INSIDE THE ISSUE

> Hospital Prices
> MHA at the State House
> Protecting 340B
> House Reform Bill
> Transition

MONDAY REPORT

RAND Study: Mass. Commercial Insurer Hospital Payments

The ongoing effort to restrain healthcare cost growth was assisted last week by new data that gives policymakers information about how Massachusetts compares to the rest of the nation when assessing payments private health insurance companies make to hospitals and health systems.

Using Medicare payments as the benchmark, the RAND Corporation’s Prices Paid to Hospitals by Private Health Plans calculated what private insurers paid providers in each state compared to Medicare between 2020 and 2022. For the nation, RAND found employers and private insurers paid on average 254% of what Medicare would have paid for the same services at the same facilities.

But for Massachusetts hospitals, RAND found commercial payers paid 195.3% of Medicare prices for hospital services. According to RAND, Massachusetts, which consistently ranks high in the quality of care delivered, ranked 46 out of 50 states for commercial hospital prices relative to Medicare pricing. The only states with lower commercial hospital prices were Arkansas, Iowa, Michigan, and Mississippi. Massachusetts hospitals beat the national payment average for both inpatient and outpatient services.

Commercial insurers pay relatively more than Medicare for a service because Medicare pays consistently below the actual cost of care provided. Nationally, the American Hospital Association (AHA) estimates Medicare pays just 82% of the cost of care. (Medicaid, which is not considered in this study, pays substantially below Medicare.) In their contract negotiations, hospitals and the insurers themselves must factor in the government underpayments.

“During remarkably difficult times, when workforce shortages, capacity constraints, and systemwide uncertainty puts hospital finances in a perilous state, Massachusetts hospitals nonetheless are making strides in controlling costs as the RAND study shows,” said MHA Vice President of Healthcare Finance and Policy Dan McHale.

The AHA, assessing the nationwide conclusions of the RAND report, said that while the researchers focused on provider costs and payments “their analysis is suspiciously silent on the hidden influence of commercial insurers in driving up healthcare costs for patients.”

Walsh’s Talk at State House Focuses on “Crisis and Collaboration”

MHA President & CEO Steve Walsh last Tuesday addressed a gathering of about 70 legislators, staff, and others to discuss the current state of the Massachusetts healthcare system.

The co-chairs of the Joint Committee on Health Care Financing, Sen. Cindy Friedman (D-Arlington) and Rep. John Lawn (D-Watertown), hosted the event and gave brief opening remarks about the important role of hospitals and health systems in solving current healthcare issues.

Walsh’s presentation was timely given the legislature’s focus on the 2025 state budget as well as the House’s healthcare market review bill. He covered the many pressures the system is under, using MHA’s recent Causes & Consequences: Inside the Healthcare Crisis report to illustrate his focus on workforce, capacity, rising incidences of violence against healthcare professionals, and overall financial instability afflicting the system.

He also spoke of how the Steward Health Care situation is compounding the challenges that have been building up over the past several years. Walsh commended the state for its actions to date on the Steward crisis and cited the frequent communication and coordination between MHA members, elected officials, and regulators in helping to resolve the issue.

While several of the solutions within MHA’s new report were discussed, the session served primarily as a reminder that through every major issue and victory in healthcare over the past few years, the healthcare system/state partnership has been key. From the unified COVID-19 response to advances in telehealth, behavioral health, health equity, and more, potentially fractious political debates have been put aside for the benefit of patients and communities. Walsh offered MHA and its membership as resources to legislators in the coming weeks and months as they consider major healthcare reforms and help the system respond to Steward.

Hospitals Push for 340B Fix in State Budget Debate This Week

Debate on the Massachusetts State Senate’s fiscal year 2025 state spending plan, as well as the proposed budget’s 1,100 amendments, begins tomorrow.

Both the Senate’s $57.9 billion proposal and the $58 billion budget the House passed in April contain language to implement an ambitious hospital assessment plan that aligns with the proposal that MHA and the Executive Office of Health & Human Services (EOHHS) agreed to. The increased tax on hospitals is expected to bring an additional $441 million back to Massachusetts in federal Medicaid funding.

