Health Policy Commission Releases 2013 Cost Trends Report

BOSTON — The state Health Policy Commission (HPC) has issued its first annual cost trends report, profiling the Commonwealth’s healthcare delivery system and examining specific cost drivers, including hospital operating expenses, wasteful spending, and high-cost patients. The report adds to the evidence base the HPC is building to inform its work on cost-containment and quality-improvement policies.

 “This report leverages new, state-specific data to enhance our understanding of and approach to healthcare cost trends and drivers,” said Dr. David Cutler, HPC commissioner and chair of the Cost Trends and Market Performance (CTMP) Committee. “We are committed to identifying challenges and opportunities to improve our current system, and our first cost-trends report sets an important baseline for collective efforts in 2014 and beyond.”

For the first time, the HPC used medical claims data from the state’s All-Payer Claims Database to analyze trends in healthcare spending by public and commercial payers. The report also breaks new ground by calculating a statewide estimate for wasteful spending in the Massachusetts healthcare delivery system, offers specific examples of waste that can be targeted for improvement, and approximates the percentage of Massachusetts patients that contribute to more than half of all healthcare spending in the state.

•  Improving hospital efficiency represents an opportunity to save on costs without reducing quality;

• Operating efficiency varies greatly from one hospital to another. The operating expenses that Massachusetts acute-care hospitals incur for inpatient care differ by thousands of dollars per patient discharge, even after adjusting for regional wages and the complexity of care provided; and

• Some hospitals deliver high-quality care with lower operating expenses, while many higher-expense hospitals achieve lower-quality performance.

In the area of wasteful spending, the commission reports that:

• Wasteful spending is healthcare spending that could be eliminated without harming consumers or reducing the quality of care people receive. In fact, wasteful spending often results in poorer outcomes for patients;

• Based on methodologies used to develop national figures, the HPC developed a Massachusetts-specific estimate for system waste;

• In 2012, an estimated 21{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 39{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} ($14.7 billion to $26.9 billion) of healthcare expenditures in Massachusetts could be considered wasteful; and

• Specific examples of waste include $700 million in preventable acute-care hospital readmissions, $550 million in unnecessary emergency-department visits, $10 million to $18 million in healthcare-associated infections, $3 million to $8 million in early elective inductions, and $1 million to $2 million in inappropriate imaging for lower back pain.

In its discussion of high-cost patients, the report noting that:

• Five percent of patients account for nearly half of all spending among the Medicare and commercial populations in Massachusetts;

• The presence of multiple conditions, such as behavioral health and chronic medical conditions, increases spending more than the combined effects of individual conditions, and illustrates the complexity of managing multiple conditions simultaneously; and

• Persistently high-cost patients — those who remain high-cost over multiple years — represent 29{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of high-cost patients and make up 15{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 20{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of Medicare and commercial spending in Massachusetts.

Finally, the HPC has released preliminary cost-trend findings regarding the state’s delivery system. Among those findings, per-capita healthcare spending in Massachusetts is the highest of any state in the U.S.; Massachusetts devoted 16.6{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of its economy to personal healthcare expenditures in 2012, compared with 15.1{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} for the nation; and over the past decade, Massachusetts healthcare spending has grown much faster than the national average.