Controlling state health care costs: Massachusetts forges ahead

The debate over federal health care reform has raged for many years, and passage of the Affordable Care Act (ACA) increased the volume of this discussion. In June, the U.S. Supreme Court ruled that the ACA was constitutional, giving proponents of the ACA plenty to cheer about, while opponents vowed to continue their fight against it.

Health care reform, though, is not just a federal issue. State legislatures have grappled with reform measures, especially with respect to Medicaid, for decades. Adding fuel to efforts to reform Medicaid are falling state revenues and a rising number of Medicaid recipients—both of which may be attributed to the recession. These factors have created intense pressure on state budgets and forced states to find ways to cut costs in their Medicaid programs.

In the waning days of its 2012 legislative session, the Commonwealth of Massachusetts General Court took on phase two of reforming the state’s health care by adopting broad cost-control legislation (S. 2400, now Chapter 224 of the Acts of 2012). The first phase of this effort, of course, was the enactment of universal coverage legislation in the state in 2006; as a result of this provision, 98.1 percent of Massachusetts residents now have health insurance.1 Since that legislation, which only addressed insurance coverage, was enacted, Massachusetts legislators sought to resolve the cost-control question three times, culminating most recently in Chapter 224.

This article offers insights into what the new law does and how it may affect Massachusetts surgeons. It explains some of the critical components of the law and outlines the ongoing concerns that should be addressed as the law is implemented.

Medical liability reform

A major victory for physicians is the inclusion of alternative medical liability reform measures. Specifically, the statute creates a disclosure, apology, and offer (DA&O) program. Under DA&O, providers may disclose mistakes and apologize to patients for those errors, or simply make a statement expressing regret, sympathy, condolences, or compassion for an unanticipated outcome without fear of these statements being used against them in a judicial or administrative proceeding.

The statute also imposes a 182-day pre-litigation period during which patients and physicians may work to settle a claim. Patients must make their intention of filing a claim known to their physicians in order for the pre-litigation period to start, and there are deadlines throughout this period for responses from physicians and plaintiffs.

Each notice of intent must include the following information:

  • Factual basis for the claim
  • Applicable standard of care for the condition
  • An explanation of how the standard of care was allegedly breached
  • A description of the action that should have been taken to comply with the standard of care
  • An explanation of how the breach of the standard of care caused the injury
  • The names of all of the health care providers whom the patient intends to notify in relation to the claim

Within 150 days of receipt of the notice of intent, a health care provider should respond with a written statement that includes:

  • A factual basis for the defense to the claim
  • The standard of care the health care provider claims to be applicable
  • An explanation of how the health care provider was or was not in compliance with the applicable standard of care
  • Information about why the alleged negligence of the health care provider was or was not a proximate cause of the patient’s alleged injury

Although the American College of Surgeons (ACS) supports traditional medical liability reforms (caps on noneconomic damages and so on), the ACS also recognizes that some states are politically or constitutionally unable to achieve passage of these reforms. Therefore, the College supports DA&O liability reforms, although imperfect, as a means of possibly improving the medical liability climate.

Key elements of the law

The statute contains other significant cost-containment measures in addition to the medical liability reforms. In most instances, these provisions and their effect on surgeons are dependent on the rules that will be written to implement them, but it is worthwhile at this point to review some of the major measures in the statute.

To begin, the statute seeks to save Massachusetts an estimated $200 billion over 15 years through the establishment of statewide targets for annual increases in health care costs.2 From 2013 to 2017, the target is equal to the potential annual growth rate of the gross state product (GSP), and from 2018 to 2022, the target will be one-half percentage point below the annual growth in the GSP. This goal is certainly an ambitious one, especially in light of the fact that, in recent years, the state’s health care costs have grown an average of 6.8 percent, whereas Massachusetts’ GSP growth has been closer to 3.6 percent. Fortunately, the law provides an opportunity in 2018 to modify the target.

