mahp annual 2011 annual report

7/31/2019 MAHP Annual 2011 Annual Report

1/36

2011 Annual Report

Targeting Health Care Costs:

Te Price or ServicesSolutions from Beacon Hill

Te Nations Best Health PlansWorking or Afordable Care


2/36

Table ofContents Lets Start with Some Facts 2

Where Does the Premium Dollar Go? 4

Where Do MA Residents Get Care? 5

Whos Making Money? 6

Whats the Role of Price Variation? 8

What Does the Data Tell Us? 10

What Are the Solutions for Dealingwith Price Variation? 12

What Our State Leaders AreRecommending 13

What You Need to Know About MarketPower and Payment Reform 22

Committed to Cost Control 24

MAHPs 2011-2012 Legislative Agenda 25

Do Higher Costs Buy Better Care? 26

NCQA: High Quality, High Satisfaction 27

Myths and Facts About Health Plans 28

MAHP Board of Directors and Staff 30

About MAHP 31

Philosophy of Care 32


3/36

Dear Friends:

In 2011, we witnessed many changes in the Massachusetts marketplace: new partnerships by health plans and providers; a signicant movement

to alternative payment methods; and several provider groups chosen to participate in the ederal accountable care organization (ACO) pilot. While

these changes all hold the potential or delivering better quality care or patients, one actor remains the same prices or medical services charged

by providers, while slowing, continue to rise.

Controlling health care costs remains the critical challenge or preserving our states landmark health reorm law and helping employers create

new jobs.MAHP member health plans continue to do their part and have brought millions o dollars in savings to small busineses through rate reductions

and new products. The Legislature, through Chapter 288 o the Acts o 2010, imposed the nations strictest health insurance premium standards,

requiring that 90 percent o the premium be spent on medical care, while limiting insurers prots and increases in administrative spending.

Still, premiums continue to rise. Why? Despite health plans eorts, the prices providers charge or their services continue to increase.

Over the last three years, nearly hal a dozen comprehensive state reports including rom the Attorney General and the Division o Health Care

Finance and Policy have examined the drivers o rising health care costs. In each case, provider price increases, not increases in utilization or health

insurance practices, have been identied as the major drivers o health care cost increases. The studies have concluded that prices vary signicantly,

that they are not correlated to the quality o care, complexity o patient conditions, or government underpayment, and that higher priced providers

are gaining market share at the expense o lower priced providers.

Payment reorm oers the promise o improving health care quality and bending the cost curve over time, but its ultimate success will require

addressing unwarranted market disparities and closing the gap between lower-paid providers and higher-cost providers to ensure a properly

unctioning marketplace. Failure to act will simply memorialize high rates o payment or certain providers, regardless o how they are paid, and

perpetuate provider consolidation that could lead to higher prices.

Closing the gap between providers will not be easy, and it must not be accomplished by simply raising rates or the bottom tier o providers. The

net result rom addressing these price variations should translate into lower health care costs or employers and working amilies.

This years annual report, Targeting Health Care Costs: The Price or Services, examines several ways Massachusetts could repair the current

dysunctions in the provider market and provide relie to businesses and residents. We hope it will be a catalyst or thoughtul consideration o

these and other proposals or addressing the underlying causes o rising health care costs.

Sincerely,

Lora M. Pellegrini

President & CEO

mahp 2011 annual report


4/36

Lets Startwith Some

FactsThe most signicant driver o health care costs in Massachusetts is the amount paid or medical services at dierent institutions. Over the last several

years, numerous state reports have highlighted the wide pricing variation that has become a act o lie in our health care system and the challenges

this creates as we try to make health care more aordable and eective.

As the Attorney Generals 2010 report noted, price variations are correlated to the market leverage o providers and these variations are not correlated

to quality o care, the sickness or complexity o the population served, the extent to which a provider is responsible or caring or a large portion o

patients on Medicare or Medicaid, or whether a provider is an academic teaching or research acility.

The prices listed in the enclosed charts come rom publicly available data, oering a glimpse o the price o common services based upon where care

is delivered.

source: Health Care Quality and Cost Council (HCQCC):

7/1/2008-6/30/2009 with claims paid through 12/31/2009.

2

Teaching Hospitals:Typical Cost o aCT Scan o Abdomen

Statewide Median:$575

St. Elizabeths Medical Center $375

Cambridge Health Alliance $425

Boston Medical Center $500

Tufts Medical Center $550

Lahey Clinic $575

St. Vincent Hospital $600

UMass Memorial Med. Center $625

Baystate Medical Center $675

Beth Israel Deaconess Med. Center $675

Mount Auburn Hospital $675

Brigham and Womens Hospital $950

Mass. General Hospital $975Childrens Hospital Boston $1,475

Community Hospitals:Typical Cost o a CT Scan o Abdomen

Statewide Median:$575

Quincy Medical Center $400

Norwood Hospital $425

Health Alliance Hospitals $450

Anna Jaques Hospital $475

Lawrence General Hospital $475

Lowell General Hospital $475

MetroWest Medical Center $475

Marlborough Hospital $525

St. Lukes Hospital $525

South Shore Hospital $575

Winchester Hospital $575

North Adams Hospital $600Newton-Wellesley Hospital $600

Milford Regional Medical Center $650

Harrington Memorial $850

Berkshire Medical Center $875

Cooley Dickinson Hospital $950

Sturdy Memorial Hospital $1,150

Cape Cod Hospital $1,400


5/36


Teaching Hospitals: Typical Cost o aMammogram Statewide Median:$225


UMass Memorial Med. Center $125


Cambridge Health Alliance $175




Lahey Clinic $250




Mass. General Hospital $325

Community Hospitals: Typical Cost o a Mammogram Statewide Median:$225

Quincy Medical Center $75Berkshire Medical Center $100

North Adams Hospital $125


Anna Jaques Hospital $200


Health Alliance Hospital $200


Cape Cod Hospital $225






Sturdy Memorial Hospital $250



Newton-Wellesley Hospital $275

Harrington Memorial Hospital $350

Teaching Hospitals: Typical Cost o a Chest X-Ray Statewide Median:$100

Cambridge Hospital $75



Lahey Clinic $100






UMass Memorial Medical Center $125


Mass. General Hospital $175

Childrens Hospital Boston $225

Community Hospitals: Typical Cost o a Chest X-Ray Statewide Median:$100

Anna Jaques Hospital $75Health Alliance Hospital $75





Quincy Medical Center $75


Newton-Wellesley Hospital $100

North Adams Hospital $100



Sturdy Memorial Hospital $100


Cape Cod Hospital $125


Berkshire Medical Center $150

Harrington Memorial Hospital $150



6/36

WhereDoes thePremium

Dollar Go?

