Health Policy Commission Looks Backward, Forward, Southward
The Health Policy Commission met Wednesday December 18, for its 11th full meeting. The bulk of the meeting focused on a presentation of the preliminary findings of the 2013 Cost Trends Report and an update on the Cost and Market Impact Review of the acquisition of South Shore Hospital and Harbor Medical Associates by Partners HealthCare. The slide deck is here, and our full report is on the backside:
Commissioner Carole Allen began with an update on behalf of the Care Delivery and Payment System Reform Committee. Of particular note was that the Committee is close to completing the standards for Patient Center Medical Home certification. She also shared an update on the registration of provider organizations program and the development of regulations to implement the program. Next, Commissioner Marylou Sudders gave an update on behalf of the Committee on Quality Improvement and Patient Protection. Commissioner Sudders discussed the progress made on the Office of Patient Protection proposed regulations on internal and external appeals, stating that testimony on these regulations are due by noon on December 24. She then provided an update on mandatory nurse overtime monitoring by the Department of Public Health and noted that in 2014 the Committee staff plans to address specific behavioral health issues.
Next up was an update from the Committee on Community Health Care Investment and Consumer Involvement. Iyah Romm, Director for System Performance and Strategic Investment, provided an update on the CHART (Community Hospital Acceleration Revitalization and Transformation) investment program (slides 12-20). A review committee comprised of Commission staff and Commissioner Paul Hattis are in the process of reviewing a robust set of applications for the grant program with varying focus areas and geographic variety. In response to a question from Commissioner Jean Yang about processes to ensure there isn’t overlap between CHART and some of the Commission’s other programs, Romm ensured the Commission staff is looking closely at this particular issue and will have more to present on it in future meetings. Cost Trends The next presentation was from the Committee on Cost Trends and Market Performance. First, Nikhil Sahni, Policy Director for Cost Trends and Special Projects presented preliminary findings of the Commission’s 2013 Cost Trends Report. Sahni stated that although there is no benchmark this year, this report is supposed to add to the Commission and state’s goal to make data driven health care policy and to build on the work of the Attorney General and the Center for Health Information and Analysis (CHIA). He then presented the findings from the report, specifically focusing on the overall trends in MA (the more specific “deep dive” findings will be presented at the January meeting). The key findings were as follows:
- Health care spending as a proportion of the MA economy rose over the last decade, but declined from 2009-2012 (slide 5).
- As of 2012, as a measure of personal health care expenditures relative to the size of the economy, MA spent 16.6%. The U.S. spent 15.1%.
- Per capita health care spending in MA is $9,278 and is the highest of any state. It is 36% higher than the U.S as a whole (slide 8).
- Spending differs significantly between MA and the U.S., even after adjusting for certain factors. Of the 36% difference, 16% of that is due to the fact that the MA population is older than the U.S. population and that MA offers broader insurance coverage and has higher input costs. The remaining 20% is due to other factors (slide 9).
- On this factor, Commissioner David Cutler noted that the Commonwealth should be concerned about lowering both the 16% and 20%. He reiterated that the 20% should not be seen as “fixed.”
- Overall, MA spends more than the U.S. average across all categories, but especially in hospital care and long-term care (slides 10 – 11).
- Overall health utilization is higher in MA that then U.S. average, especially for outpatient services (slide 15).
- MA also has higher prices than the U.S. average across all payers (Medicare, MassHealth and Commercial) (slide 16).
- Commercial prices were the primary driver of the increased difference from the U.S. average (slide 22).
- From 2009-2012, growth rates slowed in line with the U.S. (slide 23).
- Accounting for shifts in payer mix is important when tracking statewide growth (slide 25).
- Price has driven recent commercial expenditure growth, while utilization has driven Medicare expenditure growth (slide 27).
- MA outperforms national averages on many quality measures but often falls short of the 90th percentile benchmark (slide 33).
The main takeaway of these preliminary findings is twofold: 1) Spending in MA is the highest of any state in the U.S., crowding out spending in other areas for consumers, businesses and government. This growth is driven primarily by faster growth in prices. 2) While spending growth in MA since 2009 has slowed in line with slower national growth, sustaining lower growth rates will still require effort (slide 34). Commission Chair Stuart Altman reiterated that overall health care cost growth is due mostly to increasing prices. He also stated that given that MA is a rich state we need to focus on spending as a percentage of income. Using this criteria, Chair Altman said, health care costs in MA are not the highest but most certainly not the lowest. Partners-South Shore Transaction
Next, Karen Tseng, Policy Director for Market Performance, presented the Cost and Market Impact Review (CMIR) of the acquisition of South Shore Hospital (SSH) and Harbor Medical Associates by Partners HealthCare (slides 24-66). Tseng first gave an over view of CMIRs and the criteria used for examining provider consolidations, mergers or acquisitions (slide 24-25). She then discussed the process for the reviews (slide 26) and gave a description of the parties involved in the Partners acquisition (slide 28). When conducting CMIRs, the Commission looks at how the change will impact costs, quality and care delivery and access (slide 29). The principal findings of the CMIR were as follows:
- SSH and Partners combined have a 50% share of the commercial inpatient market in SSH’s primary service area (slide 37).
- SSH and Partners physicians refer to a high-priced mix of hospitals. Total medical expenditure (TME) will increase if new physicians adopt these referral practices (slide 53).
- Changes in market concentration far exceed thresholds above which an increase in market power for the Partners/SSH system is presumed. In other words, if this acquisition occurs there will be a significant impact on market concentration (slide 56).
- Total medical spending will increase if facility fees are added to Harbor’s clinic or ancillary visits (slide 56).
- Based on the historic levels of savings achieved, the anticipated costs from these transactions far exceed the potential savings
- The data used was conservative and based on payments from Tufts, Harvard Pilgrim Health Care, and Blue Cross Blue Shield MA. These insurers cover 80% of the commercial market.
- The necessity of a corporate acquisition is not consistently supported by the experience of the parties and other providers in alternate organizational models. In other words, the necessity of a corporate acquisition is unclear (slide 61-62, and slide 64).
Tseng then went on to describe the next steps of the CMIR. This report, she noted, is preliminary and the parties have 30 days to respond to the findings. The Commission will then issue a final report. The parties may not complete the transactions until at least 30 days following the issuance of a final report. Before the Commission voted on the issuance of this preliminary report, Commissioner Paul Hattis made a speech urging Partners to abandon plans to move forward on the proposed transaction. He stated that although the parties involved were well intentioned, this report shows that the impact on health care costs will be significant. The Commission then voted to approve and authorize the issuance of the preliminary report on the CMIR of the proposed acquisitions of South Shore Hospital and Harbor Medical Associates by Partners. Lastly, Tseng presented the Commission with information to support the continuation of the CMIR of the proposed material change to Lahey Health System and Winchester Hospital and the proposed material change to Partners HealthCare System and Hallmark Health System (slides 68-71). The Commission voted to approve both requested authorizations. The next Commission meeting is scheduled for January 8, 2014.