April 2010 The Massachusetts Council of Community Hospitals released an economic report by Edward Moscovitch PhD, on the financial condition of the Commonwealth’s community hospitals. This is an especially timely report, coming in April 2010, as the Commonwealth confronts rising health care premiums, especially for small business. The Commonwealth is implementing insurer rate and provider rate controls as the bridge strategy to a new payment system utilizing Accountable Care Organizations (ACOs).

The intent of the study was to examine the current state of the community hospital sector and make no recommendations. However, Dr. Moscovitch warns that rate controls applied to an already badly undercapitalized and margin constrained sector, which is already operating relatively efficiently with a high quality of care, could be further weakened by the application of rate controls.

The report highlights several important concerns:  First, per capita use of hospital services is substantially higher than in other states. This is particularly true of outpatient services, where usage is 52% higher. Second, the percent of hospital services rendered in a teaching setting is more than twice as high as elsewhere in the country and their underlying costs are substantially higher than what community hospitals charge for patients with similar conditions.

The report further notes -

1. Our community hospitals unit costs (after adjustment for wages and severity) are 8% lower than community hospitals elsewhere in the country.
2.  Plant and equipment, per unit of patient volume, is 34% less than for community hospitals compared to other states.
3. Unit revenue at Massachusetts teaching hospitals are 38% higher (after adjustment for severity, research, and teaching) than what community hospitals are charging for comparable cases. This amounts to an approximately $2 billion dollar cost impact annually.
4. A steady increase in Non-Medicare revenues over the decade still leaves the sector with 13% less unit revenue than the national norm. This increase up through 2007 is offset by significant rising losses on Medicare patients that are offsetting any gains in reimbursement from private insurers. The net result is a sector with below average margins compared to the national performance of community hospitals.
5. The rising elderly population in the Commonwealth suggests the need to be prepared to accommodate an additional 900,000 bed days by 2030. The current trend suggests that a disproportionate number of these patients will more likely be cared for in an expanded high cost teaching sector as opposed to community hospitals.

FY2011 Q1-3 Massachusetts Acute Hospitals Financial Performance by the Massachusetts Division of Health Care Finance and Policy

October 2006 report by the Massachusetts Division of Health Care Finance and Policy shows a substantial variation in resources used in end-of-life care between teaching and community hospitals in Massachusetts.

February 2006 state launches new Massachusetts Health Care Quality and Cost website providing information on quality and cost of care for selected medical conditions and procedures at Massachusetts hospitals. Access this information by clicking on the following link www.mass.gov/healthcareqc

October 2005 MCCH issued a press release and a report by Dr. Edward Moscovitch of Cape Ann Economics, Massachusetts Community Hospitals – A Comparative Economic Analysis: Rising Demand vs. Falling Profitability, that warns the Commonwealth that it must prepare now to add at least five thousand acute care hospital beds to accommodate a coming surge of elderly patients at a time when Massachusetts community hospitals are substantially undercapitalized.

November 2004 report by the Pioneer Institute supports the community hospital argument that patients and employers can expect high quality care at significantly lower cost if the community hospital system is utilized.

July 2003 report by the Massachusetts Division of Health Care Finance and Policy shows that the care for maternal cases in community hospitals is at least the equivalent of the quality level achieved in teaching hospitals given the elements examined.

June 2005 report by the Massachusetts Medical Society details the shortage in the physician workforce in Massachusetts and the impact on patient access to care.

Massachusetts Division of Health Care Finance and Policy - To learn more about their research, please visit the Massachusetts Division of Health Care Finance and Policy website.

Massachusetts Medical Society - To learn more about their research, please visit the Massachusetts Medical Society website.

NEHI – to learn more about their research, please visit the NEHI website.

Pioneer Institute - To learn more about their research, please visit the Pioneer Institute website.