Any serious discussion about keeping health care aordable needs to start with what we pay or medical care and why it costs so much, because an

increasing portion o the premium dollar is directed to medical costs. In Massachusetts, nearly 90 cents o every health care dollar goes to pay or

medical services, such as doctor visits, diagnostic tests, prescription drugs, and hospital stays.

source: Data is based on statements led by plans with the MA Division of Insurance for the ve Massachusetts-based MAHP member commercial health plans.

Health Plan Revenues and Expenses

Medical Costs 87.65%

Administrative Costs 11.15%

Surplus 1.19%

2007

4



Surplus 0.94%

2008



Surplus -0.63%

2009



Surplus 0.47%

2010


7/36


WhereDo MA

ResidentsGet Care?

The Division o Health Care Finance and Policys 2010 Cost Trends Final Reportcited the high concentration o physicians in academic medical centers

compared to national averages as one o the major drivers o premium increases over the past several years.

In act, admissions to academic medical centers are more than double the national average and a higher proportion o outpatient care in Massachusetts

also is delivered in academic medical centers compared to the rest o the U.S.

The Divisions 2011 Trends In Health Expenditures report noted that a majority o private inpatient spending was devoted to care delivered in tertiary

care or specialty and teaching hospitals. In 2009, two-thirds o privately insured inpatient spending was or care obtained in tertiary care or specialty

and teaching hospitals, either in the Boston metro area (52 percent) or elsewhere in Massachusetts (14 percent). Just 29 percent o private inpatient

spending was or care obtained in community hospitals.

Admissions to Academic Medical Centers:

45% Massachusetts

19% National Average


8/36

WhosMakingMoney?

Making health care aordable starts with a clear understanding

o where our health care dollars go and requires those o us in the

health care systems health plans, hospitals, and physicians to

answer the questions: Why are your costs going up? and What

are you going to do about it?

MAHP and its member health plans have been strong proponents

o sharing health care cost inormation with the public. We

believe that consumers and employers have every right to know

how their health care dollars are spent.

As the ollowing charts indicate, recent data on the percentage

o health care dollars that hospitals report as prot margin

compared with the margins o MAHP member health plans oer

a useul snapshot o where the money goes.

Prot margins only tell part o the story, however. Massachusetts

has established the most stringent standards in the country or

how health plans use premium dollars. Chapter 288 o the Acts

o 2010 requires that a minimum o 90 percent o the premium

dollar must be spent on medical care. In addition, the law restricts

the amount o unds that may be allocated to administrative

expenses, limits health plan prots to no more than 1.9 percent,

and requires signicantly greater nancial, membership, and

utilization reporting by health plans. MAHP believes that, in order

to increase transparency around the true cost o health care

and to provide a more complete picture o how the health care

dollar is spent, hospitals should be subject to similar reporting

requirements.

6

Mount Auburn Hospital

8.73%

Baystate Medical Center

8.23%

Massachusetts General Hospital

6.33%

Beth Israel Deaconess Medical Center

6.25%

St. Elizabeths Medical Center

5.99%

Childrens Hospital Boston5.61%

Saint Vincent Hospital

5.33%

Lahey Clinic

5.25%

Brigham and Womens Hospital

5.07%

UMass Memorial Medical Center

4.08%

2010 Total Margins:Top 10 Teaching

Hospitals


9/36


Sturdy Memorial Hospital

11.00%

Signature Healthcare Brockton Hospital

8.98%

Saint Annes Hospital

8.60%

Marthas Vineyard Hospital

7.26%

Hallmark Health

7.00%

Good Samaritan Medical Center 6.41%

Cape Cod Hospital

5.75%

Newton-Wellesley Hospital

5.01%

Lowell General Hospital

4.88%

New England Baptist Hospital

4.16%

2010 Total Margins:Top 10 Community

Hospitals

source: Division o Health Care Finance and Policys May 2011 Key Indicators Report

2010 Total Margins:Commercial Health

Plans

Harvard Pilgrim Health Care

1.90%

Health New England

1.90%

Tufts Health Plan

1.90%

Neighborhood Health Plan

1.00%

Blue Cross Blue Shield MA

0.20%

CeltiCare

-0.20%Fallon Community Health Plan

-0.40%

UnitedHealthcare of New England -3.60%


10/36

8

Whatsthe Roleof Price

Variation?

As part o its 2011 Health Care Cost Trends hearings, the Division o Health Care Finance and Policy issued a series o reports examining health care

costs and the major trends in health care spending. The Divisions Trends in Health Expenditures report ound that rom 2007 to 2009 higher total

private spending was predominately driven by price increases. In act, higher prices explained virtually all o the increase in spending or inpatient,

outpatient and proessional services, as well as prescription drugs.

Meanwhile, the Divisions Price Variation in Health Care Services report examined the prices paid by private health plans or commercially insured

members or a sample o high-volume health care services in three service categories inpatient hospital care, outpatient hospital care, and physician

and other proessional services. This report ound that:

Prices paid for the same hospital inpatient services and for physician and professional services vary signicantly statewide for every

service examined. There was at least a three-old dierence or every service and or most, a variation o six- or seven-old.

Comparing median prices, highest paid hospitals receive payments that are more than double the lowest paid hospitals.

Data on the selected 14 routine inpatient services indicates that service volume tends to be concentrated in higher-paid hospitals.

There is little measurable variation among Massachusetts hospitals based on the available quality metrics related specically to the 14

selected inpatient services.

There was no correlation between a hospitals share of Medicaid patients and the prices they received from private payers, with some

o the lowest-paid hospitals having the highest proportion o Medicaid discharges.

The range in Medicare prices paid across hospitals is similar in breadth to the range found in this reports analysis of private payer

prices. However, the relative rankings o hospitals are not similar across Medicare and private payers.


11/36


The report also analyzed the potential savings associated with reducing payment variation. Among the ndings:

If all private payer prices were paid at the 2009 median price, it would reduce spending for professional services by an estimated $640

million and by $112 million on inpatient hospital services for the selected services. Total savings: $752 million.

