on services provided prior to the formation of the ACO program. For these reasons, MHA opposes HB2217.

HB 2990 modifies rules defining both the annual HSN surcharge and assessments that fund the state’s HSN program. It would require ambulatory surgical centers, urgent care clinics, and limited services clinics that provide select hospital services to share in hospital-like expenses related to funding low-income state health programs. This intent is very laudable. Most specialty care providers provide little-to-no service for Medicare, MassHealth, or indigent patients, and in those instances when they do provide such services, they limit their treatment to only the most highly reimbursed Medicare services. All acute care hospitals, through both their missions and by legal requirements, provide care to Medicaid and Medicare enrollees and provide free care to qualified low-income uninsured and underinsured residents.

Specialty providers and laboratories have targeted the removal of profitable services from the hospital setting and provide these services largely to only those patients with satisfactory reimbursement means. In hospitals, these more reasonably reimbursed services help to cross-subsidize other essential services that are reimbursed below their cost, including behavioral health care services for low-income patients. In addition to service and patient selectivity, specialty providers also escape the added expense of funding state low-income uncompensated care. Unlike hospital services, a surcharge is not applied to specialty health care providers and laboratory bills. These providers, along with ambulatory surgical centers, are also not subject to a provider tax. HB2990 seeks to address these issues and for these reasons MHA supports the bill.

MHA is opposed to SB655 as this bill would increase the current financial penalties placed on providers and payers who fail to submit documents, without just cause, to CHIA within certain designated time.  It also allows, but does not require, CHIA to define “just cause.” While the legislation may be well-intentioned, it fails to recognize that many entities often request and are granted an extension by CHIA to file reports at later time periods due to differences in corporate fiscal years that delay the issuance of reports and federal filing dates that are also different from the state.  Any proposed changes to the financial penalties proposed by this legislation should be carefully vetted as there could be potential unintended consequences.

MHA and our member hospitals are opposed to SB632, specifically related to expanding the reviews of closure of essential services as defined by the Massachusetts Department of Public Health (DPH).  It is important for the committee to be aware that under recent changes to hospital licensure regulations, a significant number of services that are provided within a hospital are classified as an essential service.  This may include imaging services such as x-rays, outpatient primary care, laboratory services, and more.  As drafted, SB632 would require every hospital to go through a review by the Health Policy Commission, Center for Health and Information Analysis, the Attorney General and DPH when seeking to consolidate or close duplicative x-ray services, move a primary care practice from one setting to another, or close an endoscopy suite.  While we understand the underlying intent of this bill is to ensure greater review of whole hospital closures, as drafted, it will require increased reporting to multiple state agencies if a facility is seeking to change one or more service lines based on recent mergers, participating in an ACO, or consolidation of services.  In addition, given recent changes to the state licensure regulations, DPH has already expanded notice requirements (both to the agency and publicly) that a hospital must submit when it plans to close service lines that may be deemed an essential service.  For these reasons, we urge the committee to reject SB632 given existing protections and increased reviews that are now in place under DPH’s hospital licensure regulations.

MHA is also opposed to SB657 as drafted.  While the purpose of the bill is to expand the use of Accountable Care Organizations (ACOs) within the state, we are very concerned with the limiting nature of the bill with regard to who may be deemed to be a patient engagement advocate.  Under the bill, it is limited to a licensed social worker.  But in many healthcare settings, patient engagement advocates can be any number of healthcare clinicians including support staff, or other community health workers.  As drafted, we are concerned that without providing flexibility as to which staff may be able to provide various services, SB657 would actually reduce the efficiency of ACOs.  We would ask that this specific definition be amended to allow greater use of healthcare staff instead of only focusing on licensed social workers.  

HB609/SB659 would add specific items to the list of issues that providers and provider organizations  must testify about during the annual HPC cost trend hearings including a new measure called the “weighted average payer rate” (WAPR). For a given provider, WAPR would be calculated as the sum of the inpatient revenue per discharge and outpatient revenue per visit separately calculated for Commercial, Medicare, and Medicaid and weighted using the Net Patient Service Revenue for each payer and an average derived.

It appears that the goal of this measure is to compare providers’ commercial payment levels in the context of their relative proportion of public payer mix e.g. providers with similar commercial payment levels but with higher public payer mix would generally have lower WAPR. However, section (v) of the bill requires that the WAPR to be compared to total health care expenditures statewide. The purpose of Section (v) is unclear and we look forward to discussing the intention and impact of this bill further with the committee. 

Thank you for the opportunity to offer comments on this important matter. If you have any questions or require further information, please contact MHA's Vice President of Government Advocacy, Michael Sroczynski, at (781) 262-6055 or msroczynski@mhalink.org.