In recent months, the Legislature and the media have focused intently on the high cost of small group health insurance premiums and the ways in which small businesses may gain some much-needed financial relief.
This focus is completely warranted; the current system is unsustainable. As the leaders of hospitals in our community, we understand that small-business employers — indeed, all employers, purchasers and individuals — are struggling with increasing health insurance costs that must be contained. We are pleased that the Legislature recently passed a bill that reflects the need for all players in the health care field to control costs — not just hospitals. An objective look at the facts shows this was the right approach.
Hospitals face unique challenges. Every hospital within the commonwealth already has significantly reduced costs through system efficiencies, collaborative approaches that avoid service duplications, pay freezes and targeted management and staff reductions.
Hospitals have taken these actions while continuing to endure significant reductions in state payments, despite the promise of increased reimbursements under the Massachusetts Health Reform Act of 2006. In fact, today, the MassHealth (Medicaid) program reimburses hospitals only 70 cents on the dollar for the cost of care. Furthermore, the new federal health care reform law already has forced reductions in Medicare reimbursements to hospitals, with future reductions guaranteed.
Analysis of the commonwealth's most recent hospital cost data reveals that hospital cost trends observed from FY 2004 to FY 2008 have moderated and, in some cases, reversed in the more recent fiscal periods, as hospitals have responded to the financial crisis and recession.
Massachusetts hospitals have achieved expense reductions worth an estimated $3.1 billion in FY 2009 and FY 2010. At the same time, payments for hospital services in those two years have been some $2.4 billion lower than they would have been had the FY 2004-FY 2008 trend continued. For 2009 and 2010, hospital expense growth has dropped back to very moderate levels, and that change should be acknowledged by state policymakers and insurance companies.
Hospitals struggle daily to meet the increasingly complex rules and requirements imposed by public and private payers and the state and federal government. Retroactive denials, non-uniform benefit designs, and different coding and billing systems among payers are a few of the hurdles hospitals face. Payer rules often make it harder and more expensive to continue to deliver the high-quality care that patients deserve. At times, these rules and requirements are contrary to good medical practice and not in the best interests of the patient, yet we must abide by them, even as we continue to meet our obligations to our communities and adhere to our missions of providing high-quality care to all who use our services.
The challenges facing our health care system point to the need for change, across the board. Every party involved — insurers, providers, employers, patients, policymakers and hospitals — must continue making the changes needed to secure a more coordinated, efficient and effective health care system. Payment policies and approaches must reward, not punish, greater care integration and coordination. Administrative and reporting structures must be rational and not allow each payer to play by its own rules.
The Legislature's compromise bill addresses some of these issues. It will make health insurance business more transparent to the public and simplify cumbersome administrative processes for physicians and hospitals. This includes more consistent methods for credentialing of physicians among insurers and more uniform processing of the physicians' reimbursement claims to insurance companies. Requiring insurers to apply 90 percent of their revenues to pay for care will help ensure that the patient's premium dollar is used to pay for care, not overhead.
We were also pleased to see the Legislature endorse limited open enrollment periods for individuals seeking health care coverage, special bond financing to support community hospitals and community health centers, and a piloted approach to insurance purchasing collaboratives that may help control the spiraling cost of insurance for small businesses.
We are the proud providers of a full range of quality health care services to our neighbors on the North Shore and beyond, and we are the equally proud employers of a diverse, dedicated and valuable workforce drawn from those communities.
Together, we employ over 14,000 people at all educational, skill and training levels, and we are committed to meeting our obligations to the communities we serve. Perhaps, more importantly, we are willing partners in addressing what is broken in our current health care system through innovative, collaborative and creative approaches.
• • •
David M. Barrett, M.D., is president and CEO of the Lahey Clinic, which has a facility in Peabody. Kenneth Hanover is president and CEO of Northeast Health System, parent of Beverly Hospital. Robert G. Norton is president and CEO of the North Shore Medical Center in Salem.
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