Earlier this year, JPA covered Massachusetts’ passage of S 2400, the country’s first effort to curb growing healthcare costs. The legislation’s lofty goal mandates that healthcare costs in Mass. not grow faster than the Gross State Product (GSP) for the next five years, and remain between GSP and .5% below GSP for the following five years (until 2022).

As a state that’s setting the bar for implementation of healthcare reform, the response of Massachusetts providers and insurers to new healthcare regulation will send a clear message to state and federal legislators about what works (and what doesn’t work) in efforts to reduce rising healthcare costs.

Here are recent developments we’re seeing in response to the cost reform legislation, just three months after its passing:

Budgeting to Support Cost Control
The state’s largest hospital and physician organization, Partners Healthcare System, and one of its largest insurers, Harvard Pilgrim Health Care, have agreed to a contract that puts Partners’ hospitals and physician practices on limited budgets through 2015. Rather than reimbursing for individual tests, appointments or procedures, the new contract offers providers a set amount of money to cover all patients’ care annually. The contract also limits reimbursement increases to 2-3 percent annually, roughly the rate of inflation.

Both Partners and Harvard Pilgrim have said these measures were developed in response to increasing pressure to rein in medical prices and will help to minimize health care costs.

Bolstering Primary Care
Partners has also taken steps to support community health services, establishing a grant program to strengthen community health centers over the next 15 years. The program will award $90 million to Mass. primary care providers, who (under new federal and state legislation) are expected to play a crucial role in addressing basic medical and mental health care in the community.

Community health centers are trusted resources for Medicaid and Medicare patients, and many are struggling due to low government reimbursement rates. The grants will help centers upgrade information technology, an important improvement as quality measures play a part in receiving reimbursement from insurers and government payers.

Outsourcing Specialty Care
Steward Health Care System, an organization monitored nationally as an innovator in the field, has teamed up with Partners to treat severe trauma cases. Under the agreement, ten of Steward’s community hospitals will transfer severely injured patients to Partner’s Massachusetts General and Brigham and Women’s hospitals in Boston. In return, Partners will work with several Steward hospitals to create trauma centers equipped to manage less serious trauma injuries.

Steward is making a name for itself as a lower-cost alternative to many Massachusetts healthcare systems. Through this partnership, the health system can continue to provide affordable trauma care without sacrificing quality. This integrated approach to care is expected to increase, as hospital systems develop relationships with each other, primary care providers and community health organizations to provide comprehensive care while cutting costs.

Establishing Oversight
Governor Deval Patrick recently announced creation of a board to monitor health care spending, ensuring that the cost containment mandates of S 2400 are observed. The Mass. Health Policy Commission will be headed by Prof. Stuart Altman (former health policy advisor to President Nixon), who notes that the purpose of the board is to conduct an assessment of reform in healthcare, to “make sure that it works and actually brings cost down without hurting quality.” If the changes do not work, the Commission is responsible for giving an early warning sign and making recommendations to get the system back on track.