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Massachusetts Leads Again in Health Care with First-in-Nation Payment Reform Bill

August 1, 2012

BOSTON – Yesterday, the Legislature completed work on a framework of nation-leading health care reforms, sending to the Governor a comprehensive, landmark cost-control bill estimated to save the Commonwealth $200 billion over the next 15 years while improving the quality of care, increasing patient access, and strengthening the transparency and accountability of the state’s entire health care system.

The bill comes at a crucial time as health spending is projected to double from 2009 to 2020, outpacing both inflation and growth in the overall economy, while Massachusetts residents and businesses continue to struggle with increasing premiums and other health care costs.

“Addressing the rising costs of health care is essential to the long-term economic growth of the Commonwealth,” said Senator Karen Spilka. “I am proud that we have produced a bill that builds on our past reforms and works to reduce the cost of health care while safeguarding access to high quality care for all residents.”The legislation, for the first time in the nation, establishes a statewide health care cost growth benchmark for the health care industry equal to the potential growth of the state’s gross state product (GSP) from years 2013 to 2017, then dropping it 0.5 percent below potential GSP from 2018 to 2022 and back to potential GSP for 2023 and beyond.

Meeting this goal will result in an estimated $200 billion in savings in the health care industry over the next 15 years which will be passed onto businesses, municipalities and residents of the Commonwealth who are struggling with increasing premiums and other health care costs.

Under the bill, the state’s existing Health Care Quality and Cost Council is reorganized into the Health Policy Commission which will establish and review the health care cost growth benchmarks and oversee the development and implementation of alternative payment methodologies. The Commission will also conduct annual cost trend hearings and administer funding sources that will help distressed hospitals, promote wellness programs and complete implementation of a statewide electronic medical records system.

The Commission will be governed by an 11-member board, including the Secretary of Administration and Finance and the Secretary of Health and Human Services, and three appointments each by the Governor, the Attorney General and the State Auditor.

The Commission’s cost trend hearings will be supported by a new independent state agency, the Center for Health Information and Analysis, reconstituted from the existing Division of Health Care Finance and Policy and serving as the Commonwealth’s designated health care data collection and reporting agency. The Center will be governed by an executive director appointed by a majority vote of the Governor, Attorney General and State Auditor, and it will provide critical, independent analysis of the how the state’s policies are affecting cost trends.      

The bill requires the state’s Medicaid program, the state’s employee health care program and all other state-funded health care programs to transition to new health care payment methodologies. These payment models incentivize the delivery of high-quality, coordinated, efficient and effective health care over quantity of services to reduce waste, fraud and abuse.

To support the development of “best practices” for care delivery and payment reform models, the legislation establishes a certification process for accountable care organizations (or “ACOs”), which are health care provider systems dedicated to cost growth reduction, quality improvement and patient protection through coordinated care. These “Model ACOs” would receive a contracting preference in state health programs over other ACOs.

The bill addresses the market power of certain providers by authorizing the Commission to review and determine if a provider’s market concentration exceeds certain parameters and to decide if a provider is engaged in unfair market practices or methods of competition. Any such findings or other violations of law would be referred to the Attorney General for further action.

To reduce the costs of unnecessary litigation and malpractice claims, the bill creates a 182-day cooling off period while both sides try to negotiate a settlement, and it allows for providers to offer an apology to the patient.

The bill makes the following enhancements in the transparency and accountability of the health care marketplace:

  • Requires all health care provider systems to register with the state and report regularly on financial performance, market share, cost trends and quality measures;
  • Charges the Attorney General to monitor trends in the health care market including consolidation in the provider market in order to protect patient access and quality;
  • Establishes a Cost and Market Impact Review to examine changes in the health care marketplace and their impact on cost, quality and market competition;
  • Develops a process to track price variation among different health care providers over time and establishes a Special Commission to determine and quantify the acceptable and unacceptable factors contributing to price variation among providers; and
  • Establishes new tools to help consumers make health care purchasing decisions based on comparative cost and quality.

The legislation also increases access to essential care and promotes administrative efficiencies by doing the following:

  • Expands the role of physician assistants and nurse practitioners to act as primary care providers in order to expand access to cost-effective care;
  • Expands an existing workforce loan forgiveness program to include behavior and mental health providers;
  • Requires the development of standard prior-authorization forms, which would be available electronically so that providers would use only one form for all payers; and
  • Streamlines data reporting requirements by designating a single agency as the secure data repository for all health care information reported to and collected by the state.

Since passing the omnibus Health Care Reform Act of 2006, used as the model for national health care reform, the Legislature has passed reforms in 2008 enhancing primary care access and e-health initiatives and in 2010 helping individuals and small businesses reduce the costs of health insurance plans.




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