Bill aims to curb health spending in Massachusetts

Allowable increases would be tied to growth of economy

Legislative leaders announced a compromise Monday to tame soaring health care costs, setting the stage for Massachusetts to become the first state to ­establish a target limiting how much providers and insurers spend on medical care.

The plan — expected to be voted on by the House and Senate on Tuesday, the final scheduled day for passing legislation — would allow health spending to grow no faster than the state economy overall through 2017. For the five years after that, spending would slow further, to half a percentage point below the growth of the state's economy, although leaders would have the power under certain circumstances to soften that target.

Supporters believe the bill will help moderate increases in insurance premiums for consumers and businesses. While the measure does not spell out specific cuts, health providers are expect­ed to expand efforts already under­way to slow the proliferation of some medical procedures, better coordinate care to keep patients healthier and out of the hospital, and steer patients to lower-cost care­givers.

Providers and insurers that do not meet the spending targets would have to submit "performance improvement plans'' to a new state commission. Failure to implement their plans could lead to a fine of up to $500,000.

"This is going to save us $200 billion over the next 15 years, and it's going to provide better quality of care and better access,'' Senate President ­Therese Murray said in an inter­view Monday night. "This is a big plus for us. We're once again in the forefront on health care in the nation.''

Murray said the 350-page bill, if signed by Governor ­Deval Patrick, will build on the state's 2006 landmark health insurance mandate, which ­became the model for President Obama's national health care legislation.

House Speaker Robert A. DeLeo said in a written statement that "while this bill may seem complex, its goal is simple: to cut health care costs that burden businesses and consumers while not interfering with the high quality of health care Massachusetts residents enjoy."

According to interviews with legislative leaders and a bill summary they provided, the legislation also includes provisions to reduce malpractice lawsuits, enhance public health, and increase transparency for consumers by requiring providers and insurers to provide up-to-date information online about the cost of procedures and tests. Patients generally would not have to pay more out of pocket than the disclosed amount for care.

But sticking to the spending targets could be a significant challenge for the state's robust health care industry. Medical spending in Massachusetts in recent years has climbed 6 percent to 7 percent annually, compared with the state economy's annual growth of about 3.7 percent. Health costs appear to be increasing more slowly in the past couple of years, however, in part due to the economic slowdown.

The final bill was negotiated by three House and three ­Senate leaders after their chambers passed different cost-
control plans. If the bill passes Tuesday, Patrick would have 10 days to act on it. He has been in close discussions with legislative leaders on key issues, so he is unlikely to be surprised by major provisions.

The Massachusetts Hospital Association failed in its effort to keep the bill from setting spending targets that are below the growth of the overall state economy. The group declined to comment Monday, saying it needed more time to review the legislation.

But for the most powerful hospitals and doctors groups, the outcome could have been worse. Some of the most stringent limits on providers passed by the House did not survive, including a luxury tax on hospitals, doctors groups, and others that charge considerably more than competitors. A separate House provision that would have required hospitals that are part of larger companies to ­negotiate prices with insurers individually, rather than as a more potent group as is now commonly done, was also eliminated from the final bill.

The legislators, though, did include a provision similar to one proposed by Patrick to ­attack the market power of providers, such as some Boston teaching hospitals that can ­demand high prices for their services because of brand-name or geographic dominance, one of the most-cited reasons for rising medical spending.

The new commission would be required to conduct a "cost and market impact review'' of certain providers, including those that want to expand or do not meet the state's spending benchmarks.

If the review finds that the provider has dominant market share and has "materially higher'' prices and total medical ­expenses than competitors, then the administration must refer the case to Attorney General Martha Coakley's office for possible formal investigation.

"We are pleased that the bill includes measures to address the market power of certain providers and the prices they charge as highlighted by multiple reports and studies issued by the attorney general and various state agencies over the last several years,'' said Lora ­Pellegrini, president of the Massachusetts Association of Health Plans, which lobbied for limits on market power. "Dealing with those issues is critical to the bill's success by ensuring that price differences among providers are correlated to the quality, acuity, and complexity of patient care and are not due to an institution's or system's size, brand recognition or geographic isolation.''

Amy Whitcomb Slemmer — executive director of Health Care for All, a Boston-based consumer advocacy group — said the organization is pleased with the plan and believes it "will lead to better integrated care'' for residents.

The legislation requires Medicaid and other state-funded health care programs to adopt new ways of paying hospitals and doctors by 2014, including so-called global payments, which give doctors a budget to provide all their ­patients' care. It also establishes a certification process for account­able care organizations — large groups of providers that provide all a patient's care in a coordinated fashion — and gives them a preference in contracting with state programs.