What Do Hospitals Really Want?

Dennis Keefe, the CEO of Cambridge Health Alliance, outlines his organizations' testimony on health care costs before a state panel:

Last week the Boston Globe wrote that just two hospitals out of 25 invited appeared to testify at the first day of Department of Insurance hearings on escalating health care costs.

On Monday, the Globe editorialized on the issue, saying the no-show hospitals exhibited “disrespect” by shunning the hearing. The Mass Hospital Association, however, has taken strong exception to the Globe characterization.

Amidst this furor, the media still haven’t reported what the hospitals that did testify had to say. (By the second day, two more hospitals had testified). Since we were one of the few, I thought I would use this space to explain why we chose to attend and to summarize our testimony, which was presented by Gordon Boudrow, our Chief Financial Officer, with assistance from Priscilla Dasse, our Senior Vice President for Quality and Performance Improvement, and Glover Taylor, our Senior Director of Managed Care Contracting.

As I’ve stated previously, we support the state’s initiatives to reform the current fee-for-service based payment system and move to a global payment model. We believe these reform proposals hold promise and opportunity for us to improve our system for our patients and we want to establish ourselves not only as a leader in moving the state toward this model but also as an early adopter that can demonstrate the benefits and efficiencies to the rest of the industry. That, in essence, is why we felt it was important to show up and submit both oral and written testimony at the state’s hearing.

While the hearing last week was focused primarily on private insurers and not the public payers which comprise most of our patient care, we feel there are connections and important improvements that can be made in private insurance, and we want to be part of the public conversation and efforts to better control costs.

Our testimony centered on three issues and three calls to action:

1) Reducing the inequities in the current private insurance market.

2) Removing the dysfunction in the current behavioral health insurance system.

3) Eliminating the excessive administrative burden and complexity that exists today.

We reminded the DOI that as a safety net provider with a small proportion of private payer patient care services, it is difficult for us to negotiate with insurers, who frequently give us the "you're too small a piece of our business to give you those rates." Furthermore, there has been a market tendency to underfund providers like CHA that have no have leverage with the big private insurance companies.

The current payment system lacks equity across providers and services as it is biased towards reimbursement of high acuity inpatient care and negatively biased against essential, core hospital services with preventive, outpatient services – which constitute the majority of our patient care.

Most significant, in the area of behavioral health, services are particularly poorly served by the current health plan contracting process, with low rates paid and a lack of integration of medical and mental health care.

Most insurance plans, in fact, carve out behavioral health services to large, national for-profit behavioral health vendors, which results in additional administrative burden and the fragmentation of patient care. As a result, most health plans require providers to contract independently with their carve-out vendor and with the health plan itself for medical services. This is highly burdensome and can disrupt patient care when the provider cannot reach a contract agreement with a health plan’s behavioral health carve-out vendor.

Because there is little standardization in the way the various health plans contract and administer their insurance products, administration is complex and costly, we noted. Private payers have different standards for their contract provisions, for claims administration, denials management, patient care referrals, preauthorization requirements, and quality measures.

Technical denial of claims is an area of increasing activity and long-term administrative burden. Our experience, which we believe is consistent with industry norms, has been that up to eight percent of claims are initially denied, yet all but two percent are finally paid after prolonged, multi-hour efforts per claim to appeal the denial.

Finally, greater standardization is needed across payers to align quality incentives and to reduce the unnecessary administrative burdens on clinical, quality and financial staff. The current quality approach disadvantages providers with small volumes. Cambridge Health Alliance, in fact, we may not meet the volume thresholds for individual private payers required to qualify for quality payments even though our quality is high in the aggregate.

It’s hard to know if our testimony had an impact, though the commissioners seemed pleased that we came and offered our testimony. And they certainly got our message: We believe the reorganization of care delivery to a patient-centered model, such as development of the Medical Home within Accountable Care Organizations, using a combination of global/capitated and bundled payments, will have a long-lasting and beneficial impact on bringing down health care costs while improving overall wellness and health.