Section Review

An Overview of the Final Report of the Massachusetts Health Care Task Force

I. Introduction On May 1, 2000, then-Gov. Paul Cellucci, former Lt. Gov. and current Acting Gov. Jane Swift, Senate President Thomas F. Birmingham, House Speaker Thomas M. Finneran, Senate Minority Leader Brian Lees and House Minority Leader Francis Marini convened a statewide Health Care Task Force to conduct a comprehensive analysis of the health-care industry in Massachusetts. This task force examined all areas of health care in the commonwealth, including operation, administration, access, regulation, financing, revenues, cost, liabilities, reserves, financial viability, delivery, outcome and quality. The task force was comprised of four analytical working groups: administrative simplification, finance, quality, and access. Each working group presented its findings, analysis of policy options and where possible, recommendations to the task force, and in late January of this year, the task force released its 81-page final report outlining its findings and recommended interventions to preserve access to health care in Massachusetts. While some have questioned the substance of the task force's report, all agree that the process has succeeded in bringing public and private leaders in health care closer together in hopes of continued thoughtful and informed policy development. II. Massachusetts' health-care system A. Health-care costs The rapid rate of increase in aggregate health-care costs in recent years has created a significant problem for the continued viability of the Massachusetts health-care system. The high health-care costs in Massachusetts are in part the result of high utilization of teaching hospitals, a concentration of specialty physicians and historically lower hospital operating margins. While aggregate costs are increasingly rapidly, additional revenue for health-care expenditures is scarce in both the public and private sectors. Despite the fact that Massachusetts health care expenditures per capita are 30 percent higher than the national average and higher than those of any other state1, prominent participants in the health-care system, including the state's largest HMOs and hospitals, are in financial trouble. Accordingly, if costs continue to increase, employers, consumers and the state will be unable to pay for health-care coverage under existing arrangements. If this occurs, more people are likely to lose coverage, and access to health care could be jeopardized. In addition, if lower-cost and more efficient providers close, then arguably, base costs of the health-care system will be even higher. This problem occurs in the context of a health care system that is already the most expensive in the world. B. Patient access When the Access Working Group of the task force was first convened in November 2000, it could cite dramatic reductions in the number of uninsured residents in the commonwealth between 1998 and 2000. Those reductions were due primarily to the expansion of the MassHealth (Medicaid) program and to the strong economy and low unemployment rates prevalent at the time. Currently, however, the events of Sept. 11, the economic recession and climbing unemployment rates have caused a considerable increase in the percentage of residents without insurance. Given that a person's health-insurance status affects the likelihood that he or she will seek needed health-care services, it is critical that affordable health-care coverage be made available. In its report to the task force, the Access Working Group recommended an incremental approach to expanding access to insurance and described a number of strategies that would further that approach, including: • expanding access to MassHealth by income level or category; • combining and streamlining state programs to reduce administrative complexity and confusion; • alternative insurance products such as high-deductible policies with subsidies to help low-income enrollees; • tax credits or subsidies to employers or employees for the purchase of commercial insurance; • mandates on employers to offer insurance; • insurance regulation reform, such as revised rate banding requirements; and • indirect mandates by the commonwealth requiring all its contractors to provide health insurance to their employees. The Access Working Group suggested pursuing several strategies at the same time, as no single approach would likely succeed in making adequate and affordable insurance available to all residents. C. Quality Largely as the result of our access to some of the finest teaching hospitals in the country, Massachusetts residents have become accustomed to high-quality, professional health care. In health care, quality is defined through patient satisfaction, information and emotional support, amenities and convenience, decision-making efficiency and outcomes.2 While some believe there is no direct correlation between health-care spending and quality, most agree that the efficient allocation of available resources is more likely to have a positive impact on quality than increased spending alone. Also critical in measuring health-care quality is the ability to recognize the prevalence of medical errors and the adoption of safety practices within each health-care provider. Given these parameters, the Quality Working Group of the task force made several important recommendations. First, state policies and practices should be aligned to foster quality improvement and error reduction. For instance, it is believed that incentive payment programs could motivate health-care providers to develop improvements in patient-centered quality. Second, data collection and medical error reporting requirements should be expanded and improved for all health-care providers. The collection and dissemination of such information will not only enable providers to carefully monitor their own internal practices but also will serve as important information for regulators in developing health-care policy. Third, providers, payers and regulators should work together to develop evidence-based practice guidelines and to identify and work to eliminate barriers and resistance to the implementation of those guidelines. Finally, the Quality Working Group recommended increased consumer education concerning quality of care. D. Administrative simplification The Administrative Simplification Working Group of the task force was created to develop strategies and suggestions for reducing administrative cost and complexity in the Massachusetts health-care system. A primary method for reducing such costs includes the encouragement of electronic communications in exchangeable formats among providers, payers and employers, and a movement towards broadly available Internet-based communications systems. Other methods suggested by the Administrative Simplification Working Group included the development of industry performance standards for administrative matters, including instant adjudication of clean claims upon receipt by payers; availability of written explanations of benefits at the point of service; and electronic funds transfer options for payment of claims and co-payments. The