Mass. AG finds global payment doesn't lower costs
A report from the Massachusetts Attorney General's office questions whether a shift to global payments will control rising costs if healthcare provider price disparities are not addressed and consumers are not encouraged to make prudent healthcare purchasing decisions.
Providers who are globally paid in Massachusetts do not have consistently lower medical expenses, according to the report from Attorney General Martha Coakley’s office. The findings are based on information received from major Massachusetts health insurers and providers pursuant to a 2008 law enacted to promote cost containment, transparency and efficiency in the delivery of quality healthcare.
There is wide variation in the prices and payments by health insurers to providers that is not adequately explained by differences in quality of care, the report stated.
“The difference in prices each major health insurer pays to its lowest paid physician groups versus its highest paid physician groups exceeds 145 percent, and for two health insurers, [it] exceeds 230 percent. Similarly, the difference in payments made to the lowest paid versus highest paid hospital in each major health insurer’s network exceeds 170 percent, and for two health insurers, exceeds 300 percent.”
Further, the report found no relationship between payment methodology and lower total medical expenses.
“Currently, consumers have little to no incentive to switch to more efficient providers because they are not rewarded with the cost savings associated with that switch,” the report stated. Instead, savings are distributed across everyone’s premiums.
Although insurance is designed to pool costs, such as the cost of chronic care or unexpected health events, "spreading the cost of the payment disparities has led to two key market dysfunctions: it has de-sensitized consumers from value-based choices and it has discouraged providers from competing on value.”
Preferred provider organization (PPO) health plans, unlike health maintenance organizations (HMOs), discourage providers from coordinating patient care because PPO plans are not designed around primary care providers (PCPs) who have the information and authority necessary to coordinate the provision of care.
The report offered six recommendations to promote value-based purchasing and ensure consumer access to high-quality, affordable care:
Click here to see the report.
Providers who are globally paid in Massachusetts do not have consistently lower medical expenses, according to the report from Attorney General Martha Coakley’s office. The findings are based on information received from major Massachusetts health insurers and providers pursuant to a 2008 law enacted to promote cost containment, transparency and efficiency in the delivery of quality healthcare.
There is wide variation in the prices and payments by health insurers to providers that is not adequately explained by differences in quality of care, the report stated.
“The difference in prices each major health insurer pays to its lowest paid physician groups versus its highest paid physician groups exceeds 145 percent, and for two health insurers, [it] exceeds 230 percent. Similarly, the difference in payments made to the lowest paid versus highest paid hospital in each major health insurer’s network exceeds 170 percent, and for two health insurers, exceeds 300 percent.”
Further, the report found no relationship between payment methodology and lower total medical expenses.
“Currently, consumers have little to no incentive to switch to more efficient providers because they are not rewarded with the cost savings associated with that switch,” the report stated. Instead, savings are distributed across everyone’s premiums.
Although insurance is designed to pool costs, such as the cost of chronic care or unexpected health events, "spreading the cost of the payment disparities has led to two key market dysfunctions: it has de-sensitized consumers from value-based choices and it has discouraged providers from competing on value.”
Preferred provider organization (PPO) health plans, unlike health maintenance organizations (HMOs), discourage providers from coordinating patient care because PPO plans are not designed around primary care providers (PCPs) who have the information and authority necessary to coordinate the provision of care.
The report offered six recommendations to promote value-based purchasing and ensure consumer access to high-quality, affordable care:
- Tiered and limited network options to increase value-based purchasing decisions;
- Temporary statutory restrictions to reduce healthcare price distortions until tiered, limited network options and commercial market transparency can improve market function;
- Encouragement for individuals to select a PCP who can assist in coordinating care based on individual needs and best interests;
- Coordination of patient care through PCPs by recognizing the need to improve funding of care coordination, including the infrastructure to coordinate care, and by giving providers access to relevant patient data regardless of payment methodology;
- Improved use of the all payor claims database via reports for providers and the public to guide development of patient care coordination improvements and system accountability, and by standardizing claim level submissions by reducing differences in how payors report payment level information; and
- Develop appropriate regulations, solvency standards and oversight for providers who contract to manage the risk of insured and self-insured populations.
Click here to see the report.