And this is in a state where the biggest players — hospitals and health insurers — are nonprofits.
The dilemma around reining in the cost of health care has loomed over a fierce Beacon Hill debate about the Health Policy Commission’s makeup. Last year, lobbyists for hospitals and biotechs pushed for seats on the HPC, while insurers and employer groups resisted. Legislators finally passed a health care reform bill in the last days of December, with the session about to end. Out the door: seats for an employer rep and for a primary care doc. Incoming: representatives from the hospital and biotech sectors.
Proponents argued that the commission had been largely made up of academics and retirees, and would benefit from more real-world experience. Critics, meanwhile, kept making the “fox in the henhouse” analogy — why ask someone whose organization could benefit from rising prices to be responsible for keeping them in check?
With the change in seats baked into law, it seemed all but inevitable that the debate would reemerge when it came time for Governor Maura Healey to make her appointments.
Sure enough, it did.
In this case, the uproar last month was mainly caused by Healey’s intention to appoint Steve Walsh, head of the Massachusetts Health & Hospital Association, to the commission.
Despite a last-minute lobbying blitz to stop it, Healey went ahead and named Walsh to the commission — with Walsh saying he’ll recuse himself from issues concerning his members, likely a long list. (To some extent, this endeavor is personal for Walsh because he helped write the original 2012 law establishing the HPC, as a state rep at the time.) The new biopharma seat, meanwhile, went to Biogen executive Chris Leibman; his sector isn’t directly regulated by the HPC like Walsh’s.
With those two seats in play, some had hoped Healey would pick someone who doesn’t currently work in the sector they represent; the governor did this for two other seats by appointing Umesh Kurpad, former chief financial officer of insurer Point32Health, and Sandra Cottrell, recently retired CEO of the Codman Square Health Center.
Patty Houpt, who held the “employer rep” seat until it was legislated out from under her, isn’t thrilled that an employer-friendly voice will be missing now. Before Houpt, formerly the head of the New England Employee Benefits Council, the seat was held by Rick Lord, the longtime Associated Industries of Massachusetts president. From Houpt’s perspective, the nearly 4 million people in the state with employer-sponsored insurance should still be at the table, especially as employers and workers pay an increasingly disproportionate share of health care costs.
This game of musical chairs frustrates Jon Hurst, the president of the Retailers Association of Massachusetts. He has long decried the burden that insurance premiums place on his struggling small-business members. This grand HPC experiment simply isn’t living up to expectations, from his perspective, not if the mom-and-pop shops in his association keep facing double-digit increases. He doesn’t believe the HPC’s limited penalties are anywhere near large enough to meaningfully affect hospital budgets, and there aren’t any penalties at all for drug and med-device companies.
So how does the HPC keep a lid on costs? The 65-person agency regularly analyzes the major drivers and reports on them, sometimes issuing policy recommendations. There’s also intense oversight work: Any big merger or acquisition gets scrutinized. And then there’s the threat of a Performance Improvement Plan: The HPC secretly grills dozens of health care providers and insurers each year if they exceed the benchmark inflation rate. While these reviews don’t sound fun, they haven’t been financially painful, either: Only one provider, Mass General Brigham, has had to trim its costs to patients because of a PIP, paring them back over an 18-month period that wrapped up early last year.
The end-of-2024 legislation does give the HPC a few more responsibilities, including the remit to analyze the impact of drug costs and more oversight over transactions involving private equity firms or real estate investment trusts. To some extent, lawmakers were reacting to the debacle involving Steward Health Care hospitals, not to mention the rise of PE firms in parts of the health care system.
One thing this legislation did not do: increase the punishment for noncompliance. The maximum fine for dodging a PIP is $500,000, a rounding error for a hospital group like MGB, with its $20 billion annual budget. Paul Hattis, a former HPC member who works with the Lown Institute health care think tank, says the weak penalties give providers too much leeway to decide whether or not they truly need to rein in their health care spending growth.
Then there’s the fact that some of the biggest drivers of health care costs — labor, pharmaceuticals, medical supplies — aren’t directly regulated by the HPC.
As Healey was assembling her new lineup of commissioners, an email went out to hospital networks that raised eyebrows. The note came from Sarah Iselin, chief executive of Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer. Iselin’s message: No more messing around. She takes the benchmark seriously, and wants hospital CEOs to do the same in upcoming contract negotiations with Blue Cross. The insurer plans to hold the average increase for providers across its network below the 3.6 percent threshold.
While hospital executives may disagree with this ultimatum, it’s hard to argue with its sense of urgency. Big cuts in Medicaid and other federal funding sources are on the horizon, making it more important than ever to get costs under control.
The threats posed by the federal spending pullback and the intrusion of national for-profit players would ideally bring our hospitals and insurers together to work on solutions. But maybe not, if the dustup over Walsh’s appointment is any indication.
The bottom line: While the most recent legislation brings some new faces to the table, it’s not yet clear how it brings the HPC any closer to its ultimate goal.
Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.