Looney, Fasano want more transparency in hospital costs, cap on facility fees [NHRegister]

March 12, 2015

Article as it appeared in the New Haven Register

HARTFORD >> As the legislature looks to rein in medical expenses, state Senate leaders blamed hospital consolidations and the purchase of physician practices for ballooning costs and an increasing threat to physicians who may want to remain independent.

State Senate Pro Tem Martin Looney, D-New Haven, and state Senate Minority Leader Len Fasano, R-North Haven, have tag-teamed on a large number of bills aimed at making costs more transparent to consumers and fairer to lower-cost hospitals.

The pair testified Wednesday before the Public Health Committee where they showed that the Yale New Haven Health System had revenues of $243 million in excess of expenses in 2013, which was 40.7 percent of all hospital profits that year.

The second largest system, Hartford Health System, had excess revenues in 2013, according to data filed with the Office of Health Care Access, of $98.5 million, or 16.5 percent of all profits.

The rest of the state’s 27 hospitals accounted for the remaining 42.7 percent of the $600 million total they had in 2013 to reinvest in their operations.

Looney and Fasano and their staffs have been studying the issue of medical costs for months, starting with a bipartisan roundtable that began holding hearings last year.

They found the share of medical spending attributed to hospital owned physician practices increased by 57 percent between 2007 and 2013.

In the Yale New Haven Health System, the Northeast Medical Group, which is affiliated with Yale, now employees more than 600 physicians and PriMed, which it recently acquired, has 120 physicians in 31 locations.

“My fear is we won’t have any more private physician groups,” Fasano testified.

They found that 60 percent of primary care doctors and 50 percent of surgeons are now employees of hospitals, while the number of cardiologists employed by hospitals tripled between 2007 and 2012.

Looney said the purchase of doctor groups by hospitals could mean decreased revenues for municipalities as properties come off the tax roles.

He said this would also make a larger impact on the state’s Payments in Lieu of Taxes program, which he and state House Speaker Brendan Sharkey, D-Hamden, are trying to revise to be more responsive to towns.

With two large hospitals systems controlling much of the medical landscape, Fasano said employment opportunities could be limited and “then there is no escape hatch. We are not there today, but we are not that far away from that.”

The key findings of the bipartisan study are: lower cost hospitals are being squeezed out of the market; market consolidation is resulting in higher costs for payers and consumers with greater price disparity between providers and Connecticut lacks critical information regarding costs, quality and access.

Because the state failed to implement a statewide health information exchange, the senators said this has resulted in a fragmented system that leaves out patients and providers.

On a bill that would look to state standards on Accountable Care Organizations, the Yale New Haven System said standards are already set by federal authorities and further regulation could inhibit prevent ACOs from reducing costs of managing chronic ailments

Another proposed bill addresses hospital conversions and realignments. Tenet, a for-profit entity, withdrew a plan to partner with five hospitals in Connecticut, citing excessive regulation.

Gayle Capozzalo, the chief strategy officer for the Yale system, said these conversions and partnerships already undergo review by as many as five bodies.

“Additional conditions will very likely prevent hospital alignment relationships, nonprofit and for profit, at a time when many community hospitals are no longer able to meet the challenges of the fast changing landscape on their own,” Capozzalo said.

“Health care providers need to have ability to deal with the changing environment and these bills could reduce or eliminate this ability. At Yale New Haven, we will continue to focus our energy and resources on quality, efforts that improve care efficiency, and those that maintain access and add value,” she testified.

State Comptroller Kevin Lembo’s office was charged by the legislature to look into the impact of facility fees on the state employees’ retiree health plan and thus the impact on state spending.

A facility fee is a charge in addition to a professional services fee that has been traditionally used by hospitals to cover overhead. The concern was charging it at doctor offices that have been purchased by hospitals where a patient receives the same care at the same place, but faces an additional fee.

Lembo found the practice of attaching a facility fee was not as widespread as had been anticipated for state workers, but charges increased by 400 percent in two speciality areas at two separate hospitals.

Spending by the state for retirees’ cardiology care at Yale-New Haven Hospital went from a base of $310,000 to $1.2 million, while state spending on dermatology at the University of Connecticut Health Center jumped from $40,000 to $445,000, Lembo told the committee.

Lembo said state employees, because of their comprehensive insurance coverage, are largely shielded.

He told the Public Health Committee, however, consumers in a high deductible plan or those who pay cash for doctor’s visits, “this is a real impact on those people to getting care. … many may walk away from care because they simply can’t afford it because it has doubled.”

It was this group of consumers who have submitted complaints to the state’s health care advocate, Vickie Veltri, where she reported fees as high as $5,000. One consumer reported a charge for chemotherapy went from $2,500 to almost $12,000 after a doctor’s practice was purchased.

Patrick McCabe, senior vice president of finance for Yale New Haven Hospital System, in testimony before the bipartisan roundtable in December said the charging of these fees has to be understood in the context of declining governmental reimbursements.

McCabe also said facilities the system owns that now charge these fees also must apply the hospital free and charity care rules, where applicable.

The official said the main reason to purchase a practice is to provide an adequate network. “I can’t think of a situation where the facility fee opportunity has driven physician acquisition,” McCabe said.

A 2014 report by state Attorney General George Jepsen found 22 out of the state’s 29 hospitals charge facility fees, while a federal study predicted by 2021 facility fees for routine doctor visits and cardiac imaging will cost Medicare an extra $2.3 billion and patients an extra $590 million in out-of-pocket expenses annually.

Lembo said there is more work to do on the issue of facility fees, but the full report from his office is not due until October.

One of the bills offered by Looney and Fasano would cap the facility fee at $100, require insurance coverage for the fees and not allow them for services that can be safely performed outside a hospital.

The Connecticut Hospital Association in submitted testimony said the bills submitted on facility fees are confusing. It told lawmakers to vote against them because it feared it would put reimbursements from Medicare in jeopardy.

Fasano said it is not true that the Affordable Care Act promotes consolidation of services and mergers, but it does promote cooperation. Both the senators and Lembo pointed to studies that found consolidation increases costs.

The bipartisan report said the primary motivation for hospital consolidations and purchasing doctor practices is monetary tied to reimbursement policies and to enhance bargaining power.

In addition to the facility fees paid by Medicare to hospitals, Medicare also pays 70 percent more for an office consultation with a hospital based provider than an independent physician and twice as much for an echocardiogram or colonoscopy, according to the report.

A study by The Institute for Policy Research at Northwestern University found that the most efficient model of providing care is a small group of 7 to 10 physicians.

On sharing electronic medical records, the senators have proposed a bill where hospitals would contribute to a program where all providers would be able to access these records. It would offset this with tax credits against a hospital’s provider tax.

The senators said potentially, Connecticut could hook up with a system that is already operating successfully in Rhode Island.

The Yale New Haven Hospital System submitted testimony on electronic records, pointing out ways it already shares records.

The system said the proposal “causes some concerns, and we encourage the legislature to avoid an unintended consequence of nullifying the efforts of many Connecticut hospitals that are already providing access to their electronic health record systems.”

The Connecticut Hospital Association was equally concerned and said the state should let the federal agencies take the lead. One report concludes it will take another 10 years for interoperability among systems

“Connecticut law cannot mandate a faster reality. These IT changes must be undertaken in a measured manner consistent with the federal roadmap,” it said. The CHA said the goals of the bill can be met through “a cooperative, planned approach,” according to the CHA.