Healthcare Business News
Deval Patrick, governor of Massachusetts

Mass. governor signs health cost-containment bill

By Melanie Evans
Posted: August 6, 2012 - 11:45 am ET

Massachusetts Gov. Deval Patrick signed into law the state's precedent-setting health spending bill.

The legislation, which some officials project will save the $200 billion over 15 years, sets spending targets and includes new hospital and payer surcharges to fund aid for distressed hospitals and promote disease prevention, advancement of public health and adoption of electronic health records.

Health spending under the law will be capped at the rate of Massachusetts' gross state product—a measure of economic growth—from 2013 to 2017, and as low as 0.5% below the state's gross state product growth rate through 2022.

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The governor, as he prepared to sign the bill, said the law "makes the link many have long recognized between better health and lower costs: that we need a real healthcare system in place of the sick-care system that we have today," according to a transcript of his comments. "What we're really doing is moving toward a focus on health outcomes and a system to reward that. We are ushering in the end of the fee-for-service care in Massachusetts in favor of better care at lower cost."

Moody's Investors Service, in a statement, called the new law "credit-negative" (PDF) for hospitals, saying it will "limit their revenue growth and reduce their operating flexibility." Hospitals could face more public scrutiny of their cost-reduction efforts and can expect to see Massachusetts' Medicaid program adopt new payment models such as bundled payments or accountable-care shared savings, Moody's said. "We expect the new reimbursement models will reduce hospital revenue," the ratings agency wrote.

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