Here’s Pellegrini’s post:

Recently, Governor Patrick announced legislation to promote job creation, which included proposals to provide tax credits for businesses that create new jobs and proposals for small business health care costs. We share the Governor’s concern about the impact of rising health care costs and agree with him that we need to take action to provide relief to small businesses. For the last seven months, we have been working with business groups and legislative leaders on a proposal filed by Representative Harriett Stanley and Senator Richard Moore – House Bill 4452 – known as “The Affordable Health Plan”. The bill would require both health plans and providers to control their costs and could cut premiums for small business by as much as 22 percent.

We are concerned that the Governor’s proposal will not generate any savings unless it first addresses provider costs, as the bulk of the premium dollar – nearly 90 cents – pays for medical services such as doctor visits, prescription drugs and hospital stays and other services that directly benefit consumers.

The rising cost of medical services charged by providers is the major reason for premium increases. Among the findings in the Attorney General’s recent Investigation of Health Care Cost Trends and Cost Drivers:
· Provider rate increases caused most of the increases in health care costs during the past several years;
· Differences in prices between and among providers were not related to quality, the sickness or complexity of the patients served, or whether the facility was a teaching or community hospital; and
· Market clout of certain providers was the main factor driving the price of services.
The Division of Insurance’s 2008 trends in health care claims report found that medical costs rose at an average annual rate of 11.6% between 2002 and 2006 and there is nothing to indicate that increases in provider rates have abated. (And here’s more data, out this week from the state Division of Health Care Finance and Policy, on the factors contributing to cost hikes.)

The Affordable Health Plan is the only solution that would provide small businesses with immediate and significant savings that could be used to hire more workers, increase employee salaries, fund capital expenditures, and make other investments that will help jumpstart the Commonwealth’s economic recovery. It would also complement the Governor’s proposed tax credit for businesses that create new jobs. For example, a 40-person company with a mix of employees in their 30s and 40s, some with family coverage and others with individual coverage, that pays $525 per employee for health insurance, could lower its premiums by as much as $115 per employee per month, resulting in over $55,000 annually in savings, which could create a new job and leverage the tax credits the Governor has proposed.

And here’s Nicholas’ post:

In today’s tough economic environment, addressing small business healthcare costs is a must. Governor Deval Patrick’s new proposal to have the state regulate healthcare rates from insurers and providers aims to do just that, but is a dramatic and difficult step even if done on a temporary basis and some of what the Governor proposes isn’t temporary. The Governor has said that his proposal is meant to start the conversation and he deserves credit for that. Starting the conversation is good because there is a lot to talk about and a lot to do.

The governor’s “Job Creation Bill for Small Business” calls for any contract for payment between an insurance company and a hospital, physician group practice, or imaging service to be submitted to the Division of Health Care Finance and Policy (DHCFP). If DHCFP finds that the payments – adjusted for volume and patient acuity – increase by a rate greater than the previous year’s rate of medical inflation, the increase would be presumed to be excessive and disapproved, pending a hearing to justify the increase. The bill also places some limits on insurers, but far less challenging.

There are important questions to be asked in this “conversation” including questions about the feasibility of implementing what is proposed, the administrative complexity and cost of implementing what is proposed, the impact of many providers who are struggling to survive today, whether there is a need to address demands for medical services if one is proposing to limit provider costs, which provisions are sunset and which provisions continue, will the proposal actually lower small business premiums and if so at what cost, what effect will increased regulation have upon our economy and jobs, what is the impact upon long-term reform of adding greater complexity to the payment system, does the proposal take into account costs that providers can’t control – such as an aging population and the high level of coverage benefits in Massachusetts, how do providers account for the government not paying the costs for caring for MassHealth patients?

Because something is complicated doesn’t mean that it can’t work, but when it is this important, we better understand how it will really work or not work before buying it.

