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Mass. recasting health payments

Officials draft plans for new system to compensate doctors, hospitals

By Liz Kowalczyk
Globe Staff / September 27, 2010

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Governor Deval Patrick’s administration is reviving the state’s ambitious plan to change how doctors and hospitals are paid, aiming to hand the Legislature a specific proposal by Jan. 1 and end months of disagreement over how to control health care spending.

Dr. JudyAnn Bigby, secretary of health and human services, convened a small group of state officials and health care executives earlier this month to draft a first-in-the-nation blueprint for scrapping the current payment system, in which doctors and hospitals are typically paid a negotiated fee for every procedure and visit. This system, called fee for service, is widely viewed as lacking coordination and encouraging unnecessary tests and procedures.

“We have more and more reason to want to move away from this system,’’ Bigby said in a phone interview Friday. “It is not going to be able to support the type of health care system we need. Fee for service is about how much revenue you can get for doing a certain thing or a certain number of things. That’s not how we think about providing health care to people.’’

Bigby’s group is developing a specific plan for switching to a new cost-conscious payment system that would essentially put providers on a budget for each patient’s care.

The system, called global payments, would require doctors, hospitals, and other providers to band together into groups called accountable care organizations that would split the payments and better coordinate patient care, thereby improving quality.

These provider groups generally would get a flat per-patient fee, along with incentives for high-quality care, hopefully eliminating the incentive for unnecessary tests and procedures, and encouraging greater focus on preventing serious health problems from developing in the first place.

But the group, the Committee on the Status of Payment Reform Legislation, will have to agree on a number of contentious issues, such as how much power state regulators will have over the prices paid to providers, the rules for forming accountable care organizations, and whether providers — many of whom profit from the fee-for-service system — will have seats on the board that eventually oversees the potential dismantling of that system.

These and other difficult issues have helped stall the state’s efforts at reforming the payment system. Senate President Therese Murray, a leading advocate of payment changes, said in July that she was “very frustrated’’ with discussions about the topic, and that she could not push through a plan this year partly because ‘’nobody is in agreement on anything.’’

But Bigby and other health care executives believe the state is now ready to move forward.

Since the summer, the federal government has made it clear that changing how providers are paid is a priority. Medicare next year will give out $10 billion to 100 to 300 sites in the US to test new payment models, and many Massachusetts providers plan to vie for this seed money.

“What I’ve been hearing from the administration is a bit of a pride issue,’’ said Brian Rossman, research director for Health Care for All, a Boston-based patient advocacy group. “They’re saying, ‘We ought to be the first state to do this.’ They know other states are moving forward as well. But we have always been the pioneer on these issues and we should be first.’’

Despite the setbacks this year, “momentum for payment reform is growing,’’ agreed Andrew Dreyfus, chief executive of Blue Cross Blue Shield of Massachusetts. Bigby’s nine-member group includes six state government leaders, raising the possibility that government programs like Medicaid could be first to change how they pay doctors and hospitals, “hastening the overall adoption statewide,’’ Dreyfus said.

Bigby said her goal is to present the Legislature with a plan for the transition by the end of the year to global payments, which lawmakers could then use to draft legislation — though she acknowledged they probably won’t agree with all of it.

If Republican challenger Charles Baker wins the November gubernatorial election, however, that could set back the group’s work, at least in part. Baker has said repeatedly that transparency about provider payments and quality is the answer to controlling health care costs and improving care, but he probably would favor less government oversight of a new payment system than the Patrick administration, Rossman said.

Still, the group’s work is proceeding and members soon will begin debating the composition of the group that would oversee the transition.

Rossman said Health Care for All favors the model currently used to oversee the state’s mandatory health insurance law. The Health Connector, which oversees that program, does not include insurance company executives, doctors, or hospital executives, all of whom have a financial interest in the health care system. “That will have to be hashed out,’’ he said.

Another major issue, said James Roosevelt, president of Tufts Health Plan and a member of Bigby’s group, is how “are we going to deal with the fact that there are providers in the system who are very much the haves and those who are very much the have-nots. Are we going to agree on something that redresses these great differences?’’

Earlier this year, Attorney General Martha Coakley issued a report finding that some hospitals and doctors with market clout are paid twice as much money as others for essentially the same patient care.

Bigby said she believes that the future oversight board should “establish a mechanism for addressing’’ the inequalities, but that it should include a way to compensate costly teaching hospitals for expenses such as educating new doctors and keeping burn units on standby.

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