If payments above the current 80th percentile were instead made at the 80th percentile, it would reduce spending for professionalservices by approximately $320 million. It would also reduce spending by $170 million in inpatient hospital services for the selected

services. Total savings: $490 million.

If the range of payments were narrowed to the existing 20th and 80th percentile (increasing the lowest prices and reducing the highest

prices), it would potentially save $179 million for professional services. If the range of payments for inpatient hospital services for the

selected services were narrowed to the existing 20th and 80th percentile, the potential savings would be $88 million. Total savings:

$267 million.

Payments paid at the 2009 median

ProfessionalServices

InpatientHospitalServices

TotalSavings/Increase

$640MM $112MM $752MM

All payments above the 80th

percentile lowered to the 80th percentile




$320MM $170MM $490MM

Lowering rates above the 80th

percentile & increasing rates below

the 20th percentile




$179MM $88MM $267MM

note: The Division of Health Care Finance and Policys analysis focused on a select set of services, examining 14 routine inpatient services and

20 current procedural terminology codes for professional services.


12/36

What Doesthe DataTell Us?

Attorney General Martha Coakleys landmark 2010 Examination o Health Care Cost Trends and Cost Drivers report ound that increases in provider

prices, not increases in utilization, were the major driver o health care costs, that higher-priced hospitals have been gaining market share at the

expense o lower priced hospitals, and that variations in prices resulted rom the market clout a provider may have, not the quality or level o care or

the type o institution.

In the ollow-up to that report, the Attorney General examined whether eorts to expand global payments have reduced health care costs or the

payment disparities rst identied in the 2010 report. A 2011 report examined risk contracting and care coordination both rom the perspective o

six commercial health plans and from the perspective of 16 provider groups of varying size, scope of services, geographic location, and payment

methodology. Among the reports major ndings:

1. There is wide variation in the payments made by health insurers to providers that is not adequately explained by dierences in quality o care.

2. Globally paid providers do not have consistently lower total medical expenses.

3. Tiered and limited network products have increased consumer engagement in value-based purchasing decisions.

The Attorney General went on to note that the wide variation in provider payments and the signicant pace o market consolidation taking place in

Massachusetts demonstrate the need or immediate action to restrict and reverse distortion o the competitive market.

While payment reorm should result in better coordination o care, a shit o payment methodology by itsel is not the panacea to controlling

costs. As the charts on the ollowing page indicate, globally-paid providers do not have lower total medical expenses and provider price increases,

regardless o payment method, have been the major actor or increases in health care costs.

The Attorney Generals 2011 report also acknowledged the benets o tiered or limited network products, but noted that these products are unlikely

to counteract, on their own, the historic price disparit ies that threaten many health care providers. The report noted that the state should imposetemporary statutory restrictions on how much prices may vary or comparable services to improve market unction until these products can correct

the market distortions.

10


13/36


Marlborough/Assabet

East Boston Neighborhood Health Ctr.

Neponset Valley Healthcare Assoc.Nashoba IPA

HCPA

BMC Management Services

Metro West - LMH

Holyoke PHO

Anna Jaques/Merrimack/Whittier

Caregroup - NE Baptist

Lowell General PHO

Signature Healthcare Brockton

Lawrence General IPA

Fallon Clinic

New England Quality Care Alliance

Henry HeywoodMorton Hospital

Caritas Christi

Baystate Health

Winchester/Highland

Health Alliance

Atrius Health

Beth Israel Deaconess

Southcoast

Mount Auburn Cambridge IPA

Valley Medical Group

Northeast Health Systems

Lahey Clinic

Central Massachusetts IPA

Acton Medical Associates

UMass Memorial Med. Ctr.

Cooley - Dickinson PHO

Sturdy Memorial Hospital

South Shore PHO

Partners

Harrington PHO

Childrens

0.800 0.900 1.000 1,100 1,200 1,300 1,400 1,500 1,600

5+

5+

5+

5+

5+

Globally Paid/Risk Sharing

FFS/Upside Only

Globally Paid Providers Do Not Have Consistently LowerTotal Medical Expenses

Variation by Payment Method in on e Major Health Plans Status AdjustedTotal Medical Expenses (2009)

Provider Groups from Low to High TME

Relative Health Status Adjusted TME

2005 2006 2007 2008 2009 2010

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Utilization

Provider Mix and Service Mix

Unit Price

Price Increases Caused the Majority of the Increases inHealth Care Costs in the Last Six Years

% of Increase in Costs Due to Ch anges in Price v. Mix v. Utilization

source: Ofce o Attorney General Martha Coakley, Presentation at the 2011 MAHP annual conerence.


14/36

What Are the Solutions for Dealing with Price Variation?The Division o Health Care Finance and Policys June 2011 report on

provider rate variation and the Attorney Generals reports on health

cost trends and cost drivers have highlighted unwarranted variation in

provider prices as the main actor driving increases in the cost o health

care. Simply put, the kinds o objective actors that would be expected to

result in higher prices especially higher quality and better outcomes

are absent in our health care system. Instead, market clout is the primary

deciding actor in many cases.

12

So, now that we know what the acts tell us, what can be done to address

market power and unwarranted price variation? Several promising

approaches to correcting this costly aw in the health care market were

put orward in 2011, including legislation led by House Majority Leader

Ronald Mariano, recommendations or statutory changes oered by

Attorney General Martha Coakley, and the recommendations o the

Special Commission on Provider Price Reorm.


15/36


What Our State Leaders Are Recommending...


16/36

14

Q:Do you think Massachusetts is making progress in controlling health care costs?

I think weve made some progress. Moving people into products with tiered or limited networks

has shown some promise because it makes consumers aware o the cost o their treatments and

gives them a role in controlling some o those costs. People want the most expensive treatment,

which they think is the best treatment, because the insurer will pick up the cost. We have to

help people understand that their treatment decisions are reected in the cost o insurance. In

the big picture, weve seen payment reorm moving doctors and hospitals away rom ee-or-

service where there is no incentive to control costs. State government can speed things up and

get them moving in the right direction aster.

Q: How would your proposed legislation address the high cost o health care in our state?

The Attorney General and others ound that the prices being paid to doctors and hospitals

were the major drivers o high health care costs in Massachusetts, and that there were wide

dierences in what insurers paid that had nothing to do with quality. The legislature tried to

tackle this problem in 2010 when we passed a small business health care cost control bill (now

Chapter 288 o the Acts o 2010), but we couldnt reach agreement, so we waited to see how

the market would react.

