Health payment overhaul shelved

Consensus that system is broken, but rifts delay fix

By Liz Kowalczyk
Globe Staff / July 4, 2010

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The state’s ambitious, first-in-the-nation plan to transform how hospitals and doctors are paid is on hold, at least for this year, largely because of disagreements among key officials, legislators, and providers over how best to control health care spending.

Senate President Therese Murray, a leading advocate of payment changes, said in an interview that she will not file legislation to change the system this year, as originally planned, because of the logistical and political complexity of changing a system that has been in place for decades. The current payment system — in which doctors and hospitals are typically paid a negotiated fee for every procedure and visit — is also profitable for many providers.

Murray said discussions about the plan to improve coordination of care and to reduce costs by essentially putting many providers on a budget have been “very frustrating.’’

“It’s like going around in circles,’’ she said. “Nobody is in agreement on anything.’’

Long, intense deliberation on casinos and the state budget have added to the delay, eating up legislators’ time and energy.

Health insurance law fails to cut emergency room use. B1

A state commission recommended a year ago that Massachusetts adopt a new cost-conscious payment system and do so quickly, but a large number of issues remain unresolved. Consumer groups and some lawmakers, for example, want the legislation to guarantee patients freedom to choose doctors and hospitals, while other lawmakers and state officials believe that some limits are necessary for the plan to really save money and improve care.

Senate leaders and the Patrick administration disagree about how much authority a board that would oversee the new system should have over the actual fees paid to providers.

And hospitals have been all over the map; some want the state to provide additional money, perhaps through higher Medicaid payments, for the technology that would allow them to help better coordinate patient care. But the state budget is already extremely tight.

Murray said, however, that Senate leaders, administration officials, and many providers agree broadly that the current payment system is broken, driving up health insurance costs for all, and that it must change. She said she hopes all parties will be able to reach a consensus so she can file legislation in 2011. “Everyone has to come together and work it out,’’ she said.

The Patrick administration, which is in the midst of a reelection battle and became focused this spring on immediate ways to control costs, such as trying to force insurers to cap premium increases, declined to comment on the status of payment changes.

Many hope Massachusetts becomes the first state to adopt a broad new payment system, much as it became a national model as the first state to make health insurance coverage mandatory for nearly all residents. In making its recommendations last summer, the state commission stressed that failing to control medical spending — which is growing by more than 8 percent annually in Massachusetts, driven largely by the high costs and heavy use of hospitals — could threaten the state’s health insurance law and bankrupt employers and patients.

The current fee-for-service system is widely seen as contributing to the high cost of care because it encourages providers to perform tests and procedures that may not be necessary; the more they do, the more they are paid. Instead, the commission recommended that private insurers and the state and federal Medicaid program pay providers a set payment for each patient that covers all that person’s care for a year, a system known as global payments.

Murray said, however, that global payments may not be right for all providers and that some that provide unique services, such as Dana-Farber Cancer Institute, may need to be paid in a more traditional way.

Health care “is a huge portion of our economy and workforce, and we don’t want to negatively affect our economy,’’ she said.

State Senator Richard T. Moore, Democrat of Uxbridge, a commission member and cochairman of the Legislature’s Joint Committee on Health Care Financing, said that transforming the payment system has turned out to be far more difficult than expanding insurance coverage, because “potentially there will be some winners and losers.’’ In other words, he said, one person’s waste is another’s profit.

Nancy Kane, a commission member and a professor at the Harvard School of Public Health, said: “There are parties that obviously prefer the current payment system to go on as long as possible, because they make money off of it. And they use that money to create political influence.’’

Moore said that for the past several months, the Patrick administration and Senate leaders have been sending drafts of legislation back and forth, but that “we’re not in full agreement on specifics.’’

He does not want to return to having the state set provider fees, Moore said. “Some drafts have given the [oversight] board more authority to set rates than I am comfortable with.’’

Unlike what it did with the health insurance expansion, the House of Representatives has not taken a leadership role on long-term cost control. “We need the House to be part of the discussion,’’ Murray said.

Speaker Robert A. DeLeo “shares a commitment to tackling health care costs, but doesn’t want to see any legislation that would limit patient choice,’’ said his spokesman, Seth Gitell.

In May, the Senate passed a bill sponsored by Murray to help small businesses cope with rising health care costs in the short-term, including having wealthier hospitals make a one-time $100 million contribution to offset insurance premium increases. DeLeo said last week that the House will probably propose its own approach to the problem before the legislative session ends July 31.

While long-term solutions have been elusive, one emerging dynamic could reenergize the discussion: After urging last year that the state proceed cautiously, hospitals may be coming around, now that they see that political pressure to control costs is not going away anytime soon. The Massachusetts Hospital Association plans to release a detailed plan this month for establishing a board to oversee the transition to a new payment system.

“We’re ready to get this thing going,’’ said Lynn Nicholas, president of the association. “We don’t want anyone to use the excuse that this isn’t going forward because the hospitals don’t want it to.’’

Liz Kowalczyk can be reached at

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