Voices in Healthcare

Congress made a wise decision today - to provide a six-month extension of enhanced Federal Medical Assistance Percentage (FMAP) payments to states. I commend the members of our congressional delegation who supported the extension, as well as the Governor and hospitals across the state who advocated for the extension. Now our state leaders have the challenge of deciding how to wisely and fairly distribute the much-needed funding.

The additional funding is critical for Massachusetts during this rocky economic period. It is extremely important that significant portions of the FMAP resources be used to maintain and restore vital healthcare programs.

Specifically, portions of the funds should be used to avoid further MassHealth payment reductions to hospitals. Unfortunately, the Patrick administration is currently considering further cuts to hospitals that build upon payment reductions they experienced in FY2009 and FY2010. We hope that with the infusion of this federal funding relief, the administration will reconsider their proposed actions.

MHA is particularly concerned by a Patrick administration proposal to eliminate approximately $75 million in MassHealth performance payments as part of the upcoming hospital MassHealth contract for rate year 2011, in addition to other planned payment cuts. These new cuts will further erode one of the major goals of the healthcare reform law - closing the MassHealth payment gap, and undermine the reforms that promote payments based on performance rather than just volume.

A portion of the FMAP funds should also be used to address other important healthcare priorities such as helping distressed hospitals, the Commonwealth Care Bridge program, and the Health Safety Net.

Governor Deval Patrick was instrumental in fighting for this FMAP money, as were hospitals. Now we need a collaborative effort to stop any further payment cuts to hospitals and to restore the necessary funding we lost. The health of Massachusetts residents, as well as the state's prospects for economic growth, depends largely on the ongoing vitality and contributions of the hospital community.

In these difficult economic times, the Massachusetts legislature has done laudable work to provide meaningful insurance rate relief to small businesses that is also consistent with comprehensive, long-term reform of the healthcare delivery and payment systems. The health reform legislation passed over the weekend is a responsible compromise that moves the Commonwealth's healthcare reform effort forward without stalling or de-stabilizing our healthcare-based economic engine.

If signed by the Governor, the legislature's proposal will help healthcare stakeholders build upon the progress hospitals have already made in bending the curve of cost increases – down 65 percent from 2008 to 2009.  But that progress is matched by concern that many vulnerable hospitals, including those who serve large financially distressed populations, are in need of greater support.

The compromise legislation has some positive elements – including expansion of transparency requirements, standardization of insurers' Medical Loss Ratios moving to 90 percent, and administrative simplification of the healthcare system.

Hospitals also support the legislation's provisions to establish limited open enrollment periods for individuals seeking health care coverage, moral obligation bond financing to support community hospitals and community health centers, and a piloted approach to small business purchasing collaboratives.

The hospital community advocated for many of the measures included in the final bill with state legislative and executive leaders. But comprehensive, long-lasting payment and delivery reform remain the only real solutions to sustain the progress we have all made in improving access to quality care while ensuring that such care is affordable. Hospitals are eager to get to continue their work on these latest important changes as we all collaboratively and thoughtfully progress toward our common goal of comprehensive healthcare reform.

The Massachusetts Hospital Association (MHA) has launched a public outreach campaign to highlight hospitals' key positions on healthcare payment reform. In the face of increasing misperception that hospitals are the primary driver for rising healthcare costs, MHA's effort sets the record straight and brings hospitals' message to a broader audience.

Massachusetts hospitals and other healthcare providers are being mislabeled as the "reason" for escalating healthcare costs - and that's simply not true. Massachusetts hospitals are committed to being part of the cost solution, but we cannot do it all, and we cannot do it alone. Everyone involved - caregivers, insurers, businesses, consumers, legislators, and government - must share and contribute toward making healthcare payment reform work.

MHA's vision includes the following five shared changes that must occur in Massachusetts to achieve successful healthcare payment reform:

• All stakeholders must recognize that hospitals already have reduced costs significantly
• Insurance companies should stop playing doctor
• Government must close the underpayment gap for public healthcare programs
• Everyone must understand that hospitals are major employers as well as community anchors 
• Together we must develop a payment system that makes sense.
  