I didnt eel like there was nearly enough progress, so I led a proposal that would lowerreimbursement rates or hospitals charging above the 80th percentile and increase rates or

hospitals below the 20th percentile. What Im trying to do is close the gap between the haves

and the have-nots, specically community hospitals. I youre going to have a tiered system

that oers alternatives or low-cost quality care, the marketplace needs community hospitals to

provide that care. Many o them are struggling because they get lower reimbursements than

The PEER Act: An Act Promoting Equity &Representative Ronald Mariano o QuincyHouse Majority Leader

The projected total savings - $267 million...can be used between now and 2015 to provide

an impetus to keep moving the system

in the right direction.


17/36


academic medical centers or the same services and or equal quality. I wanted to do something to make sure they were treated airly and they were in a nancially sustainable

position.

Q: Does this mean you think the market cant solve the problem?

My proposal expands government involvement, but it sunsets ater 2015. This is not meant to be a long-term solution; its an attempt to x a problem thats immediate while

moving the marketplace in a direction that will allow or the sustainability o our states low-cost hospitals. There are saeguards that ensure that the savings are real and that they

are reected in reduced premiums and not as surplus for insurers. And the projected total savings $267 million, according to the Division of Health Care Finance and Policy for

a limited number o procedures can be used between now and 2015 to provide an impetus to keep moving the system in the right direction.

Q: Theres been a huge drop in premium increases this year and hospitals and health plans have been renegotiating contracts or lower rates. Arent those signs the market is

working?

To some extent it shows the market is working, but it also shows theres been a reaction to what Ive proposed. Reopening contracts and reducing payments is a much better

alternative or hospitals and insurers than my plan, so Im not surprised that theyre moving in the direction wed like them to move.

Q: What else should the health care community ocus on?

Theres a huge learning curve that has to begin with educating consumers about their role in making health care choices. We need to do a better job in establishing quality

measurements so that people understand that youre just as well o getting your gallbladder removed at a community hospital as at a teaching hospital.

Q: Do you think Massachusetts can lead the nation in managing costs as we did on health reorm?

The olks on the national level are watching us, waiting to see how we approach the cost containment issue and what kind o results we get. The Governor has made it his priority;

hes been very orceul in trying to get the legislature to take action and we will take action.

Efciency in Rates


18/36

16

Fixing a Flawed FoundationMartha CoakleyMassachusetts Attorney General

At MAHPs 2011 annual health policy conerence, Attorney General Martha Coakley outlined her

recommendations or dealing with price variations due to market dysunction. Excerpts rom her

speech ollow.

One o the most signicant ways our ofce has been engaged in cost containment is through

the two examinations we have done on the cost drivers o health care. We explained that a shit

to global payments is certainly not a panacea because it ignores the awed oundation o the

dysunctional health care market. That dysunction is a market where costs are not based on

value or quality, but on the market leverage o providers.

Id like to oer some specic solutions to address that dysunction three pillars to shore up

that oundation and reduce costs.

Greater Transparency For Consumers

Consumers are eeling the impact o rising health care prices without necessarily having more

choices or control over those costs.

When consumers go to buy a car, or instance, they can shop or the lowest price at the quality

they want. When they go to repair a car, they can even get estimates rom mechanics beore

they authorize the repair. In the same way, consumers need inormation about their health

costs so they can make decisions about the most cost-eective choices.

We are considering requirements that providers disclose the ull amount that consumers could

be liable to pay, so that patients know in advance what they are agreeing to.We still need to address this entrencheddysunction in order to create a level playing feld

or competition.


19/36


Ensuring A More Eective, Competitive Marketplace

Providers in the market are consolidating, merging, and afliating at an increased rate. With increased ocus on payment and delivery system reorm, we should anticipate evenmore consolidation in the uture. But how big is too big?

Right now, there is no reporting mechanism in place to eectively monitor provider market size or clout. There should be an administrative review process in place in which

updated inormation is provided to a regulatory agency. When a provider does reach a certain level o market clout, it should trigger a market impact review to determine

whether the providers size is having a negative impact on consumer choice, access, or healthy market unction. The agency must then have authority to restrict certain types o

provider activity to protect consumers and the market.

A Balanced Approach To Addressing Price Disparities

We still need to address this entrenched dysunction in order to create a level playing eld or competition. We believe that the market should be given a chance to correct itsel.

I those market eorts ail, then we need to set the stage or limited and temporary government intervention to bring the market into alignment and reduce costs.

First, we already have rules in place prohibiting excessive or unreasonable health plan premiums. We need to have similar rules or health care providers. The administration

should have specic authority to ensure that provider contract rates are not unreasonable neither excessive nor inadequate.

We then should give the market a chance to correct the unwarranted price variations, but set reasonable and rm markers to guide market corrections over the next ew years.

Starting in 2015, i the market has not corrected unwarranted price variation, the administration should be able to reject health plan contracts with excessive or inadequate

provider price variations.

Health plans should be prohibited rom paying provider rates that dier beyond a certain band. One example would be 20 percent above or 20 percent below the plans average

price or the previous year. Any savings would then be directed to consumers in the orm o lower premiums. We should include a sunset provision to re-evaluate this system

and determine whether this regulatory mechanism should be continued in 2018 or 2019.


20/36

18

Special Commission: Provider Price ReformJay GonzalezSecretary, Executive Oce or Administration and Finance

Co-Chair, Special Commission on Provider Price Reorm

Q: How would you summarize the work o the special commission?

My rst observation about the commission was the high level o consensus on the need or

government to play a role in helping to address unjustied variation in prices or health care

services. Everyone recognized, based on the great work done by the Attorney General and

the Division o Health Care Finance and Policy, that there is oten a lack o any real correlation

between higher cost and better quality or other outcomes that might explain the variation.

Our #1 recommendation was that we need to change the way we pay or and deliver health care

to bring down costs and get better results. We also had recommendations about improving

transparency on quality and costs; we had a recommendation, involving the Attorney Generaland others, to make sure we have a competitive marketplace; and we had recommendations

around analyzing the extent to which the new, limited-network and tiered products are playing

a meaningul role in addressing price variation.

Two recommendations were the most signicant. One was unanimously approved by all 10

members o the commission, acknowledging that there seems to be variation in prices thats

hard to explain. We recommended creating a panel that consists o a number o experts to

take an in-depth look at the data behind dierences in price and to develop recommendations

on whether and, i so, how the government could play a role when variations in prices are not

justied.

