1. MASSACHUSETTS ATTORNEY GENERAL’S
2011 EXAMINATION OF HEALTH CARE
COST TRENDS & COST DRIVERS
AAFP STATE LEGISLATIVE CONFERENCE
NOVEMBER 5, 2011
©2011 Office of Massachusetts Attorney General Martha Coakley

2. MA REFORM IN NATIONAL CONTEXT
REFORMS MA FEDERAL
Insurance reform
Partially, through
• Guaranteed issue market 1990s 2010 Affordable
• Acceptance of preexisting conditions Care Act
• Modified community rating
Expansion of coverage
• Individual mandate
Chapter 58 of 2010 Affordable
• Employer responsibility
the Acts of 2006 Care Act
• Medicaid expansion
• Insurance exchange
Initial cost containment Chapter 305 of
• Investigation of health care cost drivers the Acts of 2008
TBD
• Standardized reporting of cost/quality metrics Chapter 288 of
• Tools for prudent purchasing the Acts of 2010

3. 2011 EXAMINATION: KEY FINDINGS
1. There is wide variation in the payments made by health
insurers to providers that is not adequately explained by
differences in quality of care.
2. Globally paid providers do not have consistently lower
total medical expenses.
3. Total medical spending is on average higher for the care
of health plan members with higher incomes.
4. Tiered and limited network products have increased
consumer engagement in value-based purchasing
decisions.
©2011 Office of Massachusetts Attorney General Martha Coakley

4. FINDINGS CONT’D
5. PPO health plans, unlike HMO health plans, create significant
impediments for providers to coordinate patient care
because PPO plans are not designed around primary care
providers who have the information and authority necessary
to coordinate the provision of health care effectively.
6. Health care provider organizations designed around primary
care can coordinate care effectively (1) through a variety of
organizational models, (2) provided they have appropriate
data and resources, and (3) while global payments may
encourage care coordination, they pose significant
challenges.
© 2011 Office of Massachusetts Attorney General Martha Coakley

5. MEASURING HEALTH CARE COSTS
PRICE
• Negotiated amount insurers pay providers for health
care services provided to members.
TOTAL MEDICAL EXPENSES (TME)
• Total cost of all the care a patient receives (price of
services X utilization of services).
• Often attributed to the patient’s primary provider
group. This shows, for each provider group, how much
health care the group’s patients consume on average.
© 2011 Office of Massachusetts Attorney General Martha Coakley

6. MEASURING HEALTH CARE DELIVERY
QUALITY OF CARE
• With expert assistance, we reviewed the best available,
well-vetted, widely accepted quality measures from state
and national agencies and nonprofit organizations.
• We focused on outcome measures where available.
CARE COORDINATION
• We examined how MA providers perform on a variety of
quality measures related to the degree of coordinated
activity over time and/or across health care specialties.
© 2011 Office of Massachusetts Attorney General Martha Coakley

7. Relative Payments to Hospitals
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Hubbard Regional Hospital
Saints Medical Center
Milton Hospital
Noble Hospital
Essent - Merrimack Valley
Athol Memorial Hospital
Morton Hospital and Medical Center
Cambridge Health Alliance
Massachusetts Eye and Ear Infirmary
Mercy Medical Center
UMASS - Health Alliance
Holyoke Medical Center
Quincy Medical Center
Lawrence General Hospital
Jordan Hospital
Boston Medical Center
Anna Jaques Hospital
Heywood Hospital
Southcoast - St. Luke's
UMASS - Marlborough Hospital
New England Baptist Hospital
Wing Memorial Hospital
Signature HC - Brockton Hospital
Southcoast - Tobey Hospital
UMASS - Clinton Hospital
Winchester Hospital
Lowell General Hospital
Baystate Medical Center
Vanguard - Saint Vincent Hospital
Southcoast - Charlton Memorial
Essent - Nashoba Valley
Vanguard - MetroWest Medical Center
Milford Regional Medical Center
Caritas Holy Family Hospital
PHS - Emerson Hospital
Hospitals from Low to
Baystate - Mary Lane Hospital
Tufts Medical Center
Caritas - Good Samaritan
Northeast Health System
Caritas - Norwood Hospital
Caritas - Carney Hospital
Caritas - Saint Anne's Hospital
Dana-Farber Cancer Institute
Partners - Faulkner Hospital
PHS - Hallmark Health
General Martha
Lahey Clinic
Baystate - Franklin Medical Center
BID - Needham/Glover
Partners - North Shore Med Ctr
Partners - Newton-Wellesley Hospital
© 2011 Office of Massachusetts Attorney High Payments Coakley
Mount Auburn Hospital
South Shore Hospital
Caritas - St. Elizabeth's
Harrington Memorial Hospital
UMass Memorial Medical Center
BI Deaconess Medical Center
Sturdy Memorial Hospital
CCHS - Falmouth Hospital
CCHS - Cape Cod Hospital
FINDING #1: THERE IS WIDE VARIATION IN THE
Partners - MGH
BkHS - Fairview Hospital
Partners - BWH
BkHS - Berkshire Medical Center
North Adams Regional Hospital
PAYMENTS MADE BY HEALTH INSURERS TO PROVIDERS
Cooley Dickinson Hospital
Partners - Martha's Vineyard
Children's Hospital Boston
Partners - Nantucket Cottage