The disproportionately high premiums that small businesses pay are a legitimate concern. The rapidly rising premiums result from business decisions being made by the state’s insurers. Under current Division of Insurance regulations, insurers can charge small businesses as much as 76 percent more in premiums than they charge their ‘big business’ counterparts. But hospitals and other providers get paid exactly the same regardless of whether a patient works for a large or small employer. The Governor’s bill authorizes the Commissioner of Insurance to limit these so-called rating decisions.

It is high time to ask tough questions about the cost of insurers’ red-tape, cost in terms of dollars spent and in terms of providers and beneficiaries running in circles. Their administrative costs add significantly to providers’ medical costs. Their billing and claims processes account for billions of dollars in our state’s health care system.

There are steps we can take together. We should look carefully at new ideas such as allowing small business to join together to get lower insurance premiums while not excluding businesses from joining such networks. And increased transparency if handled responsibly and applied to all stakeholders can contribute to a more effective and efficient healthcare system.
MHA is committed to basic reform of the healthcare payment system and to participating in the conversation that the Governor started.

Rising health care premiums are placing an increased burden on Massachusetts small businesses, and the Massachusetts Hospital Association agrees with Senator Richard Moore (D-Uxbridge), the Retailers Association of Massachusetts and other health care stakeholders that action needs to be taken to give these businesses and their employees some relief.

In testimony presented at informational hearings sponsored by the Division of Insurance, MHA reiterated Bay State hospitals’ backing of many initiatives that are already in progress, such as the Connector’s contributory plan for small businesses, the development of medical homes, pay for performance, improvements in end-of-life care, and reduction of preventable readmissions. Our hospital community shares a common goal and commitment to support the significant changes in health care that are already underway, and that can improve quality as well as increase accountability, transparency, efficiency and affordability.

Hospitals must accept ownership for the cost issues under their control, but the significant differential between small and large group insurance premiums is due to the way the health plans calculate those premiums, not to what providers charge for care. It’s important to note that hospitals are reimbursed the same amount by the health plans regardless of whether the patient works for a small “mom and pop” business or a large employer.

Carrier pricing strategies, however, can significantly drive up premiums. For example, premiums can be brought up if insurers maximize their use of rating bands, group size, and geographic location qualifiers.

Health plans should be asked to share their analyses of some of their pricing and “cost containment” strategies, which affect providers and consumers as well, not just the insurers themselves. These analyses should include documentation of the impact that proposed strategies will have on patients and the administrative and operational burden for providers; if there is no actual reduction in cost to the overall system, it is quite possible that all health plans are doing is shifting costs and compromising quality of care and patient satisfaction in the process.

Massachusetts hospitals remain committed to transparency and to continuing our partnership with legislative leaders, the Patrick administration and other healthcare stakeholders to identify and constrain the cost of healthcare for Massachusetts residents.

The Massachusetts Hospital Association (MHA) recently released “Creating Accountable Care Organizations in Massachusetts: Key Issues for the Commonwealth to Address,” the second report in our six-part series on healthcare payment reform. The new report outlines goals and recommends strategies the state can adopt to facilitate successful formation and operation of ACOs in Massachusetts. Our strategic recommendations include:

· Providing adequate and appropriate payment for services
· Aligning payment methods across payers
· Ensuring appropriate and efficient quality measurement
· Facilitating the formation of successful Accountable Care Organizations
· Addressing key transition issues

Bay State hospitals are proud to be taking a leadership role in moving the state’s healthcare reform efforts forward. A shift to ACOs could result in major improvements in care delivery and efficiency across the Commonwealth. But just changing the model without careful and thoughtful planning would threaten the entire reform process.

Our hospitals care for our residents when they need it most, and they also drive 15 percent of the state’s economy. The consequences of poor execution are enormous. These changes deserve to be done right, and we believe that Massachusetts policy makers and stakeholders are committed to taking the time and to working collaboratively so that reform can succeed.

This latest MHA report provides concrete ideas for our state government leaders and policymakers to consider as they work to create and build successful ACOs in Massachusetts.