The nal recommendation, which passed by a 9-1 vote, recognized the need or a short-term step

to address unjustied price variation until we get to a place where variation can be determined

to be legitimate and weve changed how we pay or and deliver health care services.

The fnal recommendation, which passedby a 9-1 vote, recognized the need or a short-term

step to address unjustifed price variation.


21/36


Q: What role would state government play in making that determination?

This isnt government dictating prices. It would rely on insurer and provider negotiations to make sure there is a relationship between dierent prices and the quality o care. I

the parties cant reach agreement, and the provider is asking or a price in excess o the median o what other providers are charging or those same services, the insurer could

take the issue to an independent panel that would assess whether the providers request is justied based on better quality o care. I the panel determined it was, then the

provider would be entitled to that price. I the panel determined that it wasnt justied, then the provider would get either the lower o what they were paid in the prior years

contract or the median o what the plan pays other providers. Government would set up the process, but insurers and providers ultimately negotiate prices.

Q: Isnt it likely that lower-paid hospitals would ask or larger increases, and i so, will there be net savings?

The commission made it clear that implementation o these recommendations needs to result in overall cost reduction. That doesnt mean hospitals that arent getting paid a

air amount or their services wouldnt have a chance to demonstrate that theyre providing quality that justies higher prices. All providers would have that opportunity i they

couldnt reach agreement with the insurer through the regular negotiation process. But it would begin leveling the playing eld, so when we move orward and work to control

costs, were doing so against a base that is more in line with the quality o care thats being provided and what the market generally is charging or those services.

Q: Are you confdent that uture savings would be passed on to consumers?

Addressing unjustied price variation and controlling health care costs in general is all about lowering costs or the consumer, whether its government, businesses, amilies, or

individuals. Its very important to Governor Patrick that we reduce health care costs or the purchasers so they have more o their resources to invest in everything else they need

to and want to do.


22/36

20

Will Reducing Payment Variation Simply Increase Cost-Shifting?[N]egative Medicare margins do not necessarily mean that payments aretoo low but are due at least in part to the lack o private fnancial pressure

or cost containment.MedPAC, Report to the Congress, March 2011, p. 37


23/36


There is a common assumption that hospitals need to charge private payers, like

health plans, higher rates in order to oset lower rates they receive rom public

payers, such as Medicare. I that were true, high-payment hospitals, such as those

in Massachusetts that have been identied as beneting rom their market power,

might make the case that their rates are justied by low public payments. This

argument only accounts or one side o the equation, however. Hospital prot

margins are determined, not just by how much is paid or services, but by the cost

o those services. An efcient hospital can accept lower rates o payment public or

private and still maintain an adequate margin by controlling its costs.

Researchers have ound, in act, that hospitals with higher market power had highercosts, higher private-pay margins, and lower Medicare margins. This contradicts

the traditional theory o cost shiting, which rests on the assumption that hospitals

will use market power to raise rates only i they ace nancial stress as a result o

uncompensated care cost or inadequate payments rom certain payers.*

According to MedPACs March 2001 Report to Congress, some hospitals have strong

prots on non-Medicare services and investments and are under little nancial

pressure to constrain their costs. As a result, negative Medicare margins do not

necessarily mean that payments are too low but are due at least in part to the lack oprivate nancial pressure or cost containment.**

The MedPAC report went on to examine institutions under high nancial pressure

those with smaller operations, a lower case-mix index, and a larger share o patients

covered by Medicaid. The report noted that hospitals under nancial pressure

tend to have lower costs.

Similarly, the Division o Health Care Finance and Policys Price Variation in Health

Care Services report reutes assertions by some providers that higher private payer

prices are needed to compensate or losses incurred by serving Medicaid patients.

The report ound no correlation between a hospitals share o Medicaid patients and

the prices they received rom private payers, and pointed out that several hospitals

with the highest proportion o Medicaid discharges are among the lowest paid orcertain services.

Implementing measures to deal with price variation would help to enhance

competition, airness, and cost-eectiveness in the health care market, leveling

the playing eld or providers to compete on quality rather than market clout and

lowering the cost o care or employers and working amilies.

*Stensland, J., Gaumer, Z. & Miller, M. (2010). Private-Payer Profts Can Induce Negative Medicare Margins.

Health Aairs, 29:5, 1045-1051.

**Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Medicare Payment Policy,

March 2011


24/36

22

What YouNeed to

KnowAbout

MarketPower and

PaymentReform

MAHP and its member health plans are committed to working with state policymakers and others in the health care sector to reorm the payment

system. Health plans have spent many years learning how to manage care across delivery settings and across diverse populations, and that experience

will be critical to a successul transition o the health care payment and delivery systems. As measures are undertaken to develop payment reorm

legislation, it is important or policymakers to consider a ew key questions.

Will Payment Reorm reduce health care costs?

As the Attorney Generals 2011 Examination o Health Care Cost Trends and Cost Drivers noted, a shit to global payments by itsel is not the panacea

to controlling health care costs. Price dierences exist regardless o the way the provider is paid and any payment reorm legislation should include

eorts to mitigate these payment disparities. Eorts to reorm the payment system and reduce health care costs or Massachusetts employers and

working amilies will only be success by addressing the disparities brought about by the market power o certain providers.

Once we address market distortions, how do we ensure that health care remains aordable?

It is prudent to set goals or cost trend reduction that would be aggressive, yet attainable. Payment reorm should establish metrics that the entire

health care sector would be required to meet.

Will Payment Reorm lead to urther market consolidation and will greater consolidation lead to higher prices?

Changes in the delivery system, such as the ormation o ACOs in order to accelerate the adoption o alternative payment methods, have the potential

to lead to increased consolidation, increased market power, and higher health care costs. State agencies should prevent and remedy any anti-

competitive behavior, but existing antitrust enorcement is insufcient to be counted upon to catch and prevent every inappropriate accretion o

market power. Payment reorm legislation should include a process to screen or anti-competitive behavior and to determine whether such changes

will result in urther consolidation that will increase health care costs and are disadvantageous to consumers.

Should ACOs and the adoption o global payments be mandatory?