8. 0.00
0.20
0.40
0.60
0.80
1.00
1.20
MA Hospital 1
MA Hospital 2
MA Hospital 3
MA Hospital 4
MA Hospital 5
MA Hospital 6
MA Hospital 7
MA Hospital 8
MA Hospital 9
MA Hospital 10
MA Hospital 11
MA Hospital 12
MA Hospital 13
MA Hospital 14
MA Hospital 15
MA Hospital 16
MA Hospital 17
MA Hospital 18
MA Hospital 19
MA Hospital 20
MA Hospital 21
MA Hospital 22
MA Hospital 23
MA Hospital 24
MA Hospital 25
MA Hospital 26
MA Hospital 27
MA Hospital 28
MA Hospital 29
MA Hospital 30
MA Hospital 31
MA Hospital 32
MA Hospital 33
MA Hospital 34
MA Hospital 35
MA Hospital 36
MA Hospital 37
MA Hospital 38
MA Hospital 39
MA Hospital 40
MA Hospital 41
MA Hospital 42
MA Hospital 43
MA Hospital 44
Compared to National Average Performance
MA Hospital 45
© 2011 Office of Massachusetts Attorney General Martha Coakley
MA Hospital 46
MA Hospital 47
MA Hospital Performance on CMS Process Measures
MA Hospital 48
MA Hospital 49
MA Hospital 50
MA Hospital 51
EXPLAINED BY DIFFERENCES IN QUALITY:
MA Hospital 52
MA Hospital 53
MA Hospital 54
MA Hospital 55
MA Hospital 56
MA Hospital 57
MA PROVIDERS HAVE CONSISTENTLY HIGH QUALITY
MA Hospital 58
MA Hospital 59
MA Hospital 60
FINDING #1: DIFFERENCES IN PRICE ARE NOT ADEQUATELY
MA Hospital 61

9. Relative Health Status Adjusted TME
1.000
1.100
1.400
1.500
0.800
0.900
1.200
1.300
1.600
MARLBOROUGH/ASSABET
East Boston Neighborhood Health Ctr
Neponset Valley Healthcare Assoc
NASHOBA IPA
HCPA
BMC MANAGEMENT SERVICES
METRO WEST-LMH
HOLYOKE PHO
ANNA JAQUES/MERRIMACK/WHITTIER
CAREGROUP - N.E. BAPTIST
Lowell General PHO
Signature Healthcare Brockton
Lawrence General IPA
Fallon Clinic
New England Quality Care Alliance
HENRY HEYWOOD
MORTON HOSPITAL
Caritas Christi
Baystate Health
WINCHESTER/HIGHLAND
HEALTH ALLIANCE
Medical Expenses (2009)
Atrius Health
Beth Israel Deaconess
Provider Groups from Low to High TME
Southcoast
Mount Auburn Cambridge IPA
VALLEY MEDICAL GROUP
Northeast Health Systems
© 2011 Office of Massachusetts Attorney General Martha Coakley
Lahey Clinic
Central Massachusetts IPA
Acton Medical Associates
UMASS MEMORIAL MED. CTR.
COOLEY - DICKINSON PHO
Variation by Payment Method in one Major Health Plan's Health Status Adjusted Total
STURDY MEMORIAL HOSPITAL
CONSISTENTLY LOWER TOTAL MEDICAL EXPENSES
South Shore PHO
Partners
FINDING #2: GLOBALLY PAID PROVIDERS DO NOT HAVE
HARRINGTON PHO
Childrens

10. FINDING #2: GLOBAL PAYMENTS POSE CHALLENGES,
ESPECIALLY FOR SMALLER PROVIDERS
• Bearing financial risk through global payments requires
significant investment in expertise, resources, and
infrastructure, which many providers lack.
• Risk contracts expose providers to random insurance risk,
which providers, especially smaller providers, are ill-
equipped to bear.
• We should ensure the incentive to manage risk contracts
does not lead providers to avoid patients whose care may
be more difficult to manage.
• We should address concerns regarding how risk contracts
interact with self-insured accounts.
© 2011 Office of Massachusetts Attorney General Martha Coakley

