Med. budgets capped ?but firms don’t feel relief

WAITING GAME: Rob Cagnetta, owner of Heritage Restoration in Providence and a member of the Health Insurance Small Employer Task Force, left, works with Shop Manager Seth Jacobson. / PBN PHOTO/?RUPERT ?WHITELEY
WAITING GAME: Rob Cagnetta, owner of Heritage Restoration in Providence and a member of the Health Insurance Small Employer Task Force, left, works with Shop Manager Seth Jacobson. / PBN PHOTO/?RUPERT ?WHITELEY

Rhode Island Health Insurance Commissioner Dr. Kathleen Hittner turned the screws a little tighter last month to force lower medical costs and more-efficient care by the state’s doctors and hospitals.

Amendments to the Affordable Standards announced Feb. 2 lower the existing spending caps for hospitals and institutions called accountable care organizations. The changes peg hospital rates and ACO budgets to the consumer price index, and then whittle down, through 2018, the percentage above the CPU that hospitals may charge and ACOs may budget.

But business representatives on various health insurance advisory panels said they are still waiting to see the reforms hit them in the wallet – in the form of lower insurance premiums.

The insurance commissioner’s work “has cut costs a lot but it doesn’t seem to translate back to the insured people,” said Rob Cagnetta, owner of Heritage Restoration in Providence and a member of the Health Insurance Small Employer Task Force. “This is going to take time.”

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According to the Agency for Healthcare Research and Quality, the average family premium at private-sector jobs in Rhode Island was $5,403 in 1997. By 2013, the average premium was $16,077.

Hittner noted that the state is reforming a very complicated system. “When major interventions in health care are adopted, it may take several years to show measurable results,” she said.

The R.I. Office of the Health Insurance Commissioner pressures the industry through its Affordability Standards, which require price and budget caps and other improvements from health insurance companies. Insurers then work with hospitals and doctors to squeeze out savings.

Rhode Island businesses spend $3.5 billion a year for health care, according to the Rhode Island Business Group on Health, and 30 percent of that could be eliminated without hurting the quality of care, said a coalition of health care leaders that convened for discussions in 2014.

The amended standards require that 80 percent of primary care practices function as patient-centered medical homes by the end of 2019. Now, the proportion is 45 percent.

Systems like these usually are paid through population-based contracts, meaning a reimbursement that covers the total cost of medical care for a group of patients. This type of contract creates incentives for the medical providers to manage care holistically and with an eye to disease prevention.

The standards require the percentage of insured Rhode Islanders subject to population-based contracts to rise in steps through 2017.

Rhode Island has four ACOs using population-based contracting, according to the commissioner. One of them, Coastal Medical, saved $7.2 million in its first year functioning as an ACO under the Medicare Shared Savings Program, which rewards thrifty providers with part of the savings they earn.

Dr. G. Alan Kurose, president and CEO of Coastal Medical, said even a robust primary care system cannot by itself solve the problem of high medical costs, because the whole health care system is so fragmented. “We would be better served if we all take a portion of responsibility for health care costs,” Kurose said.

Affordability standards continue to press toward a goal of bolstering primary care, which reduces medical costs because it intervenes in early stages of illness, when patients can be treated at less expense. The standards require insurers to direct at least 10.7 percent of all medical payments toward primary care.

Also, the standards are slowly moving insurers and medical providers away from traditional fee for service, which is like paying for health care as piecework. Fee for service, now becoming an anathema, can jack up costs by rewarding excessive testing or treatment.

Hittner believes changing the payment system is crucial. “We want to drive the payment system away from fee for services,” she said. “We believe that will change the incentives to keep doing more medical procedures.”

Mark Waggoner, senior vice president for care integration and management at Blue Cross & Blue Shield of Rhode Island, said the insurer “supports these efforts to address the lack of coordinated care and perverse fee-for-service payment system that drive unsustainable health care costs.”

A big cost driver is hospitals. Outside of imposing spending caps and pushing providers toward accountable-care organizations, the health insurance commissioner has limited leverage over hospitals. The commissioner’s office says 48.4 percent of medical costs are incurred in hospitals.

“We are not tackling hospital costs in any meaningful way,” said Al Charbonneau, a retired hospital administrator who serves on the Rhode Island Business Group on Health.

Michael Souza, president of the Hospital Association of Rhode Island, agreed that a comprehensive picture is needed to determine how treatment should be parceled out among the hospitals.

“If we keep trying to push down costs and we are not addressing utilization we will talk about this forever,” Souza said. •

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