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Thirteen Ways to Contain Health Care Costs in Massachusetts: The Health Policy Commission Issues Its 2015 Report and Recommendations

In 2012 Massachusetts adopted the most recent in a series of comprehensive legislative approaches to health care reform, Chapter 224 of the Acts of 2012 (Chapter 224), which focused especially on addressing the drivers of health care costs in the Commonwealth.  A key element of this legislation was creation of the Health Policy Commission (HPC), to which Chapter 224 gave a broad portfolio of responsibilities, including reviewing material changes in corporate and clinical affiliations, registering provider organizations, certifying (non-CMS) accountable care organizations (ACOs) and patient-centered medical homes (PCMHs), and promoting alternative payment methods (APMs) and innovations in health care delivery.

In implementing its responsibilities, Chapter 224 charged the HPC with conducting annual health care cost growth hearings and the preparation of an annual report based on those hearings; and with monitoring a benchmark of aggregate health care cost growth in Massachusetts that ties that growth to the Commonwealth’s gross domestic product.  The HPC held its 2015 cost growth hearings in October, at which time it was reported that the aggregate health care cost growth for 2014 had been 4.8%, 1.2% above the benchmark 3.6%.   For more discussion of the hearing and its focus on the drivers for this actual v. benchmarked percentage, see our previous alert.

On January 20, 2016, the HPC issued its 2015 Cost Trends Report, based on the 2015 hearings.  The report contained 13 key recommendations ranging across a wide range of health care policy issues, all aimed at fostering initiatives to create an integrated strategy for tackling the benchmark-breaking rise in 2014 aggregate costs.  The recommendations were grouped into four distinct categories (see below) and included, but were by no means limited to, proposals for increasing use of APMs, including bringing PPO enrollees under them; addressing perceived provider price differentials underlying current use of APMs; identifying what the Commonwealth can do to tackle rapidly rising drug costs, while recognizing that federal action would ultimately be required for a successful strategy; addressing perceived problems with out-of-network billing; seeking to establish site of service equivalency; promoting greater integration of behavioral health and long-term care into payment and system reform initiatives; insurance product design; standardizing quality measures; and fostering more relevant price and quality transparency through recommendations for actions to be taken by its sister agency, the Center for Health Information and Analysis (CHIA), also created by Chapter 224.

A summary of the recommendations is set out below, organized by the four categories used by the HPC:

1. Fostering Value-Based Care  

In its introduction to the five recommendations in this category, the HPC noted both the continuing consolidation of providers in the Massachusetts market (the majority of care being provided by a relatively small number of large provider systems; hospitals and physicians becoming increasingly aligned with large systems) and changes in health insurance product design (enrollment growth in high deductible plans, from 14% in 2012 to 19% in 2014, and, while slower, in tiered plans, from 14% in 2012 to 16% in 2014), as well as the payer launch of price information tools in  2014, as required by Chapter 224. 

The five recommendations intended to foster value-based care include the following:

    • Enhance payer and employer strategies to enable consumers to make “high-value” choices:
      • Payers should promote:
      • Both employers and payers should work to enhance the use of information, especially accessible price and quality information, linked to opportunities and incentives for “high-value” choices.  
      • Employers should promote more choice of health plans, favoring especially lower cost products (e.g., high-deductible plans paired with HSAs or HRAs), with the caution, however, that all such plans must be monitored to “ensure they do not impose an undue burden and unavoidable cost-sharing burden on members, especially lower income members.”
      • limited and tiered networks, using transparent methods to tier providers; increased cost-sharing differentials between preferred and non-preferred providers; improved outreach to employers and employees to promote the benefits, and trade-offs, of such plans; and exploration of the use of limited networks associated with high-performing ACOs (ones certified by the HPC); and
      • innovative approaches to rewarding consumers for “high value” choices, through, as examples, rebates for choosing low-cost providers and offering incentives when a member selects a primary care provider (PCP) tied to the total cost of care associated with the selected PCP.
    • Enhance transparency of drug prices and spending and value in drug purchasing, through state and public and private payer initiatives (not relying on federal action):
      • Payers should:
      • In general:
        • Public and commercial payers and purchasers should consider a range of opportunities for group purchasing and joint negotiation of drug prices;
        • Payers and provider should seek to ensure more efficient utilization of drugs; and
        • Stakeholders should develop treatment protocols and guidelines for proper use of lower-cost drugs and develop consensus on the propriety of using new higher cost drugs entering the market.
        • The Legislature should:
          • require increased transparency in drug pricing and manufacturer rebates;
          • mandate the participation of pharmaceutical and medical device manufacturers in the annual HPC cost hearings; and
          • advocate for federal legislation to allow Medicare to negotiate prescription drug prices.
          • pursue “value-based” benchmarks in negotiating prices with manufacturers; and
          • consider use of risk-based contracting with manufacturers.
    • The Legislature should establish safeguards related to out-of-network billing, by:
      • Requiring providers to inform consumers, before services are rendered, whether they are in- or out-of-network; 
      • Establishing maximum allowable prices for out-of-network services to limit growth of overall spending. 
      • Requiring payers to hold members harmless from out-of-network emergency services and enhance awareness of existing “surprise billing” protections; and
    • Action should be taken to equalize payments for the same services regardless of site of service, including having:
      • The Legislature limit the types of provider locations eligible to bill as hospital outpatient services; and
      • Payers equalize payment rates of hospital outpatient departments with lower physician office rates for E&M visits and a select set of other services.
    • The Legislature should act to reduce unwarranted variations in provider prices given the perceived persistency of extensive variations in prices paid providers for the same services.  The HPC proposes to undertake additional research and analysis to identify data-driven policy options for consideration by the Legislature, policy makers and market participants in the first half of 2016.