11. FINDING #3: TOTAL MEDICAL SPENDING IS HIGHER
FOR THE CARE OF COMMERCIAL HEALTH PLAN MEMBERS
FROM HIGHER INCOME COMMUNITIES
• We received health status adjusted TME from the three
major insurers in MA for all their commercial members –
HMO, PPO, and indemnity.
• For each Massachusetts zip code, we compared average
TME for members living in that zip code with average
income for that zip code, as reported on 2007 federal
income tax returns.
• The next graph shows that total medical spending for the
care of patients from higher-income zip codes is higher on a
health-status adjusted basis than total medical spending on
the care of patients from lower-income zip codes.
© 2011 Office of Massachusetts Attorney General Martha Coakley

12. FINDING #3: TOTAL MEDICAL SPENDING IS HIGHER
FOR THE CARE OF COMMERCIAL HEALTH PLAN MEMBERS
FROM HIGHER INCOME COMMUNITIES
100.0%
Proportion of Members at Each Spending Level with Low v. High
90.0%
80.0%
70.0%
60.0%
$120,149
Income
50.0%
$54,827
40.0% $42,850
$36,390
30.0% $27,802
20.0%
10.0%
0.0%
$335 $367 $388 $410 $448
1st 2nd 3rd 4th 5th
Members of Major Health Plan by Spending Quintile (As Measured by PMPM Health Status Adjusted TME)
© 2011 Office of Massachusetts Attorney General Martha Coakley

13. FINDING #4: TIERED AND LIMITED NETWORK PRODUCTS
HAVE INCREASED CONSUMER ENGAGEMENT IN VALUE-
BASED PURCHASING DECISIONS
• Health insurance products that do not differentiate
among providers based on value do not give consumers
an incentive to seek out more efficient providers,
because consumers are not rewarded with the cost
savings associated with that choice.
• As a result: (1) consumers are de-sensitized from value-
based purchasing decisions and (2) providers are not
rewarded for competing on value.
• Massachusetts has seen recent developments in tiered
and limited network products; these types of innovative
products should be further encouraged.
© 2011 Office of Massachusetts Attorney General Martha Coakley

14. FINDING #5: PPO HEALTH PLANS CREATE
SIGNIFICANT IMPEDIMENTS FOR PROVIDERS TO
COORDINATE PATIENT CARE
• We found that primary care providers, with adequate
data and resources, are the foundation of effective care
coordination.
• Preferred provider organization (PPO) plans do not
require selection of a primary care provider, and as
such are inconsistent with structured approaches to
improving care coordination.
• Enrollment in PPO plans is increasing: for the three
largest commercial insurers in MA, it has surpassed
40% of their membership.
© 2011 Office of Massachusetts Attorney General Martha Coakley

15. FINDING #6: A VARIETY OF PROVIDERS WITH ADEQUATE
DATA AND RESOURCES CAN COORDINATE PATIENT CARE,
REGARDLESS OF ORGANIZATIONAL STRUCTURE
• A variety of provider organizational models,
with adequate data and resources, can deliver
high-quality, coordinated care.
• Enhanced availability of information on patient
care is essential to supporting care
coordination and measuring system-wide
performance.
© 2011 Office of Massachusetts Attorney General Martha Coakley

16. THOUGHTS FOR PRACTITIONERS
1. The importance of access to timely data on patient
care
2. The importance of effective oversight and
solvency standards for providers who contract to
manage the risk of patient populations
3. The importance of supporting primary care
providers who can assist patients in coordinating
care based on each patient’s needs and best
interests
© 2011 Office of Massachusetts Attorney General Martha Coakley

17. RESOURCES & CONTACT INFORMATION
• Massachusetts Attorney General’s 2011 Examination of Health Care Cost
Trends and Cost Drivers: http://www.mass.gov/ago/docs/healthcare/2011-
hcctd-full.pdf
• Massachusetts Attorney General’s 2010 Examination of Health Care Cost
Trends and Cost Drivers: http://www.mass.gov/ago/docs/healthcare/final-
report-w-cover-appendices-glossary.pdf
• Massachusetts legislation (Chapter 288 of Acts of 2010) to increase
transparency and control costs in health care market:
http://www.malegislature.gov/Laws/SessionLaws/Acts/2010/Chapter288
• Massachusetts Division of Health Care Finance and Policy materials on cost
trends hearings: http://www.mass.gov/dhcfp/costtrends
Karen Tseng, Assistant Attorney General, MA Attorney General’s Office
Karen.Tseng@state.ma.us; (617) 963-2123