The worthy goals o accountable care can best be achieved by ensuring that the market retains needed exibility or critical innovation while dening

the core elements or ACOs. Massachusetts health plans and providers have already made signicant progress in transitioning the market to one


25/36


that rewards high value and coordinated care. Rather than a prescribed one-size-ts-all approach, achieving payment reorms goals o better

integration o care, better alignment o incentives, and lower costs is best accomplished through a voluntary, market-based approach with clearly

dened goals aimed at improving care and lowering costs.

What eect will payment reorm have on employers and consumers health care coverage?Today, nearly 50 percent of individuals under the age of 65 are covered by self-insured plans. These plans are governed by the Federal Employee

Retirement Income Security Act, which prevents the state rom imposing specic requirements on how they operate. Additionally, nearly hal o

individuals enrolled in the private market are in a PPO product, which allows individuals broad access to providers without restrictive networks.

Employers need exibility in benet design, and consumers want choice. Payment reorm legislation should ensure sufcient product options so

that employers and consumers have meaningul choice o products that meet their health care needs.

What is the role o government?

Government can accelerate the positive changes taking place in the health care market by changing its own policies and practices as an employer

and as a major public payer. Government should not be a barrier to market innovation. Instead, it should monitor, acilitate, and guide the broader

transition and ensure that the entire market is meeting established metrics. Further, the Attorney Generals ofce should continue to play a role in

ensuring that the integration o health care providers and payers does not lead to market consolidation disadvantageous to consumers.


26/36

24

Committedto CostControl

Four years ago, MAHP and its member plans outlined a comprehensive cost control agenda designed to improve the aordability and quality o

the health care system in the Commonwealth. Since that time, a number o proposals we outlined have been adopted, but we havent stopped. We

remain committed to doing everything we can to control the rising cost o care and make health care more aordable or employers and working

amilies.

MAHPs16-PointPropos

al:

1. RequiringHealthPlan

sandProvidersto

ParticipateinPublicHeari

ngsonCostDrivers

Passed

2. PublicReportingofP

reventableErrors

andProhibitBillingforAv

oidableMistakes

Passed

3. StrengtheningtheDet

erminationof

Passed

NeedProcess

4. MedicalMalpracticeR

eform Needswor

k

5. RequireElectronicTr

ansmissionofHealth

CareTransactions

Needswork

6. RepealMandatedBene

ftsThatAreNo

LongerEffective

Needswork

7. ComparativeEffective

nessStudiesof

MedicalServices

Needswork

8. PermitMandate-Lite&

Mandate-FreeProducts

Needswork

9. ExtendingMoratoriu

monMandatedBenefts

Needswork

10.HospitalReportingtoDPHonMeasu

res

toReduceDuplicativeD

iagnosticServices

Needswork

11.HospitalReporting

toDPHonMeasuresto

EliminateEmergencyRoo

mOvercrowding

ThroughImprovedMan

agement

Needswork

12.MakeGreaterUseo

fManagedMedicaid

Needswork

13.EliminateDuplicativ

eRegulatoryRequiremen

ts Needswork

14. StandardizeReportingRequireme

nts Passed

15. StreamlineAdminis

trativeProcesses

Passed

16. StandardizePhysicia

nCredentialing

Passed


27/36


Controlling Health Care Costs TheAordableHealthPlan:limits provider rates and health plan prots

to provide a low-cost, aordable option or small businesses.

LimitsonOut-of-NetworkRates:controls the amount out-o-network

providers may charge or services and prohibits balance billing

consumers.

LimitsonHospitalMargins:subjects hospitals with operating margins

above 5% to a public hearing on the measures they are taking to

reduce the cost and improve the quality o care they provide.

ProhibitiononPublic-PrivateCostShift:prohibits providers rom cost

shiting rom public programs to commercial carriers.

HospitalBillingandLicensure:requires hospitals that provide services

at a new acility to obtain a new license and national provider

identication number or that acility.

StrengtheningtheDON: establishes a statewide planning process

to ensure services are located only where they are needed when

evaluating proposed new acilities or service expansions.

MandatedBenetReform:imposes a moratorium on new mandated

benets, allows consumers and employers to choose mandate-ree

and mandate-lite products, and requires an analysis o the cost o

new mandated benets on municipalities and small businesses.

All-MedicaidManagedCareModelforMassHealth:enrolls all Medicaid

recipients in a Medicaid health plan, improving the quality and

continuity o care while signicantly reducing the Commonwealths

cost growth within Medicaid.

Quality Improvement ReducePreventableHospitalReadmissions:limits reimbursement to

hospitals that have recurring preventable readmissions.

ReduceDuplicateDiagnosticTesting:seeks to eliminate duplicating

diagnostic services perormed on a patient in one acility by another

hospital or diagnostic acility.

EmergencyRoomOvercrowding:requires all hospitals with ERs to le

annually a written operating plan to eliminate ER overcrowding.

Administrative Simplication

ACentralRepositoryforClaimsData:establishes the Division o Health

Care Finance and Policy as the sole entity o the Commonwealths

health care data and requires all state agencies utilize this

inormation or their health care data needs.

ElectronicTransmissionofHealthCareTransactions:requires health

care providers and group purchasers to exchange health care

administrative transactions in electronic ormats.

ElectronicSubmissionofClaims:encourages greater use o electronic

claims submission by limiting the states prompt payment law to

claims sent electronically.

MAHPs2011 - 2012Legislative

Agenda

MAHPs legislative priorities ocus on improving the aordability and quality o the health care system and simpliying the administration o

health care.


28/36

*The Commonwealth Fund, 2009 State Scorecard. **AHRQ, 2010 National Healthcare Quality Report.

26

Do HigherCosts Buy

BetterCare?

Despite the continued growth in spending, the Massachusetts health care system remains widely inconsistent and is not yielding the highest quality

or saety. The Commonwealth Funds 2009 State Scorecard and the Agency or Healthcare Research and Qualitys (AHRQ) 2010 National Healthcare

Quality Report ranked each state on the overall perormance o its health care system and clearly shows the areas where improvements are needed.

While the state ranked well on access, Massachusetts continues to rank towards the bottom on avoidable costs and there remains wide variation in

the quality o care.