We are at a critical point in the healthcare reform debate. There are some meaningful short-term steps that can help the containment of health premiums for small businesses across the Commonwealth without compromising long-term reform efforts - including limited low-cost networks, a minimum insurer Medical Loss Ratio of at least 90 percent, the development of a high-risk reinsurance trust fund and limitations on open enrollments for individuals purchasing individual coverage. MHA is advocating for those and other measures with state legislative and executive leaders. But comprehensive, long-term payment and delivery reform remain the only real solutions to escalating healthcare costs.

A popular TV show - Grey's Anatomy - recently aired its season finale, and while the critics may have called it "edge-of-your-seat" drama, for many in the hospital community it was, literally, sickening. The episode showed a man with a handgun in a hospital systematically killing physicians and staff.

In a different forum, at a different time, I could talk about gun ownership, violence on TV, its influence on children and more - but I want to note here that the fiction that was aired on Thursday night made caregivers queasy because violence is a threat that our hospital personnel work under every day.

We know that in Boston, at hospitals, gang members have run into emergency rooms with automatic weapons looking to finish off someone they'd previously shot.  We know that a hospital's ER - open to everyone at every hour of the day - admits patients that are drug addled, unstable, and/or armed. Security personnel have become, unfortunately, as integral a part of a hospital's staff as a radiologist or RN.

So when a hospital CEO e-mailed me after Thursday's show saying he was perturbed by the violence and the copycat crazies it could spur, I saw his point.

As part of MHA's legislative package this year, we made it a priority to pass legislation (sponsored by Sen. Anthony Petrucelli) that  imposes heightened penalties for assaults committed on healthcare providers in the line of duty.  Both the House and Senate have approved versions of this language. The bill won't end violence, but it may help curb it. I hope so.

And I hope that when we talk about hospitals - about healthcare costs, and quality of care, about payment reform, and the like - that we never lose sight of the fact that hospitals are extraordinarily complex places that are woven into the fabric of a community - both the good and bad parts of it. Our caregivers are courageous, not only protecting the health and welfare of citizens but doing it within a stressful, and potentially dangerous, environment. Life-saving care under life-threatening circumstances is something for "stakeholders" to think about before they lob the next verbal bomb against hospitals.

The Massachusetts Division of Health Care Finance and Policy (DHCFP), in conjunction with the Division of Insurance (DOI), released a much-anticipated study of the reserves, endowments, and surpluses of Massachusetts hospitals. This study follows a similar examination of health plan reserves published earlier this month. The reports help clarify some of the many differences between insurer surplus - where clear standards exist regarding definitions, appropriate levels, and other regulatory requirements - and the financial performance indicators that comprise hospital surplus and reserves. But it's even more important to understand that hospitals and insurers require reserves and accumulate surpluses for vastly different reasons.

While clearly the focus of the report was to identify and quantify "excess" financial resources: the most impressive element of the Division's report is actually the inadequacy of hospital total surpluses and reserves. For example:

• Only 10 hospitals, based on the parameters selected by DHCFP, were found to have "considerable financial resources." That's a mere 15% of the state's hospitals.
• 45 hospitals (68%) had less than 30 days cash on hand.
• 13 hospitals have a debt service coverage ratio of 1.0 or less, which means that their "income cannot cover their interest and principal obligations on existing debt."
• 10 hospitals had negative net unrestricted assets in 2009.

The methodology used to measure 'financial resources' in the report has also produced some misleading numbers. For example, the DHCFP study cites reserves and surpluses for entire health systems, which includes not just hospitals but also nursing homes, health centers, physician practices, assisted living residences, research organizations, real estate holding companies, rehabilitation and psychiatric hospitals, international medical consulting and education, and so on. The total aggregate "system" net assets figure is $17.2 billion; but $10 billion (58% of that amount) is property, plant and equipment, which cannot properly be considered 'reserves' since they are not liquid assets and are also essential to the actual provision of services provided by hospitals.

