Benchmark Set; Data Lags Put 2015-16 Costs in Spotlight

The Health Policy Commission (HPC) last week voted to set the statewide healthcare cost growth benchmark for calendar year 2020 at 3.1% – which was not unexpected.
By statute, between 2018 and 2023, the benchmark is calculated by subtracting 0.5% from potential gross state product (currently 3.6%), to arrive at 3.1%. The HPC has the ability to raise the benchmark after going through its hearing process with the Legislature. After 2023, the HPC can modify the benchmark to any amount, subject to legislative approval.
No one expected last week that the HPC would raise the threshold from 3.1% as the total healthcare expenditures per capita in Massachusetts grew just 1.6% from 2016 to 2017, which is well below both the state’s healthcare cost growth benchmark and national growth rates. But HPC Chairman Stuart Altman indicated that since healthcare cost growth in the state and nationally has slowed, it may be time to free the HPC from its statutory limits and allow it to drive down the benchmark.
“It may be time to consider whether additional flexibility is warranted for the HPC to set the benchmark lower than 3.1%,” Altman said.
In its previous comments to the HPC, MHA, along with the majority of other healthcare entities commenting, concurred that the benchmark should be set at the lowest allowable level – or 3.1%. At the same time, MHA noted a number of challenges to the healthcare cost equation that remain largely beyond the control of hospitals and providers, ranging from the rising cost of pharmaceuticals and labor to the effects of demographics and an aging populace. MHA also cautioned that the cost growth benchmark should be used for its intended purpose (to rein in costs) and not for other reasons (such as being a sort of quasi price cap by insurance companies in their negotiations with hospitals). The HPC last week noted this provider concern.
The other noteworthy news to emerge last week from the HPC is that the state’s Center for Health Information and Analysis (CHIA) has referred 35 providers and six payers to the HPC for potential Performance Improvement Plans (PIPs). By statute, providers subject to a potential PIP are not publicly identified. When a provider or payer doesn’t meet the benchmark for all or part of its business, the HPC has the authority to investigate it and, if warranted, request a performance improvement plan to explain how the provider/payer is going to come back into cost-growth compliance. The HPC noted at the meeting that it has never required a performance improvement plan of any entity under this process.
Of the 35 providers, 27 were referred to the HPC for growth in one contract or book of business. So, for instance, if one hospital is meeting the benchmark in all of its dozens of contracts with insurers, but pushes past the benchmark in, say, a Preferred HMO contract with one insurer, it will be referred to the HPC. The contracts and books of business at issue last week were ones that existed in 2015-2016. CHIA has a three-year lag, which the HPC noted “may not reflect the entity’s current performance.”