How National

Scorecards Rank

Massachusetts

on Health Care

Quality

Measure Massachusetts Rank out of 50 States

Adult Preventive Care 7th*

Percentage o adults age 50 and older who received recommended screening and preventive care

Pneumonia Recommended Care Receive 25th**

Percentage o hospital patients with pneumonia who received recommended hospital care

Heart Failure 26th*

Percentage o heart ailure patients given written instructions at discharge

Hospital Readmissions 37th*

Medicare 30-day hospital readmissions as a percentage o admissions

End Stage Renal Disease - Adequate Dialysis 38th**

Percentage o adult hemodialysis patients with adequate dialysis

Preventable Hospital Admissions 39th*

Medicare hospital admissions or ambulatory care sensitive conditions per 100,000 benefciaries

Heart Attack ACE or ARB at Discharge 42nd**

Percentage o hospital patients with heart attack and let ventricular systolic dysunction who were prescribed ACE inhibitor or ARB at discharge


29/36

1NCQA is an independent, non-prot organization dedicated to improving health care quality. NCQA accredits and certies health plans and a wide range of other health care organizations, recognizes physicians and

physician groups in key clinical areas, and manages the Health Plan Employer Data and Information Set (HEDIS), the tool health plans use to measure and report on their performance.

2MAHP member health plans that were ranked among the top 13 commercial health plans in 2011 and have received the NCQA accreditation designation of Excellent include Fallon Community Health Plan (HMO/POS),

Harvard Pilgrim Health Care (HMO/POS & PPO), Health New England (HMO/POS), and Tufts Health Plan (HMO/POS & PPO).

3MAHP member health plans that were ranked among the top 12 Medicare plans in 2011 and have received the NCQA accreditation designation of Excellent include Fallon Community Health Plan and Tufts Health Plan.

4MAHP member health plans that were ranked among the top 7 Medicaid health plans in 2011 and have received the NCQA accreditation designation of Excellent include BMC HealthNet Plan, Fallon Community Health

Plan, Neighborhood Health Plan, and Network Health.

NCQA analyzed the information, and found:

6 of the nations top 13 commercial healthplans2 were based in Massachusetts

2 of the top 12 Medicare plans3 were basedin Massachusetts4 of the top 7 Medicaid plans4 were basedin Massachusetts


NCQA:High

Quality,High

Satisfaction

MAHP member health plans are consistently rated the best in the nation. In its annual report card ranking the clinical quality and member satisaction

o health plans across the country, the National Committee or Quality Assurance (NCQA) 1 rated members o MAHP among the top health plans in

the country or all three categories commercial, Medicare and Medicaid including the top two health plans or commercial coverage and the #1

Medicaid plan. The rankings are based on data evaluating 483 private health plans, ranking 390 of those based on clinical performance, member

satisaction, and NCQA Accreditation. Additionally, NCQA evaluated over 200 Medicaid health plans and ranked 99 o those based on the same

criteria on issues such as access to care, prevention eorts and treatment o diseases, such as diabetes and heart disease.


30/36

28

Myths & Facts About Health Plans

Myth: Utilization is Driving Premium Increases.

Fact: Utilization is not driving premium increases, the price o services is. As the Division o Health Care Finance and PolicysTrends in Health Expendituresreport

noted, rom 2007 to 2009 higher total private spending was predominately driven by price increases. Higher prices explained virtually all o the increase in

spending or inpatient, outpatient, and proessional services, as well as or prescription drugs.

Myth: Payment reorm will Fix the Cost Problem.

Fact: As the Attorney Generals reports have noted, while payment reorm should result in better coordination o care, a shit o payment methodology by itsel

is not the panacea to controlling costs. The Attorney Generals 2011 report noted that globally paid providers do not have consistently lower total medical

expenses. Addressing the market power dynamics is essential or payment reorm to lead to lower costs or employers and working amilies.

Myth: Health Plans Make Excessive Profts.

Fact: Health plan surpluses (profts) represent a tiny raction o the premium dollar. In most years, health plan surpluses account or 1 precent to 2 percent o the

premium. Over the last several years, health plan profts have decreased, with several health plans experiencing operating losses, and state law limits profts

in the small group market to no more than 1.9 percent.

Myth: Capping Health Insurers Premium Increases will Drive Down Health Care Costs.

Fact: Placing caps on insurers premiums ignores the fndings o multiple state reports, which have all pointed to provider pricing and the market clout o certain

providers as major drivers o health care costs. Without comparable restrictions on provider rates, capping premium rate increases will do nothing to address

disparities in provider pricing nor will it contain health care costs.

Myth: State Mandated Benefts Apply to All Coverage.

Fact: State mandated benefts only apply to coverage oered through a health plan licensed by the state. These policies are purchased by an individual or througha small or medium-sized business. Large companies typically sel-insure, providing employee health benefts by directly paying health care claims to

providers. They are governed by the Federal Employee Retirement Income Security Act and are not subject to state mandated benefts. Small and medium-

sized employers typically do not have the ability to sel-insure and must include benefts they and their employees may not need or want.


31/36


Myth: Providers Who Only Take a Little Bit o Insurance Risk Dont Need an Insurance License.

Fact: In the transition to alternative payment methods and ACOs, there should be appropriate oversight o providers, including licensure or providers

that take insurance risk. Any provider or ACO that takes on insurance risk should be held to the standards as a licensed health plan. This is

necessary to ensure that there is fnancial accountability o providers, including that they meet state solvency standards and can manage

insurance risk, and that they abide by consumer protections.

Myth: Administrative Costs are Driving Premium Increases.

Fact: The major driver or premium increases is due to increases in the rates providers charge or medical services. Roughly 90 cents o every premium

dollar is spent on medical care, including hospital stays, diagnostic tests, doctor visits, and prescription drugs. Further, Chapter 288 restricted

the rate o increase or administrative expenses to no more than the New England medical CPI, so administrative spending is not the cause or

rising premiums.

Myth: Hospitals are only Receiving 2 Precent 3 Precent Rate Increases while Premiums are Increasing 6 Percent 8 Percent.

Fact: The prices paid to providers are the leading driver o premium increases. While some hospitals have negotiated lower rate increases o between

2 percent 3 percent, some o these institutions may be starting rom a higher base and will thereore continue to receive substantially higher

reimbursement rates than other hospitals.

Myth: Up to 30 Percent o Premiums is Being Spent on Administrative Costs.

Fact: Only about 10 percent o the premium is allocated toward health plan administrative costs, which include services that beneft consumers and

support providers, such as care management programs or individuals with chronic conditions, claims administration, disease management,

and health inormation technology, as well as reporting requirements mandated by state and ederal agencies.