2. Promoting an Efficient High-Quality Delivery System

The three recommendations grouped under this heading are aimed at fostering opportunities to improve quality and efficiency in care coordination and clinical integration across settings, and leveraging technology and increased adoption of APMs for aligning provider incentives around quality and efficiency in care delivery.

    • Continue the focus on reducing unnecessary utilization of the acute setting, through increasing reductions in 30-day all-cause, all-payer hospital readmissions—achieving a 20% reduction from 2013 levels by 2019; and seeking, by 2017, to have one-third of all PCPs  practicing in NQCA-recognized PCMHs and 20% of all PCPs practicing within HPC-certified PCMH-PRIME practices (medical homes with integrated mental health services);
    • Remove scope of practice restrictions for Advanced Practice Registered Nurses; and
    • Continue promoting enabling technologies to advance care delivery through health information exchange, telehealth and other digital health innovations, including addressing policy and payment barriers to increased use of telehealth.

3. Advancing Alternative Payment Methods

In introducing this set of three recommendations, the HPC noted the dissemination of APMs in Massachusetts (a statewide increase in coverage from 2012 through 2014 of 8%) and looked to additional mechanisms for further promoting that growth, including by extending the use of APMs to the PPO population.

The three recommendations in this category include the following:

    • In general, promoting further coverage of enrolled populations under APMs:
      • Commercial payers should have a goal of 80% of the Commonwealth’s HMO population and one-third of its PPO population under APMs by 2017;
      • The Group Insurance Commission, which contracts for coverage for state employees and many municipal employees, should make payment reform a core component of its next procurement process.
      • Payers should include behavioral health services and long-term supports and services in constructing global budgets; and
      • Payers should differentiate rates of growth in global budgets by establishing strict targets for “highly paid providers” or by moving away from the use of historical spending as the basis for global budgeting.  This recommendation is associated with the findings relative to the disparities in pricing referenced above, and the perception that global budgets tend to build on, but not change, perceived existing disparities;
      • Payers and providers should implement bundled payment programs for common and costly episodes of care, with payment covering care within a hospital and, within an appropriate time frame, outside of the hospital as well.  In conjunction with this recommendation the report noted that, while 62 Massachusetts provider organizations participate in CMS’ bundled payment pilots, this payment approach is not yet used by commercial payers in the Commonwealth;
    • MassHealth (the Massachusetts Medicaid program) should promote APM models to catalyze delivery system reform.  The HPC noted MassHealth’s intent to launch a range of ACO models over the next couple of years.  In supporting this initiative the HPC proposes that MassHealth consider certain design elements, as follows:
      • Integrating behavioral health services and long-term supports and services;
      • Aligning where appropriate with commercial payers and CMS on technical elements of payment models, such as quality measures, risk adjustment and attribution logic.
      • Increasing member engagement, including incentives for members to maintain care in an ACO; and 
      • Moving toward a payment model that includes “absolute performance benchmarks,” rather than historical-based spending;
      • Incentivizing development of cross-continuum partnerships especially with high-performing community-based providers;
    • Payers and providers should seek alignment of the technical aspects of their global budget arrangements, including quality measures, risk adjustment and reporting to providers.

4. Enhancing transparency and data availability.

In recognition that data “are essential to all aspects of system transformation,” the HPC made the following two recommendations to advance greater transparency and data availability:

    • The Commonwealth should develop a coordinated strategy for establishing relevant and credible quality measures across public agencies and the commercial market.  This would include developing measures for behavioral health and long-term supports and services and the designation of limited sets of high priority measures for specific uses, such as global budgets and limited and tiered network product design.
    • CHIA should:
      • continue to improve data resources and develop key spending measures in areas such as behavioral health, drug rebates, and provider to provider discount arrangements;
      • refine its relative price methodology to allow for cross-payer comparisons in order to facilitate comparisons of payer performance in the market.
      • develop and implement, in conjunction with the HPC and stakeholders, measures of spending growth of hospitals and specialty physicians; and
      • prioritize development of a total medical expenditure measure for the PPO population;
      • enhance the value of the Massachusetts All Claims Data Base, including, among other approaches: to assist MassHealth to calculate enrollment, spending and other measures of its population; to attribute patients to providers; and to seek to make data available in a more timely fashion;



As noted above, the HPC takes a comprehensive approach to its responsibilities, seeing that health care cost containment in Massachusetts, as elsewhere, requires the synchronization of many different elements, and that the mix of these elements, and the priority to be given them, evolves over time.  The focus on APMs for PPOs, the Commonwealth’s role in addressing drug pricing, concerns about out-of-network billing (identified by the HPC Chair as perhaps the one recommendation that should have a flashing red light attached to it), site of service equalization, addressing price disparities, and the importance of looking at total health care costs, including behavioral health and long-term care, must be included in any efforts to address payment and system delivery reform.  We look forward to seeing what actions are taken on the HPC’s comprehensive recommendations.  The HPC will continue its cost containment efforts with the 2016 cost hearings and the 2016 cost trends report.  

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Stephen M. Weiner

Member Emeritus