News & Events

Pay for care a new way, state is urged (MC)

A state commission recommended yesterday that Massachusetts dramatically change how doctors and hospitals are paid, essentially putting providers on a budget as a way to control exploding healthcare costs and improve the quality of care.

The 10-member commission, which includes key legislators and members of Governor Deval Patrick’s administration, voted unanimously to largely scrap the current system, in which insurers typically pay doctors and hospitals a negotiated fee for each individual procedure or visit. That arrangement is widely seen as leading tounneeded tests and procedures.

Instead, the group wants private insurers and the state and federal Medicaid program to pay providers a set payment for each patient that covers all that person’s care for an entire year and to make the radical shift within five years. Providers would have to work within a predetermined budget, forcing them to better coordinate patients’ care, which could improve quality and reduce costs.

Massachusetts would be the first state to adopt such a broad “global payment’’ system, and commission members are acutely aware that Congress and the Obama administration are watching how the state moves forward as the federal government overhauls healthcare nationally.

“This is an historic moment, an extraordinary moment in healthcare in Massachusetts,’’ Andrew Dreyfus, senior vice president of Blue Cross and Blue Shield of Massachusetts and a commission member, said after the panel’s vote. “I urge the Legislature and the administration to take this up quickly.’’

Commission members stressed that failing to control medical spending – which is growing by more than 8 percent annually in Massachusetts, driven largely by the high price and heavy use of hospitals – could threaten the state’s model health insurance law and bankrupt employers and patients.

Still, while commission members who represent doctors and hospitals endorsed the change, they have serious reservations. They are afraid that a new payment system could create serious financial problems for providers if the yearly fees are too low and if they are not adjusted upward for patients who are very sick or at risk of serious disease and require more care. Low payments were one reason for the downfall of a similar payment system (called capitation) tried in the 1990s, providers said.

Providers want to know that if they have a lot of very sick patients, “they won’t be penalized for that,’’ said Dr. Alice Coombs, an anesthesiologist and commission member.

Lynn Nicholas, president of the Massachusetts Hospital Association and a commission member, said payments must also be adjusted for socioeconomic factors, because “someone who lives in Brockton and doesn’t speak English’’ might require more intense care than “someone who lives in Newton or Wellesley with a lot of other resources around them.’’

Dr. Mario Motta,president of the Massachusetts Medical Society, said that very few doctors could succeed under global payments today and that they will need financial and technical help to establish new legal structures and electronic medical records.Continued…

“A big transition like this has never been done on such a broad scale, so it must be done very carefully, deliberately, and thoughtfully,’’ Motta said.

The plan would require significant restructuring of the healthcare system, and some of its components would need legislative approval. Primary-care doctors, specialists, hospitals, and home healthcare agencies would have to form so-called accountable care organizations. Patients would choose a primary care doctor to coordinate their care, mostly within the organization. Insurers would pay the accountable care organization a flat yearly per-patient fee to be divided among the providers.

Consumer advocates said patients are going to have to be educated about the new system. Patients could find it harder to get procedures they want but are of questionable benefit if doctors are operating within a budget. And they might find it more difficult to get care wherever they want, if primary doctors push to keep patients within their accountable care organization.

Implementing this “is going to be a very long haul,’’ said state Representative Harriett Stanley, Democrat of West Newbury, a commission member, and cochairwoman of the Joint Committee on Health Care Financing.

While the commission outlined a broad vision, it left many questions unanswered, such as the requirements for forming an accountable care organization and how the yearly payments will be set and how they will be divided among the hospitals and doctors, questions providers want answered before a new system becomes law. The recommendations call for a special “oversight entity’’ or agency to develop details and monitor results. And the approval of the federal government would almost certainly be needed to change how Medicaid pays providers.

Dreyfus, of Blue Cross and Blue Shield, said that if officials had answered every question about implementing near-universal health coverage before passing the law “we would still have a half-million people in the Commonwealth without health insurance.’’

Because of the health insurance law, about 97 percent of all Massachusetts residents are covered, the highest rate in the nation. But soaring costs threaten to make state subsidies for lower-income residents and their out-of-pocket payments too expensive.

State Senator Richard Moore, Democrat of Uxbridge, a commission member, and cochairman of the Joint Committee on Health Care Financing, said the committee will hold a public hearing, probably in September, as a next step, and potentially develop legislation in the fall.

“This is an important step, but there is a great deal more to get done,’’ he said. “It would have been great to get further along . . . on some potentially contentious issues. I hope we can get something, if not passed by the end of the year, then well along in that direction.’’

But Moore acknowledged that the current state budget crisis is a distraction and makes it unclear how the state will pay for start-up costs.

Sarah Iselin, , cochairwoman of the commission and head of the state Division of Health Care Finance and Policy, said there are no estimates of start-up costs or potential savings from a global payment system. But she said that “the opportunities for savings are significant.’’

Liz Kowalczyk can be reached at