Administrative Simplification Working Group also expressed its concern on the need to assist providers in complying with the administrative simplification standards imposed under HIPAA and ways to help providers, payers, employers and public agencies use HIPAA compliance efforts to achieve broader administrative simplification gains. In furtherance of this objective, the Administrative Simplification Working Group recommended that health-care-system participants periodically submit information showing their progress in support of HIPAA compliance and the development of a mechanism to share this information widely within the system. III. Health care sector financial conditions and options for intervention In addition to making specific observations on the health-care industry as a whole, the task force was charged with the responsibility of carefully analyzing the performance of nine sectors of the health-care system. These sectors included hospitals, nursing homes, community-based providers, physicians, workforce issues, prescription drugs, HMOs/insurers/payers, employers and consumers. While each sector has unique circumstances, the task force final report was able to identify several common themes. Most importantly, the task force further confirmed the commonly held belief that Massachusetts health-care providers, and the system as a whole, are in serious trouble. A. Hospitals As has been reported by many in the industry, the financial condition of Massachusetts' hospitals, whose operating margins had been lower than national averages for years, has deteriorated to among the worst in the country. This continued financial difficulty is largely the result of three factors: (1) revenue shifts and low payment rates, (2) patient volume shifts and (3) cost increases. Revenue shifts and low payment rates continue to plague hospitals nationwide primarily as a result of Medicare payment cuts established pursuant to the Balanced Budget Act of 1997. Although there has been some money put back into the system as a result of "give-back" legislation over the past two years, many hospitals continue to suffer. In addition, increased volumes of low paying managed care lines of business and Medicaid participants have made the suffering all the worse. Another cause of hospital financial distress has been patient volume shifts from lower-cost to higher-cost settings. For instance, many patients who traditionally may have been serviced in low-cost outpatient settings are now more frequently being seen in hospital emergency departments and other high-cost centers. The shift of patient volume away from community hospitals in recent years also has played an important role in a greater concentration of services being provided in high-cost settings. At the same time, hospitals have experienced very rapid increases in costs that are not recognized by most public or private payment systems. In particular, labor and supply costs have risen rapidly in recent years while inflation adjustment factors used by Medicare and Medicaid are at best a year or more behind these growth trends. Recognizing these disturbing factors, the task force created several possible options for intervention. These strategies included increasing state funding for hospitals, forcing increases in private payments and preserving needed hospitals through rate regulation, increasing oversight of and technical assistance to hospitals through more detailed monitoring and identification of best practices, and intervention to alleviate detrimental effects of shifts in patient volume. B. Nursing homes Although conditions are serious for hospitals in Massachusetts, nursing homes are facing an even greater threat. Studies conducted by the Department of Public Health indicate that nearly 4,500 nursing home beds have been lost within the past four years. Given this fact, industry representatives predict that there will be no more available beds by Jan. 1, 2003. Faced with an ever-increasing aged population, this trend is particularly disturbing. Several factors have contributed substantially to the financial distress of the nursing-home industry. The two most prominent factors are nursing homes' reliance on Medicaid revenues, which are lower than the costs of providing care, and the inability of nursing homes to attract and retain qualified direct-care staff. While there are no hard and fast ways to immediately improve the financial condition of Massachusetts nursing homes, the task force has suggested increasing Medicaid payments, providing targeted assistance to the most distressed homes and increasing coordinated monitoring and policymaking. While each of these suggested strategies pose many political hurdles, the fact remains that immediate financial relief and support is needed in order to preserve this critically important sector of the health-care system. C. Community-based providers/physicians/HMOs Although the task force discussed the financial stability of community-based providers, physicians and HMOs separately within its final report, each sector faces similar obstacles to future viability, such as inadequate public and private rates of reimbursement, increased administrative costs as a result of rigid contract requirements and the inability to attract and retain high quality staff. Overall, the task force was able to identify four major initiatives in these sectors. First, reduce the rates of cost increases by focusing on shifting use patterns, encouraging efficiency and reducing unnecessary cost. Second, examine Medicaid payment and utilization patterns. Third, maintain access to health insurance and assess the adequacy of state oversight of HMOs' financial requirements and pricing practices. Fourth, increase state monitoring, analysis and reporting of the health-care system. As many of these proposed improvement strategies are untested, it is difficult to predict with any accuracy whether they will be successful. IV. Conclusion The task force succeeded in finding facts and identifying forces and trends affecting the Massachusetts health-care system and its financial stability. While the task force did not find or recommend comprehensive solutions to the problems of high aggregate cost, provider financial performance disparities and the appropriate structure of regulatory oversight, it has served an important educational purpose and provided a forum for communication about the heath-care system. Overall, continued analysis and communication between public and private stakeholders will be essential as conditions continue to present challenges to health-care providers. The task force final report is an important step in the commonwealth's ongoing response to these challenges. End notes 1. The Massachusetts Health Care Task Force Final Report. A copy of this report can be found at: /pages/pdf/dr_final.pdf.[back] 2. Jon Chilingerian, Chapter 8 "Evaluating Quality Outcomes Against Best Practices: A New Frontier," The Quality Imperative Measurement and Management of Quality in Healthcare, Imperial College Press, 1999.[back] 3. The Health Insurance Portability and Accountability Act of 1996. [back]
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