Since the Massachusetts Special Commission on the Health Care Payment System issued its recommendations over the summer, there has been a lot of pressure to act on the proposals, despite the fact that the Commission made its recommendations purposefully broad. I sat on the Special Commission and the MHA Board of Trustees, a representative sample of our member hospitals and health systems, authorized me to vote for the final recommendations, but with the caveat that a number of extremely important questions that were left unanswered in the Commission’s report would need to be addressed before the Commonwealth moved forward with specific plans or other implementation.

Our hospitals are now contemplating what they need to do to be successful in an environment that is not predominantly fee for service. Meanwhile, MHA is reaching out to other key stakeholders including legislative leaders and Administration officials to find common ground regarding workable efforts to move the reform effort forward. MHA released a white paper a few weeks ago that outlined providers’ most serious concerns about implementing payment reform; we’ll be issuing several additional papers on these “foundational” issues and suggestions for how best to resolve them over the course of the next month.

We should not let “the perfect be the enemy of the good,” as we advance toward healthcare payment reform. But neither should we ignore the complex and difficult realities we face, or gloss over the compromises that everyone will need to make in order for reform to truly succeed.

Massachusetts has been on the forefront of America’s current healthcare reform efforts, and the Commonwealth’s hospitals actively support health system reform and continued coverage expansion both state-wide and across the nation. . Our hospitals will continue to provide a unified voice in favor of comprehensive, high-quality and affordable care and we commend our state leaders for their ongoing support and the members of our Congressional delegation for championing this important effort on behalf of all Americans. (See Martha Bebinger’s Aug. 4 post on why some hospitals are worried about two particular elements of the national health care reform debate.)

As these healthcare reform efforts continue to unfold, we must ensure that the state’s current focus on controlling costs fairly engages all stakeholders – hospitals, physicians, state government, employers, insurers and patients themselves– and that any federal proposals are not a step backward from the advances we have made here in the Commonwealth. Massachusetts was founded on a strong sense of social justice and community obligation – just look at the centrally located “commons” found in nearly every Bay State city and town. Our predecessors set aside valuable property to be used for the greater good in Colonial times. Today we should muster our collective will and energy to meet the larger responsibilities posed by healthcare reform. To do this we need “all hands on deck” in our state, which includes immediately filling the temporary vacancy in Massachusetts’ Congressional delegation. (Read the Globe’s latest story on filling Kennedy’s seat.)

I have worked in healthcare for over 30 years and the volume and pace of reform deliberations is unprecedented in my experience. The national reform proposals currently pending ostensibly affect one-sixth of the nation’s economy and are wide-ranging in scope. They could well affect the progress we have made in Massachusetts, including additional insurance coverage for more than 400,000 Massachusetts citizens who didn’t have coverage prior to the passage of our state’s landmark healthcare reform law. In the months ahead, it will be essential for the Commonwealth to closely monitor the evolving federal plan with a full Congressional delegation to ensure appropriate coordination with the path we have set here in Massachusetts.

There is a great deal of controversy around the pros and cons of filling the Senate vacancy left by the death of Sen. Edward Kennedy; but the potential harm to our citizens and our Commonwealth from underrepresentation in the US Senate trumps every other concern. The intrigue around this issue will last a few months, but the ramifications of decisions being made in Washington will likely impact us for decades.

In particular, some of the health care proposals currently being considered in Congress could severely damage or even destroy key components of the Massachusetts economy. Healthcare and hospitals in particular are an integral and extremely valuable component of the economic infrastructure in the Commonwealth. Our hospitals anchor the health care delivery system in their communities and are among the state’s largest employers, and the number of Massachusetts residents working in direct care, medical industry and research accounts for 15.8 percent of the state’s total employment. Many of these jobs are directly or indirectly supported by the significant federal funds that flow into Massachusetts for Medicare, medical research, education and services.

There are now federal proposals on the table that would change the formula for distributing Medicare funds nationally. One such plan is a “value formula” that would take Medicare dollars from hospitals in higher-cost regions like Massachusetts and transfer them to so-called “efficient” hospitals with lower costs in other parts of the country. If implemented, these geographic payment variation proposals would spell economic disaster for a number of states – including Massachusetts – that have advanced healthcare-centered infrastructures. Their simplistic comparisons of health spending levels disregard underlying demographic and cost‐of‐living differences, overlook added costs from educating the next generation of physicians, and ignore numerous complex nuances and important factors like the condition and socioeconomic status of particular patient populations.

