Massachusetts Commission Proposes Sweeping Payment Changes

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The state whose 2006 adoption of comprehensive health reform legislation helped set the stage for the current national debate is again exploring a major overhaul, this time of the provider payment system. On July 16, the Massachusetts Special Commission on Health Care Payments released its recommendations for reforming the way in which health care in the Commonwealth is paid for, by private and public payers alike. The Commission recommended a system of “global payments with adjustments to reward the provision of high quality and accessible care” as the best solution to contain rising health care costs while ensuring that patients receive the care they need. The Commission issued a harsh criticism of the existing fee-for-service model and explored how risk adjustment and pay-for-performance incentives could be used to maximize the benefits of global payments. The report also called for providers to be reconfigured into accountable care organizations with a focus on providing comprehensive primary care and coordinating services across treatment settings.

Although the Commission’s recommendations were issued pursuant to a legislative mandate, they are, nevertheless, just recommendations, and would need to be adopted by the legislature to be implemented. Even if a regime of global payment were adopted, Massachusetts would face significant implementation challenges, beginning with establishing the “oversight entity” to which the Report leaves many of the finer details of restructuring. Reform plans would also need to address the complexities of risk adjustment between payers and providers, antitrust constraints on joint price negotiations by providers that are separately organized and would otherwise compete, as well as the need for federal waivers and exemptions from certain Medicare and fraud and abuse restrictions.

Given the significant obstacles to adopting more minor payment reforms on the national level (see, for example, the earlier article, Proposals to Address Geographic Variations in Health Care Spending Gather Momentum, Provoke Controversy describing efforts to delegate away from Congress the politically thorny task of adopting Medicare payment changes), it is unclear whether this Massachusetts proposal could serve as a model for national reform. Yet five years ago, the idea of mandating individual insurance coverage also seemed unrealistic. At the very least, the Commission’s report lays out a vision for what may need to be a longer-term effort to change the payment incentives that drive excess and waste in the delivery of health care services.

Ropes & Gray attorneys have published an in-depth analysis of the Massachusetts proposal, summarizing the Commission’s critique of the fee-for-service model, describing in detail how global payments would work under the Commission’s proposal and laying out the implementation challenges ahead. View a copy of “Is Massachusetts Poised to Leap Ahead of the Curve on Health Care Cost Containment?” by Stephen Warnke, Dan Roble and Jane Willis published in the BNA Health Plan & Provider Report (8/26/09).