“I have no doubt this will be influential because this really is the first time any state has attempted to legislate lower cost trends,” Paul Ginsburg, president of the Washington-based Center for Studying Health System Change, said of the bill. “I think other states, particularly in the Northeast, will be looking at this bill very carefully.”
From 2013 through 2017, the legislation sets healthcare cost goals at the gross state product, estimated for 2013 at 3.6%. The goals for 2018 through 2022 are even more aggressive, pushing the state to reduce spending to as low as 0.5% below the gross state product.
Healthcare spending has increased at an annual rate of about 6% or 7% in recent years, Massachusetts lawmakers said.
The Massachusetts Hospital Association called such cost goals “daunting,” particularly given added pressures to address increasing obesity rates and provide care for a rapidly aging population.
Massachusetts healthcare spending was projected to be about $68 billion in 2010, according to figures from RAND Health.
The 349-page bill, approved by a vote of 38-0 in the Senate and 133-20 in the House, represents a compromise from versions introduced this spring. In many ways, the new bill takes a softer, gentler approach to cost containment than did the previous bills, said attorney Stephen Weiner, chair of the health law section of Mintz Levin, Boston.
For instance, the “luxury tax,” a controversial provision that would have taxed pricier hospitals that provide premium services, was left out of the newest version. That was replaced by a one-time surcharge assessment on acute-care hospitals and health systems that have more than $1 billion in total net assets and derive less than 50% of their revenues from public payers.
The funds from hospitals' surcharge assessments, totaling $60 million, along with $165 million in one-time surcharge assessments from payers, will be distributed among three funds. Sixty percent, or $135 million, will go to a trust fund for distressed hospitals, while $60 million will be put toward prevention and wellness efforts. The remaining $30 million will go to a fund that promotes the use of health information technology, according to the bill.
Those are worthwhile targets for improvement, said Tim Gens, the state hospital association's executive vice president, but he argued that adding another cost burden onto certain hospitals is the wrong way to generate needed funds.
“At a time when the government is looking to lower costs, to actually impose additional costs on providers is something that we don't think is sound public policy, particularly at a time of chronic underpayment for services,” Gens said.
Given the parameters of the surcharge assessment, it's likely to apply to only a few large hospitals and health systems, including perhaps 12-hospital Partners HealthCare System; 396-bed Boston Children's Hospital; and 621-bed Beth Israel Deaconess Medical Center, all in Boston, experts say.
In a statement, Partners CEO Dr. Gary Gottlieb did not address the assessment directly, but said reaching the bill's healthcare spending target would present “a tremendous challenge for hospitals and doctors.”
Enforcement is another area softened in the compromise version of the bill. The bill establishes a health policy commission—led by an 11-member board—that will set cost goals, gather data, track prices and determine whether providers are meeting benchmarks. And that commission can require providers that don't hit those targets to develop and submit performance improvement plans. The bill does say that providers that willfully neglect to file or implement such improvement plans could be subject to a last-resort fine of up to $500,000, but lawmakers did not go into much detail about that or any other potential penalties.
“Earlier versions had some pretty severe regulatory interventions, including one that would have required providers to renegotiate their payer contracts,” Weiner said. “This bill does put in place pretty robust monitoring and reputational pressure, but it does not say to hospitals: 'If you don't meet this goal, we will do this.' ”
And that's a good thing, he said. The bill institutionalizes the pressure to control costs and sends a clear message to providers without complicated regulatory interventions upfront, Weiner said. “There may need to be more regulations down the road, but I don't think it's smart now,” he said.
Dr. Paul Hattis, assistant professor and associate director of the Master of Public Health Program at Tufts University, predicted more enforcement will be necessary.
The bill is “an important first stake in the ground,” said Hattis, who also co-chairs the healthcare task force of the Greater Boston Interfaith Organization, a community organization that lobbied aggressively for tight spending targets aligned below the growth rate of the gross state product.
“The legislation has laid down the challenge to all Massachusetts providers and insurers to demonstrate there is value in what they do and to use the market to correct the failures that have led to uncontrolled costs for many years,” Hattis said. “It gives them the opportunity, of their own accord, to get things under control without significant government involvement. Over time, if the market can't self-correct, there will likely be a need for greater oversight.”
