Voices in Healthcare

A Blue Cross Blue Shield Foundation report on the benefit of slowing healthcare cost increases makes some great points about potential cost savings for Massachusetts businesses and employees if we successfully lower healthcare costs in Massachusetts; as some of the state's largest employers, our hospitals actively support efforts to lower costs. In fact, Massachusetts hospitals have already taken several billion dollars out of the cost trend in FY 2009 and FY 2010.

What the Blue Cross report does not address is how such reductions could affect the Massachusetts economy overall, given the importance of the healthcare sector in the state. As the report itself states (on page 6): "Importantly, this analysis does not attempt to quantify the effects that reducing health care cost growth would have on the health sector per se. … Any impact on the Massachusetts health care sector would be determined by the nature of the cost-containment policies and how those policies ultimately translate into any changes in the health care workforce or profitability."

Cutting costs too much or too quickly could end up substantially damaging our hospitals, especially the many that have inadequate margins already, and as a byproduct the entire Massachusetts economy.

Hospitals actively support reducing healthcare costs to more closely align with the overall cost of inflation in a reasonable amount of time. But with about 70 percent of every hospital dollar tied to labor, substantial, abrupt cutbacks would inevitably lead to layoffs and reductions of services that would have far-reaching negative consequences that would affect every Bay State community. What we need to do is give the market time to build upon the progress it has made already, with support from government and continued commitment from insurers, providers, employers and consumers to tackle the challenge of reining in healthcare costs.

First, the good news: Everyone in the Massachusetts healthcare debate – hospitals, other providers, insurers, government leaders, employers and consumers – agrees that we must lower the cost of healthcare, and we have all committed to addressing this difficult challenge head-on. But there is both a right way and a wrong way to reduce costs; the right way produces substantial savings and is sustainable, and the wrong way destabilizes our vital healthcare sector and harms the economy. The right kind of progress is already being made in the market:

• Hospital cost management efforts here in Massachusetts have contributed to expense trend reductions worth billions of dollars in FY 2009 and FY 2010.
  
• Insurance products are now beginning to align with new payment and care delivery models that reward better coordinated and more efficient patient care. The Boston Globe reports more than 1.2 million people are now covered by plans that limit payments to providers based on value over volume, and that number is growing.
  
• There is increasingly widespread consensus in support of slowing the rate of healthcare cost increases to align healthcare spending with the state's economy in a reasonable amount of time.

Now, the bad news: Three weeks ago, with good intentions but bad judgment, the Associated Industries of Massachusetts (AIM) and Greater Boston Interfaith Organization GBIO made a reckless call for the Bay State's healthcare system to reduce the growth of total healthcare spending to two percentage points below the growth in the overall state economy within three years.

The "GSP minus two" target cuts too much, too fast. It ignores the serious and potentially devastating damage that such a 'slash and burn' approach would cause not only to Massachusetts' excellent healthcare delivery system, but to the overall state economy. And it completely ignores important lessons we should have learned from recent history here in Massachusetts:

• Medical spending has tended to exceed state economic growth. Overall medical spend in the U.S. is about 1.5 to 2 percent above income as measured by Gross State Product – or GSP. This is the state version of "GDP" you hear so much about.
  
• Aggressive managed care in the 1990's suppressed that trend. At the height of managed care, from 1992 to 2000, the payment rate for healthcare costs in Massachusetts was -0.4 percent, less than half a percent below the state's economic growth. Many of you may remember the consumer backlash from those times. Quintuple that if you want a picture of what AIM's/GBIO's "GSP minus two" scenario would look like.

Projected medical spend from 2012 to 2015 comes in at 6 percent, which is 2 percent above the rate of growth for the state's economy. Let’s be clear: That's too high.

But some unadjusted metrics are being cited that mistakenly suggest Massachusetts health insurance premiums are among the highest in the country. Here are some facts:

• Massachusetts had the fourth highest median household income among the 50 states in 2010 (after Maryland, New Jersey, and Connecticut), and when premiums are considered as a percentage of median household income, the cost of Massachusetts premiums ranked 48^th out of 51 (including Washington D.C.)
  
