THE HEALTH POLICY COMMISSION took a back seat last week to Attorney General Andrea Campbell on issues related to Steward Health Care, but to its credit the agency kept its eyes on the bigger issue facing Massachusetts health care policy makers — the longstanding market dysfunction stemming from inequities in health care resources.
Yes, Steward is the front-of-mind issue for most in the health care industry, but it’s clear Campbell wants to move on as quickly as possible and put the whole catastrophe in the rearview mirror. Without waiting for the commission to finish its review, the attorney general has already signaled she will go along with the sale of five Steward hospitals in Massachusetts, the shuttering of two others, and the sale of Steward’s physician group to a subsidiary of private equity player Kinderhook Industries.
I would have loved to see the commission dig into the Kinderhook purchase more, but I get it. Closing that and the other Steward deals as fast as possible is the current priority. It’s time to move on, get Steward out of the state, and focus on equally challenging priorities.
That’s why a presentation last Thursday by David Auerbach, the Health Policy Commission’s research director, caught my eye. He drew attention to the inequities in health care resources that plague our system and often result from having too much market power in the hands of a few big players. Here’s my takeaways from Auerbach’s presentation.
Health care spending has been ratcheting up in recent years, driven by commercial spending growth fueled by higher pharmaceutical prices and increases in hospital outpatient spending. Massachusetts is now the state with the second-highest family health insurance premiums in the country, behind only New Jersey. We were fourth or fifth highest a few years ago, so we’re going in the wrong direction.
Annual family health care spending is topping $29,000 per year when you combine employer and family payments for premiums plus out-of-pocket expenses.
A 2023 survey indicates approximately 900,000 people in our state with employer-based health insurance now report that they did not get needed health care due to costs—up from 600,000 in 2021.
There continues to be a wide disparity in payments to health care providers. Our most prestigious and market-dominating hospitals receive inpatient commercial payments far beyond Medicare payment levels, while many other hospitals are paid commercial prices that are much closer to Medicare prices.
This sort of commercial price variation also exists for outpatient services, and often can be much higher in hospital outpatient departments compared to physician offices. One example Auerbach provided in his presentation was how the infusion of a standard chemotherapy drug, which on average may require payment of around $10,000 if infused at a physician office or at some lower-priced hospital outpatient clinic. But the cost to insurers is double that for infusion of the very same drug at Dana-Farber or Massachusetts General Hospital. Another example was how a market basket of 50 common outpatient services (labs, imaging, etc.) ran over $50,000 at Boston Children’s or Dana Farber, about double the amount that insurers pay to the 10 or so lowest-charging hospitals in the state for the very same services.
Talk about health care waste.
On that same day, the Center for Health Information and Analysis reported that hospital total margins in the state had improved greatly with a 6.4 percent year-over-year increase, comparing fiscal year 2023 to fiscal year 2022. Even more striking, our larger and most prestigious health care systems grew their net assets. Mass General Brigham’s net assets rose to $17.1 billion, Children’s Hospital grew to $7.66 billion, Beth Israel Lahey Health rose to $3.97 billion, and Dana Farber Cancer Institute went up to $3.36 billion.
While this asset growth reflects both operating gains and increases in the value of their investment portfolios—it certainly doesn’t suggest that these particular institutions are as financially stressed as they often claim; and more recent data suggests that their net assets have grown even more over the course of the current fiscal year.
In the past, when some insurers in the state have gotten into financial trouble, some of the larger and more stable competitors have come forward to help with low interest loans. But in this current crisis in the hospital sector, none of the bigger players in the industry are stepping forward to help. Instead, the state is coming up with nearly half a billion dollars over the next three years to bail out the hospitals Steward unloaded.
I would also think that many of the other ‘have-not’ hospitals in the state, while appreciating the immediate need to bailout the six Steward hospitals, are wondering if the state will be there to backstop their operations if they too get into significant financial trouble.
For sure, improving the financial oversight and reporting for all providers with a particular watchful eye for any actions of bad actors is a good idea. But it’s quite possible the next financial emergency facing a health care provider will involve a nonprofit operator, so a better preventative approach would be a state policy increasing the resource flow to more challenged institutions, while holding the revenue growth for wealthier ones in check.
Whether such a redistribution comes from compression of commercial prices, or by paying global budgets to hospitals—that will make for an interesting policy discussion on how best to stabilize needed providers while advancing overall system affordability.
For sure, it seems timely for these sorts of critical ideas and related issues to be front and center in the discussion at the Health Policy Commission’s November cost trends hearings.
Paul A. Hattis is a senior fellow at the Lown Institute.
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