Hospital Study Commission Hears from Health Plans/Employers
On Feb. 17, The Commission to Study Maine's Hospitals heard presentatons from the Maine Association of Health Plans and an employee benefits consultant. Both presentations noted wide variations in hospital costs across the state and in physician practice patterns.
The first presentation was made by Katherine Pelletreau of The Maine Association of Health Plans. The Association is made up of the four major health insurers doing business in Maine, namely Anthem BC&BS, Cigna HealthCare, Aetna, Inc. and Harvard Pilgrim Health Care. Collectively, these carriers provide coverage for roughly 700,000 Maine people. Ms. Pelletreau's presentation focused on contracting, challenges facing insurers in contracting with hospitals, the regulatory and legislative environment, costshifting, hospital consolidation and the voluntary cost constraints established in the Dirigo Health legislation.
Ms. Pelletreau noted that in Maine, cost drivers are numerous and complex. She noted that Maine is very hospital focused, and that the state relies upon hospitals to be the public health structure in the state and increasingly, the deliverer of primary care, as well. She stated, "Expensive emergency rooms are used as a primary entry point into the system in Maine in a way they are not in other states with more varied primary care facilities. Maine has one of the highest uses of utilization of Emergency Rooms of any state in the country. This is problematic from the standpoints of quality and cost - ER staff triage emergencies, but they are not trained as thorough primary care providers and they are very expensive."
The presentation also noted the challenges facing insurers in contracting with hospitals, including the provisions of Insurance Rule 850, monopolies and consolidation among providers and hospitals and cost-shifting necessitated by inadequate reimbursement from public payors. "Maine is very large geographically and we have a high number of hospitals among which there is virtually no competition. Most communities are served by a single hospital. Further, hospitals control what they charge for services and how often and how much it changes. Hospitals have always controlled what the charge for a given service is and charges are the normal starting point for negotiations", she noted.
Ms. Pelletreau noted that Rule 850 requires that insurers provide access to healthcare services, and they they frequently must pay for services provided at facilities outside their network under the current regulatory framework. These services are more expensive for members and the plan alike as enrollees must pay the hgiher costs in the form of higher premiums for using an out-of-netwrok provider.
Ms. Pelletreau also complained that payors had not seen a decrease in rates from hospitals which had been granted federal Critical Access status, despite these facilities receiving 100% reimbursement from federal payors.
In noting the consolidation that has taken place, she stated, "Consolidation is another major factor in contract negotiations - some health systems such as Spectrum, Eastern Maine Health, Maine General, MaineHealth and Neurosurgical Associates are good examples...Since insurers must negotiate with increasingly large systems for a wide variety of services, their ability to secure lower costs is becoming more restricted."
She concluded by stating that with regard to the voluntary 3.5% cap on hospital expenses per case mix adjusted discharge and the volunatry 3% cap on consolidated operating margins, it is too early to guage the impact either positive or negative. Plans are currently in the process of negotiating contracts and simply do not have enough information yet. She further noted that the 3.5% cap is not a limit on payment rates. It does not not take utilization into account. Even is chrages are capped at 3.5% and this cap affects the rate charged by the hospital to the insurer, if utilization increases, any gain from the cap could be eroded.
There was disagreement expressed at the meeting as to whether the voluntary cap applied only to inpatient admissions. Hospital expenses in Maine represent over one-half of health care expenditures in health insurance premiums, Ms. Pelletreau asserted, and she alleged that one-half of that expense is for out-patient care.
She asked that Maine hospitals be benchmarked against other hospitals in areas with similar demographics, and for a careful examination of any outliers.
In her summation, Ms. Pelletreau offered some suggestions to the Commission:
1. Deal directly with cost shifting by requiring transparency in exactly how much is cost shifted from where and to whom. This would require that hospitals be able to determine the true cost of delivering each service.
2. Consider options such as increasing the number of facilites with Critical Access designation to mitigate the impact of low federal reimbursement.
3. Be aware that what the state pays providers for Medicaid has an impact on private payors.
4. Create consistent and timely reporting requirements for hospitals and hospital systems. Part of this approach should be including clearer reporting for affiliates within hospital systems and determining how investment income should be treated.
5. A Rule that will allow for competition among providers perhaps by eliminating the geographic restriction of Rule 850. Allow insurers to send members to facilities outside current parameters of one hour or 60 miles.
The second presentation was made by Brent D. Churchill, CHC, of Employee Benefits Design, Inc. in Fort Fairfield. One of Mr. Churchill's clients is Frazier Paper Co.
Mr. Churchill began by stating that, "Whether we want to admit it or not, our health care system is revenue driven rather than health care driven." He felt that all providers, including hospitals and physicians, were looking for ways to increase revenue. He noted advertising, increased charges and increased utilization as examples of revenue-enhancement.
He noted that in his view, there were three ways to control health care costs, 1. Cost savings, 2. Education, and 3. Cost shifting. "To control costs, it will take a combination of all three. However, we need to do all we can with number 1 and 2 before taking step 3."
Mr. Churchill provided graphs comparing costs with respect to radiology, ENT claims, orthopedic claims, and colonoscopies (facility charges only for colonoscopies). He also noted the successes that Frazier Paper had had in controlling health care costs under its plan, which is controlled by a committee made up of both union and mangement representatives. In recent history, the company had been able to keep its cost increases below 10% by employing a number of different strategies including re-designing benefits.
Discussion following the two presentations tended to focus on hospital competition, consolidation, and technology. At least one commission member asked for the views of other members as to the desirability of returning to rate-regulation as a means of controlling hospital costs. As some commission members had little background on Maine's previous efforts through the Health Care Finance Commission, it was suggested that further information be provided regarding the HCFC experience.
The Commission meets again at 9:00am on Monday, March 1, in Augusta. Physician representatives on the Commission are D. Johua Cutler, M.D., a Portland cardiologist and RIchard Wexler, M.D. an internist now working with Medical Care Development. Hospital representatives are Scott Bullock from Maine General and John Welsh from Rumford Community Hospital.