New law has Mass. providers ‘ag­gres­sively fo­cused’ on spend­ing

Modern Healthcare - - THE WEEK - Jaimy Lee

The Mas­sachusetts Hospi­tal As­so­ci­a­tion de­scribed a new state law that ties health­care-spend­ing growth to the state gross prod­uct as daunt­ing, and some providers are echo­ing the sen­ti­ment. Ex­ec­u­tives at Mas­sachusetts Gen­eral Hospi­tal and Bos­ton Chil­dren’s Hospi­tal say meet­ing the spend­ing tar­gets of the new law—signed last week by Gov. De­val Patrick—will be dif­fi­cult, es­pe­cially in a state in which Med­i­caid re­im­burse­ment rates have de­clined since 2009.

“If you look at why the dis­tressed hos­pi­tals are dis­tressed, it’s largely be­cause the state hasn’t made good on its prom­ise to pay hos­pi­tals ad­e­quately un­der the Med­i­caid pro­gram,” said Dr. Peter Slavin, pres­i­dent of 907-bed Mass Gen­eral. “It’s im­por­tant to look at the root cause of the dis­tress and ad­dress that.”

Still, Mass Gen­eral and 396-bed Bos­ton Chil­dren’s are mov­ing for­ward with pro­grams aimed at pro­duc­ing cost sav­ings.

Mass Gen­eral, one of the CMS’ Pi­o­neer ac­count­able care or­ga­ni­za­tions, es­tab­lished global pay­ments con­tracts with its two largest in­sur­ers this year. Bos­ton Chil­dren’s aims for a 3% oper­at­ing mar­gin each year. That’s less than half of the ag­gre­gate to­tal profit mar­gin posted by hos­pi­tals na­tion­ally, ac­cord­ing to the lat­est avail­able fig­ures from the Amer­i­can Hospi­tal As­so­ci­a­tion.

“We are ag­gres­sively fo­cused on try­ing to con­trol costs while si­mul­ta­ne­ously try­ing not to harm pa­tient care,” said Joshua Green­berg, vice pres­i­dent of gov­ern­ment re­la­tions at Bos­ton Chil­dren’s.

At the cen­ter of the wide-reach­ing health­care cost-con­tain­ment law is a pro­vi­sion that will re­quire health­care-cost growth to align with the gross state prod­uct from 2013 to 2017. Then, health­care spend­ing growth must be no more than 0.5% less than the growth in gross state prod­uct from 2018 to 2022.

Health­care spend­ing is grow­ing about 6% to 7% each year in Mas­sachusetts, while the pro­jected gross state prod­uct for 2013 is 3.6%.

Along with in­sur­ers, sev­eral providers, such as Mass Gen­eral and Bos­ton Chil­dren’s, are likely to face a one-time sur­charge as­sess­ment that will pool $135 mil­lion to sup­port dis­tressed hos­pi­tals within the state.

In a re­search note pub­lished Aug. 6, Moody’s In­vestors Ser­vice said the law is credit-neg­a­tive for the state’s hos­pi­tals and will limit rev­enue growth and re­duce oper­at­ing flex­i­bil­ity.

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