Mass. A.G. finds cost, quality incongruity in state healthcare system

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A systematic review of the Massachusetts healthcare system found significant variations amongst hospitals and physicians that were not based on quality of care, according to a preliminary investigation conducted by the office of Attorney General Martha Coakley.

The investigation reviewed documents from five health insurance companies which represent more than 70 percent of the state's market and 15 healthcare providers to examine the state’s healthcare costs and cost drivers.

While the investigation is still on-going, the "preliminary review has revealed serious system-wide failings in the commercial healthcare marketplace which, if unaddressed, imperil access to affordable, quality healthcare,” wrote Coakley.

While Massachusetts has gained strides in providing access to healthcare, with 97 percent of its population covered, the report found that the gains are “jeopardized by unsustainable increases in healthcare costs.”

Between 2004 and 2008, the AG's office probed insurance contract prices between health insurance providers and hospitals.

The initial findings showed that:

  • Prices paid by health insurance providers to hospitals and physician groups vary within the same geographic area and provider similar levels of service;
  • Price variations are not correlated to quality of care, the sickness or complexity of the population being served, the extent to which a provider is responsible for caring for patients on Medicare or Medicaid, or whether a provider is an academic teaching or research facility;
  • Variations in price are correlated to market leverage as measured by the relative market position of the hospital of provider group compared with other hospitals within a geographic region or within a group of academic medical centers;
  • Variations in medical expenses on a per-member, per-month basis are not correlated to the methodology used to pay for healthcare. Often, total medical expenses are higher for globally paid providers that those on a fee-for-service basis;
  • Price increases cause most of the increases in healthcare costs in the state; and
  • The commercial healthcare marketplace is distorted by contracting practices that reinforce and perpetuate disparities in pricing.

During the analysis, Coakley's office also found that price inconsistencies between providers in the same geographic areas within the state exceeded 200 percent, with the highest paid provider paid more than twice the rate of the lowest paid provider.

“If left unchecked, there is a risk that these systemic disparities will, over time, create a provider marketplace dominated by very expensive “haves” as the lower and more moderately priced “have nots” are forced to close or consolidate with higher paid systems,” Coakley wrote.

In addition, the report noted that the current healthcare payment system is not value-based, but rather centers around costs and payments.

“Healthcare costs are increasing much faster than the growth in the economy and wages. Such increases, if unchecked, threaten the financial stability of individuals and businesses, and the future viability of our gains in healthcare access,” according to Coakley.

The attorney general wrote that these inconsistencies should be taken into account by the legislature and policymakers, to implement healthcare cost containment. In addition, the office recommended that a more transparent system be put in place to promote market effectiveness and promote and develop value-based healthcare.

The remainder of the analysis is expected to be completed by March 16 and presented during hearings before the Division of Healthcare Finance and Policy of the Massachusetts Office of Health and Human Services.