Worcester Business Journal

www.wbjournal.com November 9, 2015 • Worcester Business Journal 9 smaller hospitals, but in practice it would only impede hospitals ability to do business, just like when a similar idea from the 1980s fizzled out in the 1990s. "There were very good intentions … It just never worked out," Kelly said. "It's like changing the tax code. Sometimes, people realize it doesn't achieve the wanted effect." With the Affordable Care Act chang- ing the healthcare business model toward keeping patients healthy rather than treating them when they are sick, it is an ill-timed effort to put caps and floors on specific services, said Patrick Muldoon, CEO of UMass Memorial Medical Center in Worcester. "I mean, we are all changing the way we do business to try to position our- selves for that world," Muldoon said. Proponents say a capped system remains the best step toward shrinking the disparity. The change to a global payment system hasn't stopped larger hospitals from getting richer, said David Seltz, executive director of the Massachusetts Health Policy Commission. "The concern I would have about (the idea that) the market will sort this out is … we haven't seen it getting any better," Seltz said. Longstanding tradition Information related to contracts between commercial insurance compa- nies and hospitals and other providers remains largely confidential, except for data that payers are required to report to government agencies, such as the state Center for Health Information and Analysis (CHIA). The 2012 Health Care Cost Containment law has led to an onslaught of data reporting from CHIA, which is required to produce meaningful analy- ses of healthcare cost trends. Interestingly, those that get paid more don't necessarily beat their lower-priced counterparts in the quality arena. For instance, UMass Memorial Medical Center, which is in the top quarter of hospitals in terms of price, according to CHIA, this fall received a "C" grade for hospital safety while many smaller local that are in a lower price percentile received "A" grades. Attorney General Maura Healey issued a report this summer which revealed that the state's high-priced pro- viders (Partners-owned Brigham and Women's Hospital and Massachusetts General Hospital; Beth Israel Deaconess Medical Center; UMass Memorial Medical Center and South Shore Hospital had the most commercial dis- charges in the state last year) continue to grow their market share, creating mar- ket dysfunction that drives up health- care spending. "The effects of this market dysfunc- tion, coupled with anticipated growth in pharmacy costs and utilization of health care services, raise serious concerns," a statement from Healey's office said. The union solution Enter 1199SEIU United Health Care Workers East, the state's largest health- care workers union. The union has backed a bill and two 2016 ballot initia- tives that are aimed at capping revenue for the big players. The bill and one of the ballot initiatives also set a revenue floor for smaller hospitals. The bill, filed by state Sen. Benjamin Downing (D-Pittsfield) would ban high- priced providers from receiving com- mercial payments in excess of 20 percent of the average prices paid to Bay State hospitals for comparable services, while setting a floor for small hospitals, many of which care for a large number of low- income patients and therefore generate less money, so that commercial payers would pay them no less than 10 percent lower than the average prices. An ill-timed effort? Muldoon said the union is addressing commercial contracts as they've been negotiated under a fee-for-service sys- tem. Hospitals are more frequently entering into risk-based contracts, or global payment contracts, with com- mercial insurers. Under these arrange- ments, they're paid on value, including quality and cost of delivering care. Ultimately, Muldoon said this new global payment system will level the playing field for hospitals and doctor groups by giving organizations of all sizes the opportunity to make more money by providing high-value care. This is the system that the Cost Containment Bill is designed to encour- age, and capping providers at 20 percent above the state median average prices will undermine that, said Muldoon. He argued the law, which is still a few years away from being fully implemented, should be given time to mature. Slow transition It could be a slow transition, however. Muldoon said about 20 to 25 percent of UMass Memorial insurance contracts are risk-based. In the coming year, the Health Policy Commission will examine a number of policy efforts to address price variation, Seltz said. In particular, there is a pressing need for more transparency around price information for consumers. The caps and floors for pricing could make the system more fair, and help more hospitals thrive since the shifting model to risk-based contracting has failed to demonstratively save money, said Alan Sager, a professor of health- care policy at Boston University. "We have to find a way to narrow the unfairness … of current hospital prices," Sager said. n Looking for a Successful Business Exit Strategy? — ROCG Can Help! — ROCG specializes in helping small to medium-sized, privately-owned and family businesses with exit/transition planning, value building and change or succession planning. A recognized thought leader, we've developed a unique understanding of the dynamics and psychology of owner-managed companies and what it takes to drive the results they need. We help dozens of business owners each year meet their personal and financial objectives. For more information, call Terry Shepherd at (617) 412-4640 or email him at terence.shepherd@rocg.com ROCG BOSTON OFFICE 1671 Worcester Rd, Suite 303 Framingham, MA T: 617.412.4640 Terence.Shepherd@rocg.com https://americas.rocg.com business exit & transition specialists Hospitals say price-disparity fixes address outdated model >> Continued From Page 1

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