• Massachusetts average family premiums were highest in the nation in 2009, but dropped to 9^th highest in the nation in 2010.
  
• Most people experience the cost of healthcare through the insurance premiums, co-pays, co-insurance, or deductibles that they pay. According to healthcare expert John McDonough, Massachusetts health insurance tends to include lower deductibles and co-insurance payments than most other states, which inflates MA premiums in comparison.

MHA and many other healthcare stakeholders agree with AIM and GBIO that a reduction in the rate of cost increases is needed. Furthermore, Massachusetts hospitals are fully supportive of delivering the right care, at the right time and in the right setting, even though this approach may ultimately result in lower patient volume – and thus lower revenues – for some hospitals. It's still the right thing to do.

But when talking about goals to reduce the total healthcare expenditure in Massachusetts, it's important to remember (or realize) that this isn't just about hospitals and physicians. Every aspect of healthcare spending needs to be constrained.

Hospital costs make up less than 40 percent of total healthcare spending in the state. That 40 percent covers the cost of employing doctors and nurses, developing electronic health information systems that are crucial to providing efficient and effective care, the cost of medications and medical devices, the cost of energy, and all the other costs tied to delivering care. If healthcare spending is forced down to two percent below the rate of economic growth, it's extremely unlikely that there would be a corresponding decrease in these expenses. Hospitals simply won't be able to absorb such costs without job losses, service cutbacks and delays in IT and other infrastructure investments.

Hospitals do acknowledge that there is significant waste in the overall healthcare system that needs to be teased out. Real and substantial progress is being made every day. However, due to the highly complex nature of healthcare delivery and payment, it is impossible to just "lift” this waste in one neat movement. Separating unnecessary costs from worthwhile ones must be done carefully, and that can’t happen overnight.

Former U.S. Medicare and Medicaid Administrator Donald Berwick, the same economist AIM quotes to support removing waste in the system, made this additional point on the subject: "Instantaneously reducing healthcare waste at the theoretically accessible scale—that is, 20% or more of total healthcare costs—is neither practical nor, from the viewpoint of economic stability, desirable."

Ah, yes, economic stability. AIM argues that since healthcare "only" directly supports 13 percent of the gross state product, employers and citizens who aren't employed in healthcare should not be forced to support that 13 percent by overpaying for insurance.

This argument overlooks two important facts: First, the healthcare sector's positive economic impact is actually much larger, because not only do goods and services that hospitals purchase from other businesses create additional economic value for the community, the good jobs hospitals provide for workers at all skill levels feeds the state's economy overall. The American Hospital Association (AHA) last year calculated that each hospital job in Massachusetts results in a total of 2.1 jobs in the economy as a whole. Hospital employees use their wages to purchase goods and services, which creates income and jobs for others. Unemployed healthcare workers cannot support their local businesses.

Second, in order to deal with private insurance "overpayment" by employers and their employees, Massachusetts needs to address the long-term, ongoing cost shift that continues to take place today as a result of government underpayment. Government, both federal and state, does not cover the actual cost of providing care. One of the state's major commitments when Massachusetts' healthcare reform first passed in 2006 was to narrow its underpayment gap for care provided to MassHealth/Medicaid patients. The rate now stands on average at about 70 cents for every dollar of care provided, which is worse than it was in 2006.

Hospital operating margins in Massachusetts are also dangerously anemic. Economic experts agree that operating margins of about three percent are considered 'healthy' – Currently, the median operating margin for Massachusetts hospitals is 1.4 percent. In addition, 40 percent of Massachusetts hospitals have negative operating margins for the third quarter of 2011, the most recent data available.

AIM contends that it is only asking the healthcare industry to do what employers in other sectors "have been doing for decades." That's simply not the case. What other Massachusetts business has more than 50 percent of its revenues dictated by government, which then imposes additional financial burdens through substantial regulations and oversight? What other organization runs services at a loss because of its commitment to the community? What other sector is required to provide its services regardless of customers' ability to pay?

