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Health Policy Commission Unveils 2013 Cost Trends Report and Awards $10M for Community Hospitals

Health Policy Commission Unveils 2013 Cost Trends Report and Awards $10M for Community Hospitals

January 13, 2014

HPC slide showing major components of cost trends report

The Health Policy Commission (HPC) met Wednesday, January 8, for its first meeting of 2014.  Following suit from the last full meeting, the 2013 Cost Trends Report was a main topic of discussion. Also on deck was a presentation about the award recipients for the Community Hospital Acceleration, Revitalization, and Transformation (CHART) program and an update on the registration of provider organizations.

Materials from the meeting are here, and our full report is on the back side.

Following the Executive Director report from David Seltz, Commissioner Marylou Sudders provided 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 the Committee will be meeting on Wednesday, January 22 to discuss the final regulations, with the hope that the regulations will be presented to the full Commission for a vote during the January 27 meeting.

Next up was a discussion on cost trends. Building on the information he presented at the HPC’s December meeting, Nikhil Sahni, Policy Director for Cost Trends and Special Projects, presented the findings on select cost drivers found in the HPC’s 2013 Cost Trends Report.  Sahni began his presentation with an overview of the profile of Massachusetts’ health care spending, as discussed previously, and the overall goals of the annual report (slides 1-5).  Sahni spent the remainder of the presentation outlining the HPC’s findings on this research in the context of three main topics: hospital operating expenses, wasteful spending, and high-cost patients.

Hospital Operating Expenses

Key Findings (slide 29):

  • The operating expenses that hospitals incur for inpatient care differ by thousands of dollars per discharge, even after adjusting for regional wages and complexity of care provided (slide 10)
  • Some hospitals deliver high-quality care with lower operating expenses, while many higher-expense hospitals achieve lower quality performance (slide 11)
  • Hospitals able to negotiate high commercial rates have high operating expenses and cover losses they experience on public payer business with income from their higher commercial revenue, while hospitals with more limited revenue must maintain lower operating expenses (slide 13)

The most notable discussion among the commissioners focused on cost accounting as a strategy to reduce operating expenses, including separating out expenses related to clinical vs. non-clinical staff.  As Commissioner David Cutler noted, cost accounting is particularly important because it is an issue for all hospitals, and it should be front and center in terms of moving forward.  Commissioner Carole Allen added that cost accounting will also help reduce cost on the labor side as it will empower people on the front lines to be more efficient.

Wasteful Spending

Key Findings (slide 29):

  • In 2012, an estimated $14.7 to $26.9 billion (21 to 39 percent) of health care expenditures in Massachusetts are estimated to be wasteful, reflecting both clinical and structural opportunities (slide 17)
  • There are opportunities to reduce wasteful spending in preventable hospital readmissions, unnecessary emergency department visits, health care-associated infections, early elective inductions, and unnecessary imaging for lower back pain (slides 18 and 19)

In his presentation, Sahni noted that wasteful spending is important to the cost trends analysis because wasteful spending could be eliminated without harming consumers or reducing the quality of care people receive, and that often the causes of wasteful spending also result in poorer outcomes for patients (slide 15).  However, as Sahni cautioned, one should keep in mind that the intent of the findings published in the report is not to send the impression that $15 billion could be removed from the health care system tomorrow.  The goal is to use this data to find places where the state can reduce spending over time without taking away quality care for patients.  This reduction in waste over time was a policy debate around the passage of Chapter 224 that resulted in the health care cost growth benchmark.

High Cost Patients

Key Findings (slide 29):

  • In 2010, 5% of patients accounted for nearly half of all spending among both the Medicare and commercial populations in Massachusetts (slide 21)
  • Certain characteristics differed between high-cost patients and the rest of the population (slides 22-25):
    • A number of conditions occurred more often among high-cost patients, and high-cost patients generally had more clinical conditions than the rest of the population
    • The interaction of conditions increased spending more than the individual condition contributions
    • There is modest regional variation in the concentration of high-cost patients
    • Lower-income zip codes have a higher concentration of high-cost patients
  • Persistently high-cost patients – those who remain high-cost in consecutive years – represent 29% of high-cost patients and 15 to 20% of total spending (slide 27)

In this final topic, Sahni offered that the data in this category is just the tip of the iceberg because this analysis was limited to Medicare and commercial data, with Medicaid data to be added for the summer report. Chairman Stuart Altman added that he thinks an extremely important question to answer is how do we get the delivery system to provide more efficient care for the sick population, including the need to further break down the right interventions for the right group on high cost patients. Sahni’s presentation offered examples of interventions to tackle the clinical, geographic, and demographic predictors of high-cost patients.  Some examples include preventive strategies, such as health coaching and comprehensive medication management; process and operation improvement strategies, including increasing cost-consciousness among health care providers; and care management strategies, including transitional care and health homes (slide 28).

Concluding the presentation for the 2013 Cost Trends Report, Sahni cited four areas of opportunity to capture big savings in Massachusetts (slide 30):

  1. Fostering a value-based market
  2. Promoting an efficient, high-quality health care delivery system
  3. Advancing alternative payment methods
  4. Enhancing transparency and data availability

After a brief debate among the commissioners regarding whether their vote was to “issue” or “adopt” the 2013 Cost Trends Report, the board took a roll-call vote and voted to “issue” the report with abstentions from Commissioner Marylou Sudders and Commissioner Paul Hattis due to their belief that there was inadequate time to fully read the report prior to the vote.

CHART Awards

Next was an update from the Community Health Care Investment and Consumer Involvement Committee, chaired by Commissioner Hattis. Iyah Romm, Director for System Performance and Strategic Investment, gave an in-depth presentation on the award recipients for the CHART Investment Program (slides 12-25). The HPC received 28 proposals from statewide community hospitals with a wide variety of regulatory goals and program domains (slides 14 and 15).  After a comprehensive review of the proposals on a very tight timeline, the review committee proposed nearly $10 million in phase one awards to 28 hospitals (slide 17).  Of note, 50.2% of the total amount awarded went to community hospitals in middle and western regions of the state (slide 19).

Moving forward with the CHART awardees, Romm offered that the review committee has proposed modifications to the proposals of most applicants, and that HPC anticipates substantial engagement with the CHART grantees throughout the period of the award (slides 23 and 24).  Following Romm’s presentation, the board voted unanimously to approve the Executive Director’s recommendation that the applications for the CHART Investment Program receive the award funding of nearly $10 million, with a recusal from Commissioner Hattis who was a member of the review committee.

Lastly, the Care Delivery and Payment System Reform Committee’s update focused on the proposed regulations for the Registration of Provider Organizations (RPO) Program. Iyah Romm walked through the proposed regulation in detail (slides 29-39), highlighting the policy and operational approaches of the regulation. The board unanimously voted to approve the proposed regulation on the RPO Program and to direct the Committee to conduct a public hearing and comment period.  Chairman Altman cautioned that the HPC think carefully about the information really needed through the Program so as not to add to provider costs.  A public hearing on these proposed regulations is scheduled for the following:

Wednesday, February 12, 2014
12:00 PM
Daley Conference Room
Two Boylston Street, 5th Floor, Boston

Members of the public who wish to submit comments may do so by February 28, 2014.

The next Commission meeting is scheduled for January 27, 2014.

- Ashley Blackburn