Supplemental hospital payments should be reevaluated, Mariano says

Matthew Klitus, chief financial and strategy officer for MassHealth, delivered a presentation on provider reimbursement rates to the 23-member commission tasked with studying hospital pricing disparities. [Photo Antonio Caban/SHNS]
Matthew Klitus, chief financial and strategy officer for MassHealth, delivered a presentation on provider reimbursement rates to the 23-member commission tasked with studying hospital pricing disparities. [Photo Antonio Caban/SHNS]

BOSTON, NOV. 1, 2016…A high-ranking House lawmaker on a commission studying health care pricing in Massachusetts expressed interest Tuesday in reevaluating supplemental payments made to hospitals by the state’s Medicaid program.

The 23-person panel held its third meeting Tuesday as it prepares to put forth recommendations next year on how to address gaps in prices charged by different health care providers. Matthew Klitus, the chief financial and strategy officer for MassHealth, outlined for commission members how the insurance program reimburses ambulatory care providers and hospitals for treating patients.

Of MassHealth’s $15.7 billion in spending in the 2016 fiscal year, around $4 billion went directly to medical providers, Klitus said — $1.9 billion in rate payments for ambulatory providers, $1.2 billion in rate payments to hospitals, and approximately $927 million in supplementary payments to hospitals.

The seven different kinds of supplemental payments are not tied directly to hospital admissions or episodes of care, and instead support hospitals that treat a population “that needs a little more support than our standard rates would provide,” Klitus said, such as those with high proportions of public-payer patients.

House Majority Leader Ronald Mariano, a Quincy Democrat who serves on the commission as an appointee of Speaker Robert DeLeo, said some of the supplemental payments were the result of instances “where the Legislature would step in and add additional payments to hospitals that were under stress for whatever reason.”

Mariano said he believes the supplemental payment system “has to be sort of be brought up to date.”

“That’s one of the issues that we need to get a handle on when we talk about price variation,” he said. “Maybe I’ve been around too long, because I know why a few of those [supplemental payments] are up there…and I may have had a hand in putting some of them up there. I’m not going to walk away from it. I think at times they served a purpose. I just did a little back-of-the-envelope math, and it’s almost $370 million that are going into programs that I think we at some point, you know, need to reevaluate.”

Spending on MassHealth accounted for around 28 percent of all Massachusetts health care expenditures in 2015, and the insurance program is the largest item in the state’s $39.25 billion fiscal 2017 budget.

Health and Human Services Secretary Marylou Sudders and Gov. Charlie Baker’s administration are in the process of restructuring the MassHealth payment system to move the program toward an accountable care organization model, as part of an effort to control costs and make the program more efficient.

With rising health care costs seen as a burden on government, business and family budgets, some lawmakers and health industry officials point to a need to address the varying prices that different medical providers charge for the same procedures, describing such a move as a way to protect consumers while keeping the industry financially stable. Other lawmakers are reluctant to interfere with a pricing system that’s largely unregulated.

The commission is charged by statute with conducting a “rigorous, evidence-based analysis to identify the acceptable and unacceptable factors contributing to price variation in physician, hospital, diagnostic testing and ancillary services.” It has until March to file a report and any draft legislation.

Rep. Jeffrey Sanchez, who chairs the panel with Sen. James Welch, said his and Welch’s staffs are drafting the report “as we go along.”

Noting the limited timeframe, Massachusetts Council of Community Hospitals President and CEO Steven Walsh said the commission was “taking our eye off the prize” as its members discussed MassHealth payments.

“Now this group is going to try to do in the next four months what has been done over 20 years, what the secretary’s team has been doing 24/7 for the last year, we’re going to do it between now and March and somehow do it better than they’re going to do it?” Walsh said. “And the real unfortunate part of that is in that time, we’re going to make sure that we do absolutely nothing in commercial rate variation.”

The full commission will meet next on Nov. 29, with plans to discuss health care market forces and contracting practices between providers and payers.

Copyright 2016 State House News Service

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