Healthcare payment reform  - which Bay State hospitals support as part of a comprehensive overhaul of the healthcare delivery system - will nonetheless increase hospitals' need to maintain and even build upon their existing reserves. The Special Commission on the Health Care Payment System recommended a shift to a global payment model that will lead to a transfer of risk from insurers to providers, including insurance risk and performance risk. In addition, risk is likely to be spread across smaller pools, adding to the level of risk for providers. In order for providers to take on any additional risk, they will need to be given the opportunity and means to build up the necessary reserves.

While the majority of Massachusetts hospitals are non-profit, all hospitals are capital intensive enterprises and must maintain reserves for capital and infrastructure investments/improvements, labor costs and fiscal uncertainties such as continued government underpayment for care. Hospitals must balance their charitable and societal missions with positive financial performance if they are to adequately serve their communities.

There has been a lot of discussion about healthcare costs lately,  but 'cost' can mean different things to different stakeholders. The Massachusetts Hospital Association (MHA) has issued a report that explains and examines the true meaning of "healthcare costs" for hospitals, and spells out the difficult economic realities hospitals face and which must be taken into account in order for healthcare reform efforts to succeed.

MHA's "Hospital Costs in Context: A Transparent view of the Cost of Care" illustrates Massachusetts hospitals' commitment to being part of the solution in making healthcare more affordable, details some of the sacrifices hospitals are already making to achieve the long-term goals of healthcare reform, and the need for caution in adopting short-term fixes so as not to disrupt essential medical services and further damage the state's economic engine.

Our report highlights the fact that for hospitals, 'cost' means the resources it takes to produce and deliver high-quality medical services to the community. Massachusetts hospitals have already taken substantial steps to reduce their expenses without compromising care, and are being asked to do even more as state payment reform advances and federal health reform get underway. This part of the cost equation is less well understood than most, and it needs to be taken into consideration with all the other factors in order for healthcare reform to succeed.

The report covers issues such as labor costs (which in the case of wages paid to Registered Nurses, for example, increased by more than 50 percent from FY 2004 to 2008); patient care supplies (increased by 34.7 percent over four years); and capital costs (up more than 23 percent in the same time period). The paper also explains that consistent Medicare and Medicaid underpayments represent a significant part of the healthcare "cost" equation in Massachusetts, as a portion of government underfunding has historically been passed on to insurance companies whose rates are, at least to some extent, negotiable.

It's clear that our state leadership is focused on immediate steps to improve the affordability of health insurance and to save or create jobs. Our caution is to recognize the real world cost pressures faced by hospitals and their own cost-cutting initiatives.  Any short-term regulations aimed at addressing healthcare costs must take into consideration ongoing MassHealth underpayments to hospitals and additional Medicare cuts coming down the line from federal reform.

I have great respect for Nancy Kane - we served on the Payment Reform Commission together - but her  assertion that hospitals can "survive and even profit from Medicare payments" (A Peek Under the Hood on Medicare Payments, April 1)  is oversimplifying a complicated issue and painting with too broad a brush. It just doesn't ring true in Massachusetts. The fact is that 77% of Massachusetts hospitals are losing money on Medicare business in 2010, yet our state's hospital costs per discharge are lower than their peers regionally and nationwide. While Cape Cod Hospital and others have sought and found efficiencies wherever possible, Medicare payments have not kept pace with the operational cost increases that hospitals face. Over the past 13 years Medicare payments to Massachusetts hospitals have increased 20.9% but prices for the goods and services hospitals must purchase to deliver care have risen by 56% -That adds up to one big and unsustainable shortfall.

Below is the Massachusetts Hospital Association's statement regarding federal healthcare reform, which we sent to our Congressional delegation in Washington:

The Massachusetts Hospital Association (MHA) urges the U.S. House of Representatives to pass the Senate healthcare reform bill in conjunction with the companion reconciliation amendment.  Passing this landmark legislation will mean coverage for more than 31 million Americans who don't have health insurance and stronger protection for those who do have coverage.