In FY2010, the Health Safety Net (HSN) fund paid for 800,000 hospital visits and discharges provided to low-income uninsured and underinsured patients. Hospitals not only have to provide the care, they pay for the majority of the HSN Fund itself.

Those are not the rules or the environment under which most Massachusetts business operate.

Hospitals proudly embrace their mission of providing services to those without adequate financial resources, and to contributing to the overall societal good, but there must be recognition of these contributions and fair payment by government.

There are still many things that hospitals and employers – as well as other members of the healthcare community – do agree on when it comes to reforming the payment and care delivery systems. Key among them is the belief in shared responsibility for reigning in costs. As hospitals and other providers strive to make thoughtful and innovative changes to increase efficient, coordinated and high-quality care, employers and their employees must purchase insurance products that are aligned with these goals and are easier to administer.

We must all work to make careful but steady and measurable progress toward bringing healthcare costs more in line with economic growth.

MHA and its member hospitals strongly support the Public Health Council's recent push to ban the sale of tobacco products in pharmacies. In fact, we testified in support of proposed legislation that would prohibit tobacco sales wherever any health professionals work. Smoking is the leading cause of preventable death in the US, and it is extremely important that care providers 'walk the talk' on this vital public health issue. As we said to the Legislature, our hospitals have historically adhered to the policy outlined in this bill on a voluntary basis, but we believe all healthcare providers should be working in concert to limit access to deadly tobacco products at locations where care is given.

This week Massachusetts also hosted the US Surgeon General Regina Benjamin, who spoke at the State House about her recent report on some extremely disturbing trends in youth tobacco use. The report found that each day more than 3,800 young people under age 18 in the US smoke their first cigarette, and more than 1,000 young people become daily smokers. Nearly 9 out of 10 smokers start smoking by age 18, and 99% start by age 26. And of every three current young American smokers, Dr. Benjamin says, one will quit… and one will die from tobacco-related causes.

We also know tobacco use is a tremendous drain on our economy and is adding to increases in healthcare costs. According to the Massachusetts Department of Public Health, in addition to the price paid in lives lost, smoking costs Massachusetts an estimated $6 billion annually due to excess direct health care costs and lost productivity due to premature death.

I don't see how anyone can argue against banning tobacco sales at healthcare sites in the face of those terrible statistics.

Hospitals are already leading the way, and leading by example. All Massachusetts hospitals ban smoking in their facilities, and MHA has also led Healing Inside and Out: Mass. Tobacco-Free Hospitals, which assist hospitals in going totally tobacco free – meaning tobacco use of any kind is not allowed anywhere on their campuses. Fifty-eight percent of the acute and post-acute care hospitals in the state are now tobacco free, and five more hospitals have committed to making this important advance in the coming months. Our goal is to have 100% of Massachusetts hospitals become tobacco free.

Both MHA's Tobacco-Free Hospitals initiative and HB0591/SB1094 ("An Act Restricting the Sale of Tobacco Products at Locations Where Health Professionals are Employed") are important steps forward. Now is the time for continued bold action. Legislators should approve the bill and Governor Deval Patrick should sign it into law as soon as possible.

Today's calls by the Greater Boston Interfaith Organization (GBIO) and Association Industries of Massachusetts (AIM) to cut healthcare costs in Massachusetts to below the state's economic growth rate within three years are unrealistic and irresponsible. Aligning healthcare spending with the state's economy in a reasonable amount of time is a worthwhile goal, and one that MHA and our member hospitals support. But imposing restrictions at a level below inflation, regardless of the time period involved, would harm our healthcare system, itself a driver of the economy, and force numerous layoffs, closures of services and impose barriers to access for everyone.

