INSIDE THE ISSUE

> House Ways & Means’ Budget
> CHIA’s Bleak Picture
> Benchmark is 3.6%
> Federal/State Review of Steward/Optum
> Funding for Workforce
> Healthcare Decisions Day
> Happy Patriots Day

MONDAY REPORT

House Ways & Means Releases $57.9 Billion Budget Plan

The House Ways and Means Committee rolled out a $57.9 billion state budget plan for fiscal year 2025 last Wednesday. Of note, the spending proposal does not call for any major tax hikes or draw from the state’s long-term savings account, otherwise known as the “rainy day” fund.

During a press conference, House Speaker Ron Mariano (D-Quincy) recognized the trying fiscal times the commonwealth is currently operating under and the pressures that went into crafting this year’s proposal while remaining optimistic for the future. The proposal mirrors many of the provisions put forth in Governor Maura Healey’s H.2 budget proposal, including the idea of making up to $375 million in excess capital gains tax revenue available for spending.

Of note, the House plan does not pursue cuts to the personal care attendant program proposed in H.2 that would ultimately limit access to services for certain people with disabilities. However, House Ways & Means funds the Department of Mental Health continuing care system line item at $324 million, which is $61 million below H.2’s funding of $385 million.

The House Ways & Means MassHealth budget plan is almost identical to what the governor proposed in January, increasing by 4% over estimated FY2024 spending. Given that the House’s MassHealth budget funding follows the H.2. blueprint, MHA remains very concerned with the significant reimbursement rate reductions that the Executive Office of Health and Human Services (EOHHS) intends to impose in FY2025, which will affect hospitals, providers, and Accountable Care Organizations (ACOs). MHA understands that EOHHS continues to assume $150 million in net state savings for these reductions, which is more than $300 million in gross spending reductions to providers, ACOs, and health plans.

The House budget carries forward the governor’s funding recommendation for the Health Policy Commission (HPC) administrative budget – $12.03 million in FY2025, which is a 5.2% increase from the FY2024 appropriation. For the Center for Health Information and Analysis (CHIA), the Ways & Mean’s budget proposes a $33.34 million budget – a -0.2% decrease from FY2024. Of note, the HPC’s proposed budgetary increase is well above the annual cost growth benchmark that the entities that fund these agencies are held to under Chapter 224. Acute care hospitals, ambulatory surgical centers, and insurers are responsible for funding the expenses of CHIA and the HPC.

Amendments to the budget were due last Friday, and lawmakers are expected to start debate on Wednesday, April 24, which is later than usual due to the observance of Passover.

CHIA Report: 75% of Hospital Health Systems are Operating in the Red

The Center for Health Information and Analysis (CHIA) has released its hospital and health systems financial performance for FY2024 through December 31, 2023 (the first quarter for most hospitals), and the numbers continue to show a healthcare system in distress.

The statewide median operating margin for hospitals was 1.7%. Thirty-seven percent of hospitals reported negative operating margins, meaning they were spending more than they took in for daily operations. Of the 20 hospital health systems reporting – which includes hospitals and affiliated physician groups – 75% of them (or 15 out of 20) reported negative operating margins.

Operating margins are the best measure of hospital financial performance, since they only encapsulate the on-the-ground, actual expenses of hospital operations. Total margins reported by CHIA include unrealized “paper” gains, in addition to realized gains from investments.

Thirty-five of 43 affiliated physician organizations reported a net loss for the period ending December 31, 2023, CHIA reported.

“CHIA’s report is just the latest sign of a healthcare sector that is teetering on the edge,” said MHA’s Dan McHale, the association’s vice president of healthcare finance and policy. “These are meager operating margins for a system in the midst of immense financial challenges. Massachusetts hospitals have yet to feel relief from skyrocketing labor costs, the staggering costs of unreimbursed care, and the barrage of financial pressures that have consumed their operations over the past four-plus years. Their viability must remain a priority. The commonwealth should continue to think big when it comes to the workforce solutions, innovative care, and payment reforms that can help its world-class healthcare community recover.”

The CHIA report does not include data from Steward Health Care hospitals, which have been the subject of intense interest due to the system’s instability and its announcement that it plans to sell its physician practice and cease operations in the state.

Benchmark for Calendar Year 2025

The Health Policy Commission by unanimous vote last Thursday set the state’s healthcare cost growth benchmark for calendar year 2025 at 3.6%. Under Chapter 224 of the Acts of 2012, which created the cost growth measure, the annual benchmark from 2023 on is equal to the potential gross state product, which this year is 3.6%. The HPC board can modify that default rate to any amount deemed reasonable, but it would need to seek legislative approval to do so.

Massachusetts Delegation: Look Hard at Optum/Steward Deal

The entire Massachusetts Congressional Delegation signed on to a letter last week urging the Federal Trade Commission and the Department of Justice’s Antitrust Division to closely scrutinize the proposed acquisition of Steward Health Care’s physician group by the UnitedHealth Group’s subsidiary, Optum.

The Massachusetts legislators noted that Optum currently “employs or maintains affiliations” with 10% of all physicians in the United States, and that its purchase of the Stewardship Health doctor practice will increase what the delegation termed Optum’s “stranglehold” over the nation’s physicians.

“UnitedHealth’s self-dealing and Steward’s financial distress appear to be jointly driving this acquisition,” the commonwealth’s two senators and nine representatives wrote. “Indeed, UnitedHealth has made a business of acquiring distressed physician groups to expand their monopoly power. With overwhelming market dominance, UnitedHealth’s insurance arm routinely imposes burdensome utilization management requirements and unlawful delays and denials on independent doctors that push them into financial ruin. Then, once the small providers are on the verge of bankruptcy, UnitedHealth acquires these practices at a discount.”

