Health care 2022: Challenges and opportunities in the years ahead

The COVID-19 pandemic may be slowly receding, but its aftershocks continue to reverberate strongly across the country. The pandemic exposed both new and existent challenges for the American health care system. In particular, employers and health participants continue to grapple with staggering health care costs while health care inequities that existed before the pandemic were only worsened by COVID’s impact on racial and ethnic minority groups as well as those of lower socioeconomic status. At the MAHP (Massachusetts Association of Health Plans) 2022 Annual Health Care Conference held at the Seaport Hotel in Boston on November 17, the state’s acting governor, Charlie Baker, along with nationally recognized health care experts, spoke about such challenges as well as the opportunities that lie ahead — at both the state and federal level.

It is rather apparent that residents of Massachusetts, the third most densely populated state in the country, have done admirable work handling the rigors of the pandemic. Charlie Baker, Governor of Massachusetts and soon-to-be President of the NCAA, notes how during weekly conference calls held with other governors throughout 2020, the collective volunteering efforts on behalf of the commonwealth were drawing universal praise. Behind the bipartisan, results-driven leadership of the Baker administration, there was never a shortage of volunteers to run community-based testing sites for the millions at risk of contracting the coronavirus in Massachusetts, which, within the first five months of the pandemic, had more residents in the ICU than every other state except New York and New Jersey.

But as the COVID pandemic unfolded, it involved more than just respiratory illnesses and communicable diseases. Now, nearly three years removed from the onset of the pandemic, the number of COVID-related deaths and hospitalizations may be subsiding, but the residual effects endure throughout the state, including the well-documented exacerbated mental health crisis and mainstream acceptance of remote work. Even before the pandemic, Baker tried to incentivize employers with a tax credit to allow their employees to work from home to alleviate traffic congestion; naturally, the pandemic-induced shift to remote work has accelerated this welcome development.

Perhaps the most far-reaching adverse effect of the yearslong pandemic has been the staffing crisis plaguing not only Massachusetts but the entire country. Indisputably, an exceptionally high number of baby boomers retired or changed careers during the pandemic. This sociological phenomenon has had a devastating impact on nearly every industry and has been particularly notable in the health care field.

In many hospitals across Massachusetts, stays are, generally speaking, running longer than usual. This is not, however, due to there being an unprecedented influx of sick patients. Rather, the unusually lengthy (and thus, costly) hospital stays are a byproduct of there being insufficient staffing at the particular facilities that are appropriate for said patients. In other words, there are many patients currently staying in hospitals that aren’t getting treated because they are in the wrong place. They need to go to a sub-acute facility or rehab facility but cannot be admitted because these health care centers are short-staffed.

From the governor’s perspective, another prominent issue plaguing the health care system is that of the outmoded payment system in place. That the current payment system was developed in 1968 and is largely grounded in a Medicare-reimbursement model means patients often don’t pay for necessary services. More specifically, the system was established primarily to pay for acute care services in a very particular delivery model. It wasn’t set up to account for a drastic rise in substance use disorder-related needs or a heightened number of mental health cases. These are chronic conditions, ones clearly magnified by the pandemic, that are not properly accounted for. Another Medicare-related concern of Baker’s — and one that he has addressed at the state and federal level throughout his governorship — is that under the system’s current rules, it is practically illegal for providers to collaborate in a team-based approach to care.

In sum, as we move forward in the post-COVID world, there needs to be a dramatic shift in not only Medicare but also in the relationship between payers and providers and the means by which Americans pay for health care services.

In addition to Governor Baker’s speech, there was a fascinating panel discussion moderated by John McDonough, Professor of Public Health Practice at Harvard’s T.H. Chan School of Public Health, and consisting of Stuart Altman (Brandeis University), Robert Berenson (Urban Institute), Maureen Hensley-Quinn (National Academy for State Health Policy), and Robert Murray (Global Health Payment LLC). The panel provided an in-depth discussion of health care cost containment from both a historical and modern-day perspective.

It was noted how going back to the 1970s, Massachusetts has made a concerted effort to control cost of total health care spending so as to not surpass growth in state income. The encouraging trend has held up in recent years since 2013, health care spending in Massachusetts has grown less rapidly than it has in every other state. However, the Massachusetts Health Policy Commission has become increasingly concerned about variations in hospital prices as well as the need to place a cap on hospital price growth. Clearly, Massachusetts remains the gold standard at not just prioritizing prices, but also in regard to factors such as value and quality of care and health equity.

From a national perspective, there is great interest among many employers in pursuing reference-based pricing plans. In this context, Medicare rates are often discussed, but there are other options available. There was a general consensus among the panelists that health plans and employer groups are desperately trying to negotiate better rates but are unable to do so given the contracted terms that some mega-hospital systems are implementing. Indeed, an overarching national concern is being mindful of mitigating consolidation and abuses of power in the health care system. Aside from Massachusetts, Connecticut and Oregon were referenced as states making great strides in managing health care costs with the former having success in limiting outpatient facility fees and the latter establishing legislation that fines hospitals for spending that exceeds the benchmark rate in three out of five years. Overall, although it is very challenging, health plans need to stop relying on the Medicare rate structure and instead operate in a more equitable environment for negotiating rates.

There was also a comprehensive discussion of Maryland’s track record of having a very intense regulatory structure for containing health care costs. With an established fixed payer global budget, Maryland has regulated costs based on a service-by-service basis, which is in part aided by Medicare paying 30% more in the state than it does nationally, otherwise known as a highly favorable Medicare waiver agreement. It should be noted that other states have not been able to duplicate this “high intensity” rate regulation system. However, in recent years, this strict global budget, layered on a complex unit rate setting system, has often proved too rigid for major hospitals such as Johns Hopkins, which has left the state struggling to abide by its All Payer and Medicare Total Cost of Care constraints.

Related: ‘Shoppable’ health care transparency’s lagging: How employers can cut costs now

The overall consensus from this panel discussion is that post-pandemic labor shortages and supply chain issues have left hospitals struggling mightily, which has translated to further price increases and expenditures. All of which means that financial literacy of health care costs and price transparency on behalf of providers remain all-important. It was noted by the aforementioned panel that when gauging the financial status of a health system, audited financial statements, with data verified by accounting firms, provide a much broader and valid overview of a health system’s profitability in comparison to the institution’s operating margins.

Author and journalist David Ostrowsky serves as a Content Specialist for The Phia Group, a leading health care cost containment firm.