Massachusetts hospitals have been proud to take part in the shared responsibility to provide low-cost, high-quality care for all in our state, which has led the nation in this regard. While we remain wary of the size of the Medicare and Medicaid cuts, we hope to work with the Administration and our Congressional representatives in the future to protect the groundbreaking success of our state program.

We applaud the federal healthcare legislation for stressing administrative simplification, and for funding research and clinical improvement, and a host of public health initiatives, that will help improve the healthcare system.  Further, we recognize that the bill represents an important first step in exploring vitally-needed delivery system reforms that will eventually realign our sometimes fragmented healthcare system.  Although any reform effort will by necessity be complex, we believe this bill puts patients first, as do we – so we urge you to vote yes.

With this vote, Congress can help us cut through existing red tape so our hospitals can be more efficient. We  can begin to mend the healthcare safety net that hospitals struggle to bind. National reform can help build information networks for hospitals to continue to improve the quality of care. Those who feel Massachusetts does not need to be concerned about national efforts because we have been an early adopter of reform, should understand the very real and much needed improvements this law can have on our own healthcare system. It's late, but it's not too late for Washington to do its job, so we can do ours.

Here is a copy of a blog I posted on WBUR's "Commonhealth" today. Happy reading!

In today's tough economic environment, addressing small business healthcare costs is a must. Governor Deval Patrick's new proposal to have the state regulate healthcare rates from insurers and providers aims to do just that, but is a dramatic and difficult step even if done on a temporary basis and some of what the Governor proposes isn't temporary. The Governor has said that his proposal is meant to start the conversation and he deserves credit for that.  Starting the conversation is good because there is a lot to talk about and a lot to do.

The governor's "Job Creation Bill for Small Business" calls for any contract for payment between an insurance company and a hospital, physician group practice, or imaging service to be submitted to the Division of Health Care Finance and Policy (DHCFP).  If DHCFP finds that the payments - adjusted for volume and patient acuity- increase by a rate greater than the previous year's rate of medical inflation, the increase would be presumed to be excessive and disapproved, pending a hearing to justify the increase. The bill also places some limits on insurers, but far less challenging.

There are important questions to be asked in this "conversation" including questions about the feasibility of implementing what is proposed, the administrative complexity and cost of implementing what is proposed, the impact of many providers who are struggling to survive today, whether there is a need to address demands for medical services if one is proposing to limit provider costs, which provisions are sunset and which provisions continue, will the proposal actually lower small business premiums and if so at what cost, what effect will increased regulation have upon our economy and jobs, what is the impact upon long-term reform of adding greater complexity to the payment system, does the proposal take into account costs that providers can't control - such as an aging population and the high level of coverage benefits in Massachusetts, how do providers account for the government not paying the costs for caring for MassHealth patients?

Because something is complicated doesn't mean that it can't work, but when it is this important, we better understand how it will really work or not work before buying it.

The disproportionately high premiums that small businesses pay are a legitimate concern.  The rapidly rising premiums result from business decisions being made by the state's insurers. Under current Division of Insurance regulations, insurers can charge small businesses as much as 76 percent more in premiums than they charge their 'big business' counterparts. But hospitals and other providers get paid exactly the same regardless of whether a patient works for a large or small employer. The Governor's bill authorizes the Commissioner of Insurance to limit these so-called rating decisions.

It is high time to ask tough questions about the cost of insurers' red-tape, cost in terms of dollars spent and in terms of providers and beneficiaries running in circles. Their administrative costs add significantly to providers' medical costs. Their billing and claims processes account for billions of dollars in our state's healthcare system.

There are steps we can take together. We should look carefully at new ideas such as allowing small business to join together to get lower insurance premiums while not excluding businesses from joining such networks.  And increased transparency if handled responsibly and applied to all stakeholders can contribute to a more effective and efficient healthcare system.

MHA is committed to basic reform of the healthcare payment system and to participating in the conversation that the Governor started.