While Bay State hospitals and other providers are already working with Congressman Capuano and the rest of our Congressional House delegation on this issue, it will soon be debated in the Senate. And it will be crucial for Massachusetts to have two senators in place. Without full representation in Congress, this or some similar scheme could cost Massachusetts hospitals between $440 million and $1 billion per year. If not deleted or mitigated, “geographic variation” alone could start the unraveling of our world class medical community.

Massachusetts needs and deserves full involvement and full representation on healthcare reform issues at both the state and national level. We cannot stay the course in these tumultuous times otherwise.

In healthcare, cost is the falling barometer that indicates big storms and other inclement conditions. Nationally and in Massachusetts, hospitals are working to find ways to make contributions to cost savings efforts. In addition, I represent the Massachusetts Hospital Association (MHA) on the Special Commission on the Health Care Payment System, which is charged with making policy changes to the payment system to improve the delivery and cost of care at the state level. The Commission is due to issue its final report and recommendations within days.

Massachusetts hospitals have always been willing and committed to doing their fair share as part of healthcare reform and also in terms of helping the state weather this current economic crisis. But many of our providers’ major contributions and sacrifices have gone unrecognized. Hospitals have repeatedly stepped up to the plate: to fund quality and transparency initiatives; to contribute to the Health Care Quality and Cost Council’s web site and other projects; to track and publish data on Serious Reportable Events (SREs) and Healthcare Acquired Infections (HAIs), and voluntarily not charge for care resulting from SREs; to offer hundreds of millions of dollars of community benefits ranging from asthma education to free cancer screenings; and to live up to their missions of providing care regardless of a person’s ability to pay. These contributions are just a few of the many made by hospitals to remove costs from the healthcare system while improving quality of care.

Our hospitals’ participation in these efforts has largely been voluntarily, though some has been due to legislation or other mandates. But none of these efforts has been without cost, and all have been paid for by the hospital and provider community. Now there appear to be more ‘unfunded mandates’ for hospitals on the horizon, and in some cases they may even be the straw that breaks the camel’s back.

Last week Governor Deval Patrick signed the $27.4 billion fiscal year 2010 state budget, and issued vetoes and amendments that cut $147 million out of the spending plan the legislature approved. Of particular note, he proposed a partial restoration of healthcare coverage for nearly 30,000 legal immigrants who will otherwise lose Commonwealth Care coverage on August 1, 2009.

The governor is to be commended for trying to at least partly restore funding for these much-needed healthcare benefits and protections. While many details of this compromise plan remain unknown, including benefits, provider network and reimbursement levels, we are urging the legislature to approve the governor’s proposed fix.

The state budget also continues painful payment reductions to hospitals. It cut $75 million in fee-for-service payments to acute care hospitals. A key element of healthcare reform has been the commonwealth’s promise to bridge the payment gap between what MassHealth/Medicaid pays for care and the actual cost of providing that care. Although initial progress was made, as of this moment the payment gap is larger than pre-healthcare reform rates – on average about 70 cents for every dollar’s worth of care provided.

The Health Safety Net, which pays for healthcare services to the uninsured, is funded in the FY2010 budget at $390 million. Hospitals pay $160 million of that, plus about another $15 million of the insurer surcharge (since hospitals employ more than 170,000 people in the state). The Massachusetts Hospital Association (MHA) and Patrick Administration both agree that $390 million won’t be enough to fully fund the safety net for this fiscal year. MHA estimates the funding shortfall could top $125 million, which includes the impact of the Commonwealth Care cut for the nearly 30,000 legal immigrants. As has always been the case, any shortfall is paid for entirely by hospitals.