Among the amendments that were filed by the May 10 deadline are 10 from MHA to address telehealth and behavioral health services, among other issues. Amendment 560, filed by Sen. Barry Finegold (D-Andover), would require commercial health insurance companies to share in the cost of the Health Safety Net Trust Fund shortfalls, similar to the initial surcharge contribution to the program. Today, hospitals alone must make up any funding shortfall. As previously reported, monetary deficiencies in the Health Safety Net program are now exceeding levels not experienced since prior to the state’s historic 2006 healthcare reform law.

Another amendment that has generated wide support among Massachusetts hospitals is Amendment 844, filed by Sen. Pavel Payano (D-Lawrence), which would prevent further erosion of the 340B drug pricing program within MassHealth.

Current state rules largely permit 340B-covered entities to access discounts on drugs for MassHealth patients under the federal program. The access benefits to patients and financial benefits to hospitals from 340B are immense. But in January of this year, MassHealth issued a bulletin instructing its managed care plans not to reimburse certain drugs prescribed to MassHealth members if the drugs were purchased through the 340B Drug Pricing Program. In the bulletin, EOHHS permits MassHealth managed care plans to pay for the listed drugs only when providers use non-340B stock. The MassHealth directive currently applies to seven weight-loss drugs.

Since 340B rebates to the state and discounts to providers cannot be both claimed for a single prescribed drug, debate has increased on which entity should be able to claim the discount. In recent years, MHA collaborated with EOHHS on compromise policy that was ultimately adopted in MassHealth regulations; that policy limits provider use of 340B only when the drugs were considered “high cost” – or $100,000 per year, per utilizer. State regulations also require 180-days notice and a financial impact analysis for each 340B drug that would be limited. But the January MassHealth directive did not follow these requirements.

Amendment 844 essentially holds MassHealth to those existing pharmacy regulations and limits how many “high-cost” drugs can be excluded from 340B. It also prevents further payment directives like the recent January policy that effectively restricts coverage of 340B purchased drugs. MHA argues that the amendment will prohibit further erosion of a critical component of hospital financing, and will allow hospitals and providers to stretch their resources to, among other things, subsidize underpayment by MassHealth and Medicare for medical services. Without the protection the amendment affords, hospitals are concerned that greater expansions of these 340B restrictions will result in significant financial losses that will ultimately affect patient services.

House Acts on Market Review Process Bill

Last week the Massachusetts House voted 152-1 to approve H.4643, An Act enhancing the market review process, which modifies the Health Policy Commission (HPC) board composition and benchmark process, increases commercial reimbursement for certain hospitals with low relative prices, expands healthcare organizations under the purview of the HPC and Center for Health Information and Analysis (CHIA), creates new oversight and requirements for private equity investors, and establishes a new Division of Health Insurance.

The bill was crafted in the Committee on Health Care Financing chaired by John Lawn (D-Watertown), modified in House Ways & Means chaired by Aaron Michlewitz (D-Boston), and ultimately reviewed by House Speaker Ron Mariano (D-Quincy), who took a special interest in the healthcare legislation.

Of the amendments that were ultimately approved, one filed by Marjorie Decker (D-Cambridge) includes language from MHA-supported prior authorization legislation to require a study of insurers’ use of prior auth and, in turn, tasks the HPC and CHIA with issuing recommendations to the legislature. Another amendment, filed by Danielle Gregoire (D-Marlborough) eases the reporting burdens on accountable care organizations (ACOs). As originally drafted, H.4643 would have required the ACOs to get NCQA certification for their health equity efforts. But the state and hospital community have already agreed to use Joint Commission certification for the sweeping equity efforts contained in the Section 1115 waiver.

Several other amendments that MHA supported made it into the final bill, including one that directs enhanced Medicaid payments to certain eligible hospitals.

Transition

Anthony Hollenberg, M.D. has been named president of Boston Medical Center (BMC). He will report to Alastair Bell, M.D., the president & CEO of BMC Health System. Hollenberg has been physician-in-chief at BMC since 2022 and before that he served as chair of the Joan and Sanford I. Weill Department of Medicine at Weill Cornell Medicine and physician-in-chief at NewYork-Presbyterian/Weill Cornell Medical Center.

An endocrinologist, Hollenberg’s clinical work and research has focused on thyroid disorders. He received his bachelor’s degree from Harvard College and his medical degree from the University of Calgary. He completed his residency in Internal Medicine at Beth Israel Deaconess Medical Center, followed by a clinical and research fellowship at Massachusetts General Hospital.

John LoDico, Editor