Officials examining variations in prices charged by medical providers on Tuesday floated the idea of setting a minimum rate for hospitals at the bottom end of the price spectrum.
The potential policy fix surfaced at a meeting of a 23-member commission that has until March 15 to release its report and recommendations. The panel is mulling over ideas as overall health costs consistently outpace economic growth rates.
A commission subcommittee reported its policy suggestions Tuesday, including establishing a rate floor and granting the Division of Insurance new powers to disallow contracts between insurers and health providers if the contracts are based on factors that lead to unwarranted price variation.
The commission’s final recommendations will come after discussion at a March 7 meeting and could become the basis for new legislation. Details – including how a rate floor would be set and changes to how provider-payer contracts are reviewed – could be included in the commission’s report or hashed out legislatively later on.
Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans, pushed back against the subcommittee’s proposal. She said smaller insurers would fear that providers could “walk away” and refuse to do business if an initial contract was rejected by the Division of Insurance and the carrier then offered the provider lower rates.
“If we’re being held accountable to not contract using unjustifiable factors, what accountability is there for providers not to push to use those unjustifiable factors?” she said. “There is nothing in the proposal that holds the provider to not use the unjustifiable factor.”
Pellegrini suggested instead giving the disapproval power to the Health Policy Commission, an agency that monitors health care costs and market trends. Massachusetts Hospital Association President and CEO Lynn Nicholas said she would be “very opposed” to that alternative.
“There is a growing, I think, discontent and concern that the HPC as structured currently has no hospital voice on it at all,” Nicholas said.
Other members of the commission said the decision of what agency should receive the new regulatory powers would best be left to the Legislature because granting them to either the Health Policy Commission or the Division of Insurance would require statutory changes.
“By a show of hands, half the people would say DOI, half the people would say HPC, and I’d say probably my mother because she might rule in my favor. Beyond that, we’re never going to get there among 23 people,” said Steve Walsh, the head of the Massachusetts Council of Community Hospitals and a former state representative. He said that rather than arguing over which agency, the commission should “embrace an idea, and leave it up to those that actually have a vote.”
An outside section in Gov. Charlie Baker’s fiscal 2018 budget would also enhance the Division of Insurance’s authority by directing the agency to disapprove contracts that exceed certain price caps based on Medicare reimbursement rates. Some community hospitals that serve a disproportionate share of low-income Medicaid patients have argued that a floor on rates, in addition to a cap, would be needed to level the playing field.