The increased financial burden on hospitals resulting from state government funding and program changes could exceed $300 million over the course of just two fiscal years. At a time when hospitals’ median operating margins are running close to negative one percent, and more than 25 percent of our hospitals have fewer than 45 days cash on hand – even before the FY2010 cuts have their impact – such reductions threaten the survival of some hospitals and the sustainability of many critical services across the commonwealth.

It is essential that the state and healthcare stakeholders recognize that healthcare reform cannot be achieved or sustained when funding for those who provide care is insufficient to cover the costs of providing it. When the state cuts hospital payments while increasing regulatory demands, or stops paying for all or some healthcare coverage for tens of thousands of people, costs rise – for everyone. And the effect of reductions in provider payments at the state level will only be compounded by the payment reductions that are likely to come out of Washington as part of national healthcare reform.

Hospitals are often viewed primarily as “cost centers” more than as partners in the transition to universal high quality, accessible and affordable healthcare. In the ongoing search for meaningful healthcare reform, the extensive contributions that hospitals and other care providers are already making to the effort should be recognized.

Lynn Nicholas, FACHE,
President & CEO, Massachusetts Hospital Association

Both nationally and at the state level, healthcare reform is correctly being linked to economic recovery. In the face of such severe deficits, the temptation will be to make even more widespread cutbacks. But we must pursue our goals of economic recovery through investments in healthcare, or risk doing irreparable damage not only to our healthcare infrastructure but to the broader economy.

There are three powerful reasons for investing in Massachusetts healthcare:

• Keeping the state population healthy is invaluable as a humanitarian goal, but it also helps keep our workforce productive;
• Healthcare employment is well positioned to help stabilize and invigorate the state’s economy; and
• Healthcare services provided to Medicaid (MassHealth) patients generated the federal Medicaid stimulus funding to our state. And Medicaid spending drives additional federal funding. Conversely, Medicaid payment reductions have a magnifying effect – a little Medicaid cut results in a great loss of federal funds.

Investing in healthcare and hospitals makes good economic sense, good healthcare sense and good common sense. Consider this…

Healthcare is an economic driver that offers well-paying jobs across all levels of the economic spectrum, and has long been viewed as “recession proof,” particularly in Massachusetts. Yet a new, nationwide American Hospital Association survey shows that the current economic downturn is negatively affecting hospitals across the U.S., and the survey’s results for Massachusetts are consistent with the Massachusetts Hospital Association’s own recent report showing how hospitals have historically bolstered the economy and are now suffering due to the recession.

The AHA survey reveals that as the economy worsens, hospitals nationwide are being forced to make tough decisions. Seventy percent of U.S. hospitals responding to the survey reported declining financial health, and 90 percent have cut services, expenses and/or staff to address economic concerns. The MHA report, “Massachusetts Hospitals: Critical to the Commonwealth and Threatened in the Economic Downturn,” also shows a systemic decline in hospital finances, particularly during the current economic downturn.

The statistics are grim. In Massachusetts, 59 percent of Massachusetts hospitals are reporting a decline in elective surgeries, and 24 percent report that they have – or will – cut services. Sixty-four percent of our hospitals are reporting staffing cuts. Bay State hospitals had to cut 1,000 positions in 2008, and that number will climb this year. And these jobs have a “multiplier effect” of two – each hospital job supports another job in the state’s economy.

The emergency budget cuts implemented by the Patrick Administration this fiscal year impact health care providers significantly. Even with the Governor’s recent proposed restoration of funding to two of our hospitals that provide a disproportionate share of care to the poor, hospitals state-wide are faced with at least $93 million in payment reductions in FY09.

The proposed 2010 budget now being debated in the legislature includes even deeper cuts to hospitals totaling $262 million. MHA estimates that each million dollars cut from healthcare revenue is equivalent to about 16 hospital jobs. And the economic “multiplier effect” mentioned earlier also works in reverse, so the current proposed cuts if translated into employment terms, could mean more than 10,000 lost jobs.

While the state is facing difficult financial circumstances, this reduction in Medicaid payments is nevertheless an erosion of the Massachusetts Healthcare Reform commitment to align hospital and physician payments to the cost of care. Though progress was made initially on this important initiative, MHA projects that the underpayment gap will be larger in 2010 than before the reform law was enacted – by up to $500 million annually.