Implementation of new health care payment formulas will be facilitated by requiring the state’s Medicaid program, employee health care program, and all other state-funded health care programs to transition to these methodologies. These new models are intended to incentivize the delivery of high-quality, coordinated, efficient, and effective health care while reducing waste, fraud, and abuse. In addition, targeted Medicaid rate increases in 2014 of 2 percent to acute care hospitals, non-acute care hospitals, and providers of primary care services up to $20 million will be authorized for those providers who demonstrate a significant transition to a new payment system.3

Provisions designed to boost transparency, accountability, and quality are woven into various sections of the statute. For instance, health care provider systems are required to register with the state and report regularly on financial performance, market share, cost trends, and quality measures. Over time, a special commission will be appointed to determine and quantify the factors that are contributing to price variation among providers. Those provider groups with spending that exceeds the target may be required to file a performance improvement plan.

Needless to say, technology plays a big role in implementing the statute. For example, $30 million is available to eligible health care providers to invest in and accelerate the ongoing statewide adoption of interoperable electronic health records (EHRs). In addition, physicians will be required as a condition of licensure to demonstrate competence in the use of EHRs, and patients must be allowed to access their personal EHR.

To address concerns with regard to workforce shortages, particularly in primary care, the statute establishes a new primary care residency program supported by the Department of Public Health. Access to primary care services, whether through accountable care organizations (ACOs) or the medical home model, is seen as one more way to improve quality and limit health care spending. Not only does the statute establish and/or expand loan repayment and loan forgiveness programs, it expands the role of physician assistants (PAs) and nurse practitioners (NPs) to act as primary care providers in order to improve access to cost-effective care.

Where concerns exist

Numerous elements of the cost-containment law should be of concern to surgeons and other physicians. The following measures deserve the surgical community’s attention:

  • With regard to the expanded scope of practice for PAs and NPs, the medical and surgical community has typically maintained a unified voice in ensuring that scope-of-practice expansions do not have a negative effect on the safety and quality of patient care. Is it appropriate for PAs to be designated as primary care providers? Should NPs sign forms that previously only physicians could sign? What happens to physician supervision of these health care providers?
  • Workforce shortages are a looming problem, not only in primary care but also in the medical and surgical specialties.4 This statute’s efforts to address workforce shortages focuses on primary care; these provisions should be expanded to include specialty care as well—if not through the regulatory process, then with amendments. The College has strongly supported the expansion of loan programs and residency training programs to meet future workforce needs in both primary and specialty care.
  • Requirements to report cost and quality information to the state could be burdensome to individual physicians or small groups. Large groups or hospital systems with already established EHRs may have less difficulty complying with these mandates. It will be critical for organized medicine to work through the regulatory process to limit the burden these requirements place on providers. In particular, quality measures for surgeons will need to reflect the realities of surgical practice, and existing surgical quality measures should be used.
  • Implementation of alternative payment methodologies through patient-centered medical homes or ACOs may be beneficial to some physicians, but global payment methodologies are inapplicable in some situations. Some fee-for-service care will continue to exist alongside the alternative payment methodologies, and surgeons will need to be vigilant in ensuring that fee-for-service remains an option.
  • The statewide targets for rising costs may be overly ambitious. This issue is of particular concern given the failed experiment at the federal level of tying annual increases in physician reimbursements to the nation’s economic growth, through the so-called “sustainable growth rate” (SGR) formula. Congress has had to intervene every year since imposition of the SGR to avoid mounting reductions in physician reimbursement and will have to do so again by the end of this year to avert a 27 percent cut. Although providers will not be penalized for failing to meet the state targets, they will be required to file a corrective action plan if they exceed them.

A surgeon’s view from Massachusetts

In Massachusetts, media and government attention to health care costs has increased steadily since adoption of the 2006 health care reform law. Initially, this scrutiny led to the appointment of several commissions to study the issue and two reports from the state’s attorney general regarding costs and quality. Chapter 224 adds the first real teeth to the debate by attempting to limit overall health care spending growth in Massachusetts. Whether the limits are realistic, achievable, or enforceable remains to be seen. At the very least, they are a reminder to surgeons of the importance of focusing on the cost question, eliminating unnecessary or duplicative costs, and redesigning care to be as affordable and as high-quality as possible.