The impact of such draconian measures on hospitals and the patients we care for would likely be significant. When talking about goals to reduce the total healthcare expenditure in Massachusetts, it's important to remember (or realize) that this isn't just about hospitals and physicians but every aspect of healthcare spending. Since nearly two-thirds of hospitals' expenses are related to labor, drastically reduced spending would result in widespread cuts to the healthcare labor force, as well as cutbacks in goods and services such as medical technologies, pharmaceuticals and updates to aging buildings and equipment - And that's before we even get to the question of making investments in healthcare IT and electronic health records.

Claims that patients in Massachusetts pay "among the highest insurance premiums in the country" are incorrect. As the market has moved to change the commonwealth's entire healthcare payment and delivery systems, premiums have moderated. When adjusted for the higher cost of living here, as a percentage of median household income healthcare premiums in Massachusetts rank 48 out of 51.

AIM is right that the market is showing demonstrated progress in reducing healthcare costs, and we need to give it time and flexibility to create meaningful and comprehensive changes that will create lasting reductions in costs. But reducing total healthcare spending below the state's overall economic spending would debilitate one of Massachusetts' key economic drivers. That would be penny-wise and pound foolish.

MHA was quoted and served as an extensive source in a Boston Globe article on the deep potential harm hospitals face as a result of further cuts to Medicare reimbursement to fund the so-called "doc fix" legislation passed by Congress. The article also included some comments from two noted economists stating, in essence, that hospitals' concerns need not be taken seriously; we could not let the remarks stand unchallenged.

Our letter to the editor in response to those comments was printed in the Boston Globe. Hospitals continue to work hard to improve efficiency and make care even safer and better coordinated than it is currently, but we cannot make progress if we are subject to 'death by a thousand cuts.'

This weekend's story in USA Today on the growing trend of hospitals across the country refusing to hire smokers is welcome news to start 2012. The Massachusetts Hospital Association became one of the first small businesses to stop hiring smokers more than a year ago, and it's extremely gratifying to see this important practice catching on with larger employers, particularly in healthcare.

As the new model Medicare ACOs demonstrate, now more than ever hospitals are being held accountable to improve the health of the populations they serve. It's commendable that they start by being role models and "walking the talk" on this huge driver of mortality and cost.

Employers - especially hospitals - are to be commended for making sure their employees share their commitment to health.

Massachusetts has a very real - and achievable - opportunity to improve the overall health of our residents and lower healthcare costs at the same time, and we should move forward with this effort as soon as possible. With today's intense focus on the costs of healthcare, and the pressures being exerted on providers to bring those costs down, MHA and our member hospitals are working hard on the downstream side of the equation and making real progress. But the issue needs to be addressed on the prevention side as well, and we should start with one really obvious tactic - ending the state sales tax exemption on sweetened beverages and candy.

Numerous scientific studies have shown that consumption of soft drinks is associated with poor diet, increasing rates of obesity and risk for diabetes. One study found that for children, each extra can or glass of sugar-sweetened beverage consumed per day increases their chance of becoming obese by 60 percent.

Massachusetts state law exempts certain food products from the sales tax. This includes essential items like fruits, vegetables and milk, but it also currently includes soft drinks, sugar and sugar products, and candies. In the last decade, the percentage of calories consumed by 2- to-8-year-olds from sweetened beverages has increased, while the percentage from milk has decreased.

What's wrong with this picture?

Over 40 states now have sales tax on soft drinks and Massachusetts remains one of only a handful of states that does not tax these items at all. HB1697 eliminates the sales tax exemption for candy, confectionary and soft drinks. The Massachusetts Department of Revenue estimates that lifting the sales tax exemption for soft drinks and candy could generate $52 million in annual revenue that could be used for proven public health prevention efforts. A recent poll showed 69 percent of Massachusetts residents would support ending the sales tax exemption on sweetened beverages and candy if the revenues generated went to local schools to help combat childhood obesity.

Opponents of HB1697argue that it amounts to a penalty tax on sugary drinks and candy, but this argument misses the mark. The current exemption is actually a taxpayer subsidy of items that have little nutritional value and have been linked to the growing epidemic of overweight and obesity.