MHA’s President & CEO Steve Walsh concurred with the delegation’s letter and re-stated what has been MHA’s and the hospital community’s opinion since the Optum-Steward proposal was announced in March: “We believe a transaction of this magnitude must be subject to a stringent and transparent approval process that invokes the federal government’s and the commonwealth’s best oversight tools – the very same oversight that local hospitals are held to. Any potential transfer of Stewardship Health should center on the needs of patients and help stabilize — not further harm— the commonwealth’s already fragile healthcare system.”

Concurrently, the state is conducting its own review of the Optum-Steward deal. At last Thursday’s Health Policy Commission (HPC) meeting, HPC staff updated commissioners on the Material Change Review that the HPC is conducting. The clock on that 30-day review has not yet begun because Steward has not yet submitted to the HPC all of the requested data.

If after 30 days, the HPC finds that the Optum-Steward sale demands further review, it can begin a Cost and Market Impact Review (CMIR) that could up to six months to complete. If the CMIR finds the sale would adversely affect the Massachusetts healthcare system, the HPC could refer the CMIR to the Massachusetts Attorney General’s office, which potentially could use its powers to alter or stop the deal.

Steward’s physician practice, with an estimated 2,950 doctors, is the third largest in the state after the Mass General Brigham and the Beth Israel Lahey Health M.D. groups.

Commissioners said they hoped the HPC review would answer some key questions, such as: If the deal goes through, how would it affect the health of the Massachusetts hospitals at which the Steward doctors practice? And what will Steward do with the money it receives from United/Optum if the sale goes through? Would funds be reinvested back into the hospitals to improve care, or would it be directed back to Steward corporate in Texas?

Funding to Build the Healthcare Workforce

The Department of Mental Health (DMH) has awarded nearly $10 million in student loan repayments to 221 direct care staff and clinicians through the state’s MA Repay Program.

MA Repay, run through the Massachusetts League of Community Health Centers, accepted applications at the end of 2023 from behavioral health professionals and case managers at DMH-operated programs. Loan payment awards ranged from $12,500 to $300,000.

Forty-nine percent of awardees identify as people of color and 46% speak a language other than English, according to the state. The first round of MA Repay awards were announced in August 2023, and provided $140.9 million in student loan repayment awards to 2,935 primary care and behavioral health providers. The MA Repay Program for Continuous Skilled Nurses serving MassHealth members is currently accepting applications on a rolling basis until April 19, 2024.  

Also last week, the Executive Office of Health and Human Services (EOHHS) announced the availability of four $250,000 grants to help build the healthcare workforce. Accountable Care Organizations, acute care hospitals, and affiliated hospital healthcare providers that have a formal partnership with a workforce training group are eligible to apply for the grants. EOHHS is prioritizing education and training programs that support nursing, behavioral health, and allied health roles. Funding for the grant was included in the FY2024 state budget. Grants are expected to be made in July 2024 and funds must be expended by June 30, 2025. Full details on the program, including how to apply and deadlines, are available on the state’s COMMBUYS page.

The Bottom-Line Message: Put a Plan into Place

Tomorrow, April 16, is National Healthcare Decisions Day, which is designed to get people thinking about their care wishes through the end of life.

In Massachusetts, a coalition of organizations along the continuum of care is encouraging people to ensure they have a healthcare agent designated. This is a person entrusted to make healthcare decisions on a person’s behalf if they are unable to themselves.

Care plans not only ease the minds of patients and their families, but they also benefit hospitals and caregivers. If a patient is incapacitated, the effort to move that patient from an acute care hospital to, say, a rehab hospital or nursing home becomes extraordinarily complex if the patient has not assigned a healthcare guardian. The courts must get involved; conservatorships or guardianships must be created. That process can take months, which contributes to the capacity pressures the healthcare system is now facing.

To help yourself, to avoid conflicts among family members debating the path of your care if you are unable to participate in that discussion, and to ease pressures on caregivers, visit Honoring Choices today and begin putting a plan in place.

Happy Patriots Day!

Chapter 130 of the Acts of 1894 eliminated the Massachusetts observance of “fast day” – essentially a religious holiday of prayer and repentance – and created a new legal public holiday every April 19 to be observed “to all intents and purposes” like other public holidays. It was up to Governor Frederic T. Greenhalge (R) to label April 19 “Patriots Day.” This is how the Boston Globe reported it on April 12, 1894:

“The first proclamation for the observance of the new-made holiday, April 19, has been issued and signed by Gov. Greenhalge. His excellency gives to it a name. He terms it “Patriots Day.” The proclamation runs as follows:

By an act of the legislature, duly approved, the 19th day of April has been made a legal holiday. This is a day rich with historical and significant events which are precious in the eyes of patriots. It may well be called Patriots Day. On this day in 1776 at Lexington and Concord was begun the great war of the revolution; on this day in 1783, just eight years afterward, the cessation of war and the triumph of independence were formally proclaimed; and on this day in 1861 the first blood was shed in the war for the union. Thus the day is grand with the memories of the mighty struggles which in one instance brought liberty and in the other union to the country.”

Patriots Day in later years was shifted from April 19 to a Monday holiday. In the same issue, The Globe also noted the governor’s annual proclamation urging Massachusetts citizens to recognize the last Saturday of April as Arbor Day – a holiday created by law eight years earlier (Chapter 32 of the Revised Statutes of 1886). He urged citizens to plant trees, shrubs, and vines on the day “to beautify the land of their affection.” National Arbor Day is celebrated on the last Friday of April.

John LoDico, Editor