The administration has also announced efforts to extend this financial loss throughout the Medicaid program by requiring all Medicaid Managed Care Organizations “to contract at no more than MassHealth Fee-For-Service (FFS) rates” with hospitals. This would cost hospitals more than $200 million in fiscal year 2010. Recent thoughtful and bold action by our state House of Representatives could help to prevent the latter reduction, but the matter has moved on to the Senate, and the larger issue of the Medicaid payment adequacy remains.

Instead of Medicaid payment reductions, the commonwealth should use the new federal Medicaid funds to restore as many of the FY2009 Medicaid and state health care cuts as possible, and prevent further cuts to this sector. This new Medicaid funding for Massachusetts should also be placed in a state account separate from the general fund to allow for greater transparency.

The federal Government Accountability Office (GAO) estimates that Massachusetts will receive an additional $3.09 billion in Medicaid funding over the next two and ¼ years. Under the America Recovery and Reinvestment Act (ARRA), the federal government’s share of MassHealth’s costs will be increased from 50 percent to approximately 60 percent. This means for every dollar spent on the MassHealth program, the net cost to the state is only 40 cents. Conversely every dollar cut from MassHealth payments for provider services saves Massachusetts only 40 cents.

We need to ensure our state’s economic engine does not stall, along with its multiplier effect. Using the federal Medicaid revenue to restore and prevent Medicaid and healthcare budget cuts will preserve the excellent provider access so important to Massachusetts patients and communities, and spark effective stimulus to the state’s overall economy.

Lynn Nicholas, FACHE,
President & CEO, Massachusetts Hospital Association

In Massachusetts, hospital workers have always acted independently around unionizing; some hospital employees have chosen unions, while others have not. Our state’s hospitals value employees as essential contributors to a quality healthcare system, and have a long history of collaborating with their employees – union and non-union – to provide the quality care for which the Commonwealth is nationally known.

The existing National Labor Relations Act (NLRA) is intended to protect a worker’s individual right to decide whether or not to unionize through a democratic election process free from harassment, threats, or intimidation from either employer or union.

Under EFCA, the decision whether or not to unionize would no longer be made via a democratic voting process. Instead, employers would be required to automatically recognize a union that presents union cards signed by 50 percent of an identified bargaining unit – also known as a mandatory card check. EFCA and card check strip employees of the most fundamental right of a democratic election process – the secret ballot.

By removing the familiar election process, EFCA would not allow employers and employees to engage in a full, two-sided conversation about whether a union would benefit an organization’s mission and its workers. It would eliminate the ability of employees to make their decisions in a voting booth, away from the eyes of management, peers, and union organizers. And some employees wouldn’t get to express any opinion on unionizing, whether through checking a card or voting secretly.

In addition, under EFCA, once a union is recognized by card check, the parties must immediately proceed to the bargaining table to agree on a first contract. If they reach no agreement within 120 days, the negotiation is then subject to binding interest arbitration. Arbitration would leave the first contract’s terms to be decided by an outside third party, and would be binding for two years.

An alternative to EFCA, the Secret Ballot Protection Act (SBPA), was recently introduced in Congress and has the support of the American Hospital Association (AHA), among others. Given EFCA’s threat to both workers’ and employers’ rights, we support the SBPA because it would ensure that workers in an appropriate collective bargaining unit are able to cast their votes on unionization in private. If there needs to be changes made in our nation’s current labor laws in order to improve those laws, let’s discuss change while still guaranteeing workers’ rights to make an informed decision through casting a secret ballot vote for or against unionization.

The quality of Massachusetts healthcare is in the hands of our healthcare workers. We owe it to them to preserve the basic democratic protections that have been their right for decades under the NLRA. We need to let hospital employees make their own choices in an atmosphere of open communication among unions, employers, and most importantly employees. Our health depends on it.

Lynn Nicholas, FACHE, President & CEO
Massachusetts Hospital Association