Myth: Health Plan Reserves Should be Transerred to Providers to Fund the Systems They will Need or Payment Reorm.

Fact: Health plan reserves serve an important unction: they act as the fnancial saety net or employers and consumers and ensure that providers

get paid in the event an unexpected or catastrophic event occurs, such as a pandemic or other natural or man-made disaster. There is no

evidence to indicate that health plans have excessive reserves or that the transer o reserves would do anything to get lower health care

costs.


32/36

MAHPBoard ofDirectors

30

James Roosevelt Jr.(Chair)

President and CEO

Tuts Health Plan

Patrick Hughes(Vice Chair)

President and CEO

Fallon Community Health Plan

Deborah C. Enos

(Treasurer)President and CEO


Christina Severin(Secretary)

President

Network Health

Lora M. Pellegrini, Esq.(Assistant Secretary)

President and CEO

Massachusetts Association o Health Plans

John BaackesPresident and CEOSenior Whole Health

Richard BurkePresident, Senior Care Services and

Government Programs

Chie Compliance Ofcer

Fallon Community Health Plan

Susan CoakleyChie Legal Ofcer

BMC HealthNet Plan

Lois CornellSenior Vice President, Human Resources

and General Counsel

Tuts Health Plan

Stephen FarrellPresident and CEO

UnitedHealthcare o New England

Pam GossmanPresident

Senior Whole Health

William GrahamVice President or Policy and

Government Aairs


James M. Kessler, Esq.Vice President and General Counsel

Health New England

Michael KirbyPlan President and CEO

CeltiCare Health Plan o Massachusetts

Michele M. LeporePlan President

UnitedHealthcare Community Plan

Massachusetts Plan

Jason MartiesianVice President o Government Aairs

UnitedHealthcare o New EnglandEllen McCahonChie Operating Ofcer

CeltiCare Health Plan o Massachusetts

Peggy MeehanDirector o Finance

MIT Health Plans

Paul Mendis, M.D.Chie Medical Ofcer


Tim MeyerVice President, State Aairs -

Northeast Region

Aetna

Scott OGormanPresident

BMC HealthNet Plan

Nancy RobertsAssistant ActuaryUniCare

David S. Rosenthal, M.D.Director, Health Services

Harvard University Health Services

Eric SchultzPresident and CEO


Richard SeganVice President, External Clients and State

Account Management

UnitedHealthcare Community Plan

Massachusetts Plan

Robert Sorrenti, M.D.

Chie Medical OfcerUniCare

Peter StraleyPresident and CEO

Health New England

Martha TemplePresident, New England Market

Aetna

Lucy WalshManager

MIT Health Plans

Pano Yeracaris, M.D.Vice President and Chie Medical Ofcer

Network Health

MAHPStaff

Lora M. Pellegrini, Esq.

President and CEO

Eric Linzer, Esq.Senior Vice President

Public Aairs and Operations

Sarah Gordon, Esq.Vice President o Legal Aairs

Jason A. Aluia

Government Relations Manager

Elizabeth Fluet, Esq.Public Policy Analyst

Kara CotichPublic Policy Analyst

Suzanne Lebel

Ofce Program Manager

Brian M. Quigley, Esq.Legislative Counsel

Ann Chamberlin LaBelleSta Writer


33/36

AboutMAHP


MAHP member health plans act as a touch point, connecting consumers, employers, providers and policymakers to improve health outcomes and

keep coverage aordable. MAHP member health plans provide coverage to 2.6 million Massachusetts residents, including Medicare beneciaries,

MassHealth (Medicaid) and Commonwealth Care members, participants in employer-sponsored plans, and individuals purchasing non-group

coverage. Nationally, MAHP member health plans consistently distinguish themselves through the results produced by innovative programs designed

to improve quality and lower costs within the health care system. Although the approach each plan takes may vary, the goal among all is the same:

to ocus on the patient while promoting measures that improve the quality o care and keep health care afordable.

MAHPAfliates

In addition to its health plan members, MAHP also is supported by numerous other organizations involved with the health care system in Massachusetts.

Afliates include:

Platinum Delta Dental

Gold Abbott Laboratories Amgen Astellas Pharmaceuticals

AstraZeneca Genentech Genomic Health

GlaxoSmithKline

Lilly

MA Behavioral Health Partnership

Merck Millennium Pharmaceuticals

Pzer Ropes & Gray

Silver Allergan

Amylin Pharmaceuticals Beacon Health Strategies

Boehringer IngelheimPharmaceuticals

Bristol-Myers Squibb Ethicon Endo Surgery

Forest Laboratories Health Dialog Johnson & Johnson

MedAssurant Novartis Pharmaceuticals Optum Health

Ortho McNeill Janssen Sano Aventis

SeniorLink SouthData UHealth Solutions

Vertex

MAHPMember

HealthPlans


34/36

Philosophyof Care

32

We represent a philosophy o health care that emphasizes active

partnerships between patients and their physicians.

We believe that comprehensive health care is best provided by networks

o health care proessionals who are willing to be held accountable or

the quality o their services and the satisaction o their patients.

We are committed to high standards o quality and proessional ethics,

and to the principle that patients come rst.

We believe that patients should have the right care, at the right time,

in the right setting. This includes comprehensive care or acute and

chronic illnesses, as well as preventive care in the hospital, at the

doctors ofce and at home.

We believe that all health care proessionals should be held accountable

or the quality o the services they provide and or the satisaction o

their patients.

We believe that patients should have a choice within their health plans

o physicians who meet high standards o proessional training and

experience and that inormed choice, and the reedom to change

physicians, are essential to building active partnerships between

patients and doctors.

We believe that health care decisions should be the shared

responsibility o patients, their amilies and health care proessionals,

and we encourage physicians to share inormation with patients on

their health status, medical conditions and treatment options.

We believe that consumers have a right to inormation about health

plans and how they work.

We believe that working with people to keep them healthy is asimportant as making them well. We value prevention as a key

component o comprehensive care reducing the risks o illness and

helping to treat small problems beore they can become more severe.

We believe that access to aordable, comprehensive care gives

consumers the value they expect and contributes to the peace o mind

that is essential to good health.


35/36

Design: Tautenhan Design Group Editorial: Eric Linzer and Alan G. Raymond



36/36

40 Court Street, Boston, Massachusetts 02108 617-338-2244 www.mahp.com twitter.com/MAHPhealth


mahp annual 2011 annual report

Documents