This week MHA joined our fellow members of the Healthy People/Healthy Economy Coalition at the State House to call for an end to the state sales tax exemption for soft drinks and candy. To further educate the public on the dangers of consuming large quantities of sweetened beverages, pediatricians will be handing out "prescriptions" to patients and their parents that describe the negative health effects of consuming too many sugary drinks. MHA will be supporting this education campaign as well.

If we want to lower healthcare costs, we need to support prevention efforts along with payment and care delivery reform. There are a number of ways to support improvements to our residents' public health - Ending what amounts to our Commonwealth’s taxpayer subsidy on sugary beverages and candy would be a concrete step in the right direction.

Today's story in the Boston Globe that Massachusetts insurance costs have dropped from number 1 in the US to number 9 is very good news. Hospitals throughout the Commonwealth, however, are not particularly surprised. Hospitals only account for approximately 39% of our per capita healthcare expenditures, but they are already bending the cost curve, reducing expense increases in 2009 and 2010. In other words, hospitals are helping to move the market in the right direction.

But healthcare costs aren't solely the problem of providers – we all have a responsibility to help reduce costs and premiums. Our state government must also hold itself accountable for improving price variation by paying adequately for care provided through Medicaid and other public sources, and by ending government cost shift to providers and private insurance premiums. We must be careful not to "over-correct" and end up with a situation that is actually detrimental to the healthcare community and the patients we serve.

Government definitely has a role in prompting change in the healthcare market, but that role shouldn't be to determine what rates are given to those who provide care. Recent Massachusetts laws, including M.G.L. Chapters 58, 288 and 305 are examples of constructive government involvement.

We know that price variations in healthcare exist. They exist not only in Massachusetts, but also in highly regulated environments such as Medicare and the state of Maryland, which has mandated government control over provider prices for years. The reasons for variation are complex, and more study is required to understand why particular variations exist and to determine what - if anything - needs to be done about those differences. To act before we understand the significance of variations and what to do about them is placing the cart before the horse.

I sat on the Governor's Special Commission on Provider Price Reform, which recommended that an expert panel be convened to research the many factors for variation and then determine how to reduce any unacceptable variation in provider prices. On behalf of the state’s hospitals, I voted to support this effort. In fact, MHA supported five of the six Special Commission recommendations. But I voted against the recommendation to regulate provider prices from the get-go, for the reasons I’ve mentioned here, as well as in my detailed statement to the Special Commission.

Today's report from The Commonwealth Fund found Massachusetts healthcare premiums are no longer the most expensive in the nation, and that is a great start – It's also evidence that the market's efforts to slow the cost of healthcare increases are working, and that government intervention in price regulation would be premature. But the report also highlights that there is still plenty left to do to slow and reduce healthcare cost increases. Massachusetts hospitals are contributing to the cost-control effort, and will do even more moving forward. Collaborating with all healthcare stakeholders including government, insurers, businesses and their employees, I am confident we can succeed.

The Massachusetts Hospital Association strongly supports mandatory flu vaccination for all hospital employees and applauds Beth Israel Deaconess Medical Center and Children's Hospital Boston for their bold decision to require flu vaccination as a condition of employment.

Today's release of vaccination rates at Massachusetts hospitals shows continued improvement, with 70.8 percent of acute care hospital workers statewide receiving the flu vaccine last year, compared to 68 percent the year before. But 20 percent of those hospitals' employees refused to be vaccinated, which is completely unacceptable and a huge disservice to patients.  There are rare instances where an exception needs to be made, but outside of those limited circumstances, the goal should be 100 percent.

Currently Massachusetts hospitals are required as part of their licensure to ensure that every employee is offered influenza vaccination unless such employee declines to be vaccinated. Hospital employees who decline vaccination are required to sign a form that includes providing the reason the individual refuses to be vaccinated against influenza.

Hospital employees are the front-line stewards of public health and we are proud of their service. For the relatively few employees without extenuating circumstances who may still hesitate to participate in the vaccination program, we believe that their commitment to patient care should carry the day. Patient safety shouldn’t be optional and that means that vaccination compliance shouldn’t be optional either.