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State regulators see maps as healthcare cost control tool


By Andy Metzger


BOSTON — Seeking to steer the state’s health system toward more efficiency, a new state commission has started to map out geographic areas that regulators plan to use when trying to ascertain whether industry consolidation will drive up costs.

Health Policy Commission Executive Director David Seltz said the calculations on areas served by particular hospitals would be made available to them so they could be taken into account as health care companies seek to make moves in a market where the commission serves as a new regulator under a 2012 cost control law.

The HPC is charged with evaluating the growth in total medical expenditures with the aim of keeping that growth rate at or below the growth in gross state product, which is projected at 3.6 percent.

“We want to be able to provide that clear notice to the industry in advance so they know what they’re supposed to be tracking towards, because ultimately they’re going to be the ones who are going to take the steps to make sure we’re successful or not,” Seltz told reporters.

HPC’s 2013 cost trends report found that between $14.7 billion and $26.9 billion in health care expenditures, representing 21 to 39 percent, was estimated to be wasteful. High-cost patients, who are spread throughout the state, drive up costs as well, as do hospitals whose market clout enables them to negotiate higher rates.

The estimated growth in health care expenditures between 2009 and 2012 is 3.1 percent per year, less than the 3.7 percent growth of the state’s economy, according to the commission.

HPC board members Rick Lord, CEO of the Associated Industries of Massachusetts, and consumer advocate Paul Hattis suggested the agency could focus on one or two cost drivers.

Nikhil Sahni, HPC policy director for cost trends, said CHART grants could be used to address cost drivers.

“The law sets up, in the future, some consequences if we don’t hit the benchmark, and so this commission has a role in potentially working with providers and payers that are growing faster than that,” Seltz told reporters. He said the HPC would issue a report around August measuring year-to-year cost growth between 2012 and 2013.

Last week, the commissioner determined Partners Health Care’s proposed acquisition of South Shore Hospital and a physician group would drive up costs and reduce competition, recommending Attorney General Martha Coakley review the transaction.

As part of future cost and market impact reviews, the commission will be able to look at how a proposed health market change could change circumstances within a primary service area and a dispersed service area – geographic definitions the HPC is seeking to define.

The geographic areas under development follow the same methodology HPC used to calculate South Shore Hospital’s area, where Seltz said the hospital chain Partners and South Shore Hospital were “number one and number two competitors.”

“Our referral to the attorney general isn’t based on just this one factor,” Seltz told the News Service. He said the HPC will develop a definition for dominant market share in the future.

“What we’re doing now is the equivalent of economic brain surgery,” HPC board member and economist David Cutler said during a committee meeting Monday.

HPC director of policy for market performance Karen Tseng recommended using a combination of geographic distance as well as data on hospital discharges to determine a primary service area – which could be adjusted based on the specifics of a hospital or hospital group.

The dispersed service areas, a more recent concept that could include hospitals not in direct competition for patients, could be mapped out by combining primary service areas, Tseng suggested.

“Hospitals so far apart that they don’t compete for the same patients still can be competitors,” said Corey Capps, a consultant who participated in the meeting via phone. He noted an employer whose workers live in a large geographic area would need to find a payment plan that would satisfy people seeking coverage in a variety of hospitals.

The maps would not be ironclad barriers to mergers within geographic zones, said Seltz, who said, “Context matters.”

A map of how the HPC’s favored approach would capture Steward’s dispersed service area shows a shaded area covering much of eastern Massachusetts, from the Westport seaside to the forests of Pepperell, with a carved-out area around Greater Lowell.

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