Mixed success in controlling health costs, report says

Spending at Massachusetts' biggest health insurer and health care provider helped drive overall health care spending well above inflation last year, as the state's efforts to control rising costs met mixed success, according to a report to be released Tuesday.

Spending at Blue Cross Blue Shield of Massachusetts jumped 3.65 percent, and as much as 4 percent for some Partners HealthCare patients last year, compared with an inflation rate of 1.4 percent in the Boston metropolitan area. Overall health care spending grew 2.3 percent, according to the report from the Center for Health Information and Analysis, a state agency.

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'The biggest insurer, the biggest provider - that's where there's continued cost growth,' said Aron Boros, executive director of the Center for Health Information and Analysis. 'You could almost say as goes Partners and Blue Cross Blue Shield, so goes Massachusetts.'

Partners and Blue Cross called the state's calculations inaccurate.

Sharon Torgerson, a spokeswoman for Blue Cross, said the insurer's figures show spending grew 2.1 percent, more moderately than the report estimates. 'Our highest priority is making quality health care affordable,' she said.

Partners spokesman Rich Copp said costs grew faster than expected in 2013, but that over time Partners will reduce costs by delivering more coordinated care in lower-cost community settings instead of its big academic hospitals, Massachusetts General and Brigham & Women's. Partners is trying to acquire community hospitals north and south of Boston.

'Slowing the trend of health care cost growth is a long-term effort, and it's difficult to measure in a simple one-year snapshot,' Copp said.

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This is the first time that Massachusetts has calculated the growth of spending throughout the health care system, including the private insurance market; Medicare, the insurance program for the elderly; and Medicaid, government insurance for the poor. The annual estimates are an outgrowth of the state's landmark health care reforms, which sought first to expand insurance coverage and later to control costs - among the highest in the nation.

The cost-control measures, passed in 2012, established a target for annual increases in health care spending, designed to match the state's long-term economic growth. For 2013, that cap was 3.6 percent, even though the Massachusetts economy grew at a much slower rate last year, just 1.6 percent, according to the US Commerce Department.

The new report shows Massachusetts has made progress, with the rate of growth in health care spending slowing last year and finishing below the cap. Spending on health care was rising 6.5 percent a year before the recession hit in 2008, then moderated to 3.1 percent annually.

Performance varied widely across the state's providers and insurers last year. Some reduced spending. Doctors at UMass Memorial Health Care decreased spending 1 percent for some patients, while the doctors group Atrius Health had a decrease of 3 percent for others. Among insurers, United Healthcare had the biggest decrease, 19.8 percent. Neighborhood Health Plan's spending fell about 7.9 percent, and Cigna's spending fell 1.4 percent.

The report found spending at several providers exceeded the state cap. The doctors group associated with for-profit Steward Health Care saw costs rise 6 percent for some patients. Doctors affiliated with Tufts Medical Center and Beth Israel Deaconess Medical Center each had increases of 5 percent for other patient groups.

Although the increases were greater than Partners', these providers' overall costs are lower than at Partners, the state's most expensive health system. State regulators said Partners bears special attention because of its size, which means it has a greater impact on the industry overall.

Partners controls 28 percent of the state's provider market. Blue Cross Blue Shield holds about 40 percent of the private health insurance market.

'The Health Policy Commission is going to continue to be vigilant,' said Stuart Altman, chairman of the commission, a state agency created by the 2012 law to monitor health care costs. 'I don't think we can declare victory and walk away yet.'

Overall, the recession and sluggish economic recovery slowed the growth of medical spending nationwide. But the state's efforts to rein in costs play a role, too, said Michael Doonan, a health policy specialist at Brandeis University.

'The reason [costs] are under control is because there's a watchful eye on it,' Doonan said. 'There's a target, and there's people keeping an eye on it. The big question is sustainability.'

Health insurers and providers across the country are under pressure to cut waste and reduce costs to meet the requirements of the Affordable Care Act, or Obamacare.

Reimbursements from Medicare and Medicaid are shrinking, while the numbers of patients in these programs are growing as the population ages and federal law expands eligibility for Medicaid.

Traditionally, health care providers have been reimbursed through a system known as fee-for-service, receiving payments for each service and procedure, regardless of the outcomes. State and federal agencies are pushing the industry to adopt business models that reward quality over quantity. These models could help control costs by better coordinating care and cutting the number of unnecessary visits and procedures.

But the state report found that adoption of such alternative models stalled in Massachusetts last year, as more consumers chose health plans that don't require their care to be coordinated through a primary care physician.

'The numbers suggest we're increasing the amount of fee-for-service medicine and that alternative payment contracts are actually declining,' Altman said. 'There's no indication from these numbers that we're moving in the right direction.'

Meanwhile, hospitals have sought mergers and partnerships to build bigger networks and, they say, cut administrative and other costs.

Hospitals, said Lynn Nicholas, chief executive of the Massachusetts Hospital Association, are 'working hard to reconfigure themselves to operate with lower costs.'

'This is a long journey,' she said. 'You can't turn the Titanic around overnight.'