November 7, 2011 | last updated May 16, 2012 4:35 pm

Industry Trains Its Sights On Controlling Costs

In April 2010, state officials caused an uproar in the health insurance community when 86 percent of rate increase requests for small business plans were flat out rejected.

Members of the health insurance industry decried the measures and claimed government officials had overstepped while not addressing the cost of care provided in the commonwealth.

Fast forward a year and a half, At a recent Worcester forum that discussed cost control measures, Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans — the statewide organization for the health insurance industry — called on the state to do more to help control health care costs.

It seemed to be in contrast to how the association reacted after 235 of 275 rate increase requests were denied last year.

But that shift is not necessarily a surprise to those in the industry.

Eric Schultz, president of Harvard Pilgrim Health Plan, who moderated the discussion in which Pellegrini made the statements, said after the event that there has been a shift in recent months.

There is broad agreement in the health care community, from health care providers — the doctors and hospital groups — and insurers, that something must be done. They believe annual double-digit percentage increases in health insurance costs are not sustainable for businesses.

"Health care costs continue to rise and it's impacting middle America," Schultz said. "When anything like that happens, there is broad outrage and that's what we're facing."

A recent report from Blue Cross Blue Shield found that 88 percent of Massachusetts residents think it's important for state government to take major action on health care costs (see related story).

So, with agreement from all sides that something should be done, the question becomes: What's the solution?

Local officials have ideas.

Patient Populations

Jack Dutzar, president of Reliant Medical Group, formerly Fallon Clinic, said there are two major groups that make up the population of people who receive care.

Some of the most expensive patients in the system are those with chronic, long-term needs. The others are patients who undergo more routine procedures associated with general care.

Part of a solution being pursued at Reliant, he said, is to focus on preventative measures to help avoid developing the chronic diseases that ultimately end up costing the system more, while also examining ways to more efficiently provide day-to-day care.

There are numerous ideas of how to actually execute such a plan, many of which revolve around the idea of global payment systems, which transition the health care payment system away from a fee-for-service model and toward a monthly payment per member to provide care.

Movement toward this type of system is happening in the market — Dutzar said Relaint already gets about 60 percent of its revenue from the global payment model — but he admits adoption is slow.

Discussion of looming legislation from Beacon Hill that could mandate a switch away from fee-for-service is accelerating the move, he said.

Tiered Products

Other insurance providers in the area say they too have seen movement recently toward marketplace reform measures.

David Przersiek, senior vice president of marketing and sales at Fallon Community Health Plan in Worcester, said he's seen a renewed focus recently by hospital and doctor groups that are looking to be part of tiered insurance plans. These plans let consumers choose which doctor and hospital groups they go to based on cost. If they chose a more expensive provider, they pay more. If lower-cost providers are chosen, then they don't have to pay as much.

Przersiek said those systems are catching on fast, not just from insurance companies offering them, but from businesses and consumers selecting them.

Dennis Irish, a spokesperson for Vanguard Health Care, which operates St. Vincent's Hospital in Worcester and MetroWest Medical Center in Natick and Framingham, said the tiered products offer a clear way to reduce health care costs. The key, Irish said, is to give consumers information and choice about where they want to get their health care. High costs, he said, have not been proven to mean better quality of care, as reported by Attorney General Martha Coakley and reports from the Division of Health Care Finance and Policy.

While discussion about moving away from fee-for-service and to a global payment system seems to be a hot industry topic, Pellegrini, the insurance association president, said that alone will not solve what her organization sees as a major driving force in high health care costs. Pellegrini said the market clout of some hospital and doctor groups in the state is the main driver.

Some hospitals have the market clout to be able to charge high costs, so they do. Just moving to a global payment model does not necessarily address the cost of how much hospitals charge to provide the care, she said.

Patrick Muldoon, president and CEO of HealthAlliance Hospital in Fitchburg and Leominster, agrees that global payment systems are not a panacea. Perhaps limiting future cost increases and tying them to some inflationary statistics in the state could be one solution.

Overall, both sides agree that some legislation is expected to be coming soon from Beacon Hill.

Timothy Gens, executive vice president of the Massachusetts Hospital Association, said perhaps the best role for government is to set goals for health care cost control measures and hold everyone in the industry accountable for achieving them.

But he stopped short of supporting too much intervention. He warned that getting too much into the details of specific reforms could hurt the industry.

"Taking too many steps to control costs too much, to micromanage, is taking the issue too far," he said. "There are some areas where the government just doesn't have the expertise of those who are involved in this industry 24/7."

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