Going forward

The medical and surgical community in Massachusetts must engage in the rulemaking process and participate in the appointment of the various commissions, committees, and councils created by the law (see list below). State specialty societies must join with the Massachusetts Chapter of the ACS, the Massachusetts Medical Society, and other health care organizations to nominate physicians to serve on these bodies, and to carefully review and comment on proposed regulations developed to implement the statute. The final version of Chapter 224 can be downloaded at

Entities created or enhanced by the cost-containment law

The cost containment statute will result in the creation of many new commissions, committees, task forces, and so on, and will enhance the mission of already-existing ones. The following are highlighted as they will have the most impact on the critical parts of the statute, with explanations provided of the panel’s responsibilities/tasks in executing the law.

  • The Health Policy Commission is an 11-member independent board with an advisory council. The commission is directed to carry out the following activities: monitor the reform of the health care delivery and payment system by setting health care cost growth goals; enhance the transparency of provider organizations; track the development of ACOs and patient-centered medical homes; monitor adoption of alternative payment methodologies; foster innovative health care delivery and payment models that lower health care cost growth while improving the quality of patient care; review and evaluate the impact of changes on the health care marketplace; and protect patient access to necessary health care services.
  • The health planning council holds public hearings to develop a state health plan to inventory resources and make recommendations for appropriate supply and demand. The council has a 13-member advisory committee composed of providers and their organizations, third-party payors, and so on, to advise the council. Uniform reporting requirements developed by the council shall avoid placing any burdens on providers that are not reasonably necessary to collect information.
  • The Center for Health Information and Analysis replaces the Division of Health Care Finance and Policy and collects, analyzes, and disseminates health care information, including spending trends, and publicly reports comparative health care costs and quality information through the consumer health information website.
  • The Betsy Lehman Center for Patient Safety and Medical Error Reduction exists within the Center for Health Information and Analysis. Its purpose is to serve as a clearinghouse for the development, evaluation, and dissemination of best practices for patient safety and medical error reduction. The center will have an advisory committee called the Patient Safety and Medical Errors Reduction Board.
  • The Health Care Workforce Trust Fund advisory board makes recommendations regarding the administration and allocation of the trust fund and establishes evaluation criteria.
  • The Massachusetts e-Health Institute oversees health care innovation, technology, and competitiveness; conducts the regional extension center program for the coordination and implementation of electronic health records systems by providers, and develops a plan to ensure that all providers implement EHR systems.
  • The Health Care Workforce Center Advisory Council offers recommendations to the Healthcare Provider Workforce Center on the following: trends in access to primary care and physician subspecialties, nursing, physician assistant, and behavioral, substance use disorder, and mental health services; the development and administration of the loan repayment program; and solutions to address identified health care workforce shortages.
  • The Masachussetts Health Information Technology Council works with state agencies and private stakeholders to develop a statewide health information exchange.
  • The Special Commission on the Health Care Payment System reviews public payor reimbursement rates and payment systems for health care services and the impact of such rates and payment systems on health care providers and health insurance premiums; examines whether public payor rates and rate methodologies provide fair compensation for health care services; and promotes high-quality, safe, effective, timely, efficient, culturally competent, and patient-centered care.
  • The independent task force seeks to study and reduce the practice of defensive medicine and overuse of medical resources, including but not limited to imaging and screening technologies.
  • The special task force studies and investigates issues related to the accuracy of medical diagnosis.
  • The Special Commission on Graduate Medical Education (GME) examines the economic, social, and educational value of GME and recommends a fair and sustainable model for the future funding in the commonwealth.
  • The Special Commission on Provider Price Reform reviews variation in prices among providers and the factors involved in variation and recommends steps to reduce provider price variation.


  1. Raymond AG. Massachusetts health reform: A five-year progress report. The Blue Cross Blue Shield of Massachusetts Foundation. Available at Accessed September 11, 2012.
  2. Lubell J. Pioneering health reform state enacts cost controls. American Medical News. Available at Accessed August 30, 2012.
  3. Moore RT. The next phase of Massachusetts health care reform. Available at Accessed September 26, 2012.
  4. American College of Surgeons. Division of Advocacy and Health Policy. Ensuring an adequate surgical workforce. Available at Accessed September 12, 2012.
  5. The Commonwealth of Massachusetts. Sessions Law Chapter 224. Available at Accessed October 10, 2012.

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