8/3/2019 Mariano Bill Fact Sheet

1/1

The PEER Act An Act Promoting Equity and Efficiency in Rates

Rising health care costs are crippling our economy but not producing better care. Continued cost increases are squeezingemployers, particularly small businesses, taking away resources they could use to hire more workers, fund capitalexpenditures and make other investments to grow our economy. At the same time, many community hospitals arestruggling with less reimbursement than many other hospitalswithout regard to the quality or level of care they provide.

Over the last three years, nearly half a dozen comprehensive reports from various state agencies

including the Divisionof Insurance, the Division of Health Care Finance and Policy (DHCFP) and the Attorney General have examined what'sdriving the cost of health care and have pointed to increases in the prices paid to providers for medical services. The June2011 DHCFP report on provider rate variation and last year's Attorney General's report that highlighted the market cloutof certain providers as the main factor driving increases in the cost of health care, demonstrate the need to address theissue of market power on health care costs in order to make health care more affordable.

The PEER Act would require health plans to reduce the rates they pay to certain high-cost providers and increase rates tosome of the lowest-paid providers. It would affect a limited number of hospitals and physician groups to help level theplaying field, lower costs for employers and consumers by requiring that the savings are reflected in premiums, and wouldexpire in 2015 when efforts to reform the state's health care payment system are expected to be fully implemented.

Key ElementsBeginning January 1, 2012, health plans and high-cost providers (those whose rates are above the health plan's 80thpercentile) would be prohibited from entering or renewing a contract until those rates are lowered below the 80 thpercentile. Health plans and lower-cost providers (those reimbursed below the health plan's 20th percentile) would beprohibited from entering or renewing a contract until those rates are increased above the 20 th percentile.

Health plans would identify these providers by utilizing DHCFP's Relative Price methodology, so that themethodology for identifying providers is consistent across carriers.

The calculation would examine providers according to four geographic regions:

Western Massachusetts

Central Massachusetts and MetroWest

Boston and Northeastern Massachusetts

Southern Massachusetts and Cape Cod

Providers that currently utilize alternative payment methods that are at or below the statewide median Total MedicalExpense (TME) level, as reported by DHCFP, would be exempt to ensure that efficient providers are not penalized.

Includes a default rate for covered out-of-network services equal to the health plans' median relative price forproviders that chose not to contract with a health plan.

Every provider as a condition of licensure would be required to accept payment by health plans according to thisproposal. Balance billing patients in excess of the amount reimbursed by the carrier would be prohibited.

For contracts entered into prior to 1/1/12, the provisions would take effect on the contract anniversary date.

Any savings realized by the carrier would have to be reflected in premiums charged to health plan members.

Prohibits cost-shifting and would make it a 93A violation.

Sunsets on December 31, 2015.

The Division of Insurance would be charged with promulgating regulations to monitor and ensure compliance andwould conduct a study in conjunction with DHCFP on the impact on carrier provider networks, network adequacy,rates paid to non-participating providers, and the overall impact on carrier member premiums by January 1, 2014.

Potential SavingsAs part of its recent health care cost reports on price variation, DHCFP examined the potential savings associated withreducing payment variation, including lowering rates to high-cost providers and increasing them to lower-paid providersand estimated that the system would save more than a quarter of a billion dollars. Depending upon the fullimplementation and any exemptions for TME, the PEER Act could generate similar savings.

Professional Services Inpatient Hospital Services Projected Total Saving

Lowering rates above the 80thpercentile & increasing rates belowthe 20th percentile

$179MM $88MM $267MM

* DHCFP conducted a limited analysis of price variation among hospital outpatient services, examining four service types.