2. The Massachusetts Picture- The Last Twelve Months Nancy Turnbull Massachusetts Medical Society “State of the State” October 27, 2005

3. “Leave No Health Care System Behind” Initiative “Massachusetts Medical Aura Comprehensive Assessment System” MA-MA-CAS

4. First MA-MA-CAS Results SectorGrade (how has sector fared)? Progress in last 12 months?Areas for Improvement? HospitalsB+ (Range: A-F) -Finances improved -Managing growing uninsured -COSTS! -Gaps between haves and have-nots PhysiciansB- -Growing traction on quality-Housing prices Nursing homes B -Finances improving -Labor situation improving Need more concrete policy strategies to deal with changing role Home healthC+ -Pediatric nursing-Making interest in community LTC real Health PlansA- ( Range: A to C) Finances Strong- Affordability -Reengagement in health system transformation

5. First MA-MA-CAS Results SectorGradeProgress in last 12 monthsAreas for Improvement Community Health Centers C- Some Medicaid rate reliefPressure from rise in uninsured Medicaid B Many cuts restored Substantial funding increase Immigrants 75,000 eligible but not enrolled Uninsured F Several major coverage proposals underway 460,000+ people waiting for coverage Consumers D ???????????????????????????Access, Quality, Affordability Public Health D- 9% funding increase for FY05 (+$33 million) Restoration of 30% funding cut over past 3 years Quality I Lots of activity Lots of collaboration Every area

6. One Year Later: October 2005 Positive financial results for most health care organizations Increasing number of people without insurance Rising health costs –3-5 times rate of increase in overall inflation and workers’ earnings –Stagnant median family income Very active health reform debate Crowded but uncoordinated quality landscape

7. Based on latest available DHCFP financial statements (1996-2004) and MHA Surveys Q2 2005 (n=55) Numbers are weighted averages Massachusetts Hospital Margins Are Up Massachusetts Hospital Margins: 1998 –2005(Q2)

8. Q2YTD 2005 Operating Margin Distribution Based on 55 Hospitals Ma Median Operating Margin 3% Margin Line

9. Massachusetts Hospitals Total Margin Trend, FY00-FY05 (3Q) Source: DHCFP, MHA

10. Massachusetts Hospital Margins: 2Q 2005 Community Hospitals: 41% of had negative operating margins (17/41) and 27% (11/41) had negative total margins Teaching Hospitals: 14% (2/14) had negative operating margins and 14% had negative total margins.

11. Hospitals Financial results continued to improve and overall profitability was much better in aggregate in last 12 months –Best overall financial results in past decade Discharges and days slightly down –Flat at teaching hospitals; down at community hospitals Outpatient and ED visits up overall –Increases at teaching hospitals; declines in community Wide range in performance “The ability to cover long-term obligations remained a serious concern for close to one-third of Massachusetts hospitals.” (DHCFP) Continuing concerns about uncompensated care pool funding and adequacy of Medicaid payments

12. Massachusetts Medical Society Physician Practice Environment Index

13. Physicians Medical malpractice premiums, high housing prices, and physician practice costs remain key concerns Critical workforce shortages Stress in many specialties Most acute in neurosurgery, anesthesiology, radiology, cardiology, gastroenterology, orthopedics Big problems in western part of the state, on the Cape and in many community hospitals statewide Looming Medicare fee cuts

14. Nursing Homes Financial stability compared to recent years –Medicaid fee increases –Increasing proportion of Medicare days (~15% of days; 30% of total revenue) 93% median bed occupancy rate –Shortages in some services (MS, TBI) Closed 7 homes (1000 beds) Continuing improvement in labor situation –CNA vacancy rate down –15-20% nursing vacancy –Administrator turnover and burnout Changing face of nursing homes –Half of admissions < 30 days; ALOS ~8 months –Hospice, rehabiliation Need for dramatically different physical plant

15. Home Health Care Discharges to home health care up Staff shortages severe, particularly nursing Operating costs are up –Nursing salaries, gasoline Fee increases not keeping pace –Small increase in Medicare; little increase in Medicaid fees New technologies showing promise of reducing hospital use –Telehealth monitoring Some progress on supporting community-based long term care

16. Community Health Centers Growing number of practice sites –54 organizations and 185 sites Fragile but stable financial condition –Wide variation Disturbing growth in number of patients without insurance –Erosion of employer coverage; undocumented Some Medicaid rate relief –Concern that rates still below reasonable costs for Medicaid and uncompensated care pool Unmet capital needs How will CHCs fare in health reform? –Resources for those who fall through cracks? –Inclusion in any new insurance products?

17. Most Major Health Plans Have Had Consistently Profitable Results Source: Division of Insurance Profit Margin: 2002-2005 (2Q)

19. All Health Plans But BCBS Are Losing Members Blue Cross Blue Shield vs. Top 3 Competitors June 2004 vs. June 2005 Source: Massachusetts Division of Insurance. -78,000 -9,000 -114,000 +200,000 -27,000

20. Health Plan Net Worth as of June 30,2005 Blue Cross Blue Shield vs. Top 3 Competitors Dollars in millions: Statutory Basis Source: Massachusetts Division of Insurance.

21. Health Plan Net Worth Per Member as of June 2005 ( Statutory Basis) Source: Massachusetts Division of Insurance.

22. Medicare D Comes to Massachusetts 17 Contracts for Stand-Alone Drug Plans (44 products) Aetna Medicare BCBS of Massachusetts CIGNA Healthcare Coventry AdvantraRx. Health Net Life Insurance Co Humana Insurance Company* Medco Health Solutions Memberhealth, Inc. Pacificare Life And Health Insurance Co. RxAmerica, LLC SilverScript Insurance Co. Sterling Plus Rx Unicare United American Insurance Co. United Healthcare Wellcare Health Plans 7 Medicare Advantage Plans (~36 products) BCBS of Mass. Commonwealth Care Alliance Fallon Community Health Plan Harvard Pilgrim Health Care Senior Whole Health Tufts Health Plan United Healthcare

25. Growing Number of Uninsured, Even with Significant Increase in MassHealth Sources: “Health Insurance Status of Massachusetts Residents,” 1998, 2000, 2002, and 2004Massachusetts Division of Health Care Finance and Policy. “Massachusetts Residents Without Health Insurance, 1995,” Blendon, et al, Harvard School of Public Health.. MassHealth Urban CPS

26. Active health reform landscape… Blue Cross Blue Shield Foundation “Roadmap to Coverage” Public Proposals -Romney, Travaglini, HCFA/ACT Coalition, Single payor DiMasi/House proposal in the works –Bill next week? Possible Ballot Initiatives -- Constitutional Amendment, MassACT

27. How Does the MassHealth Waiver Affect Health Reform ? Negotiations continue with CMS to finalize terms $770 million in question ($385 million of federal funding) CMS letter recommends state proposal for Safety Net Care Pool (SNCP) by January 15, 2006 Impact of tighter budget neutrality on expanding Medicaid eligibility?

28. Annual Premiums for Most Popular Individual Health Insurance Products Source: Division of Insurance. Rates are for residents of Boston; standard HMO product Annual rate of increase 2004-2005= 10-17%

29. 2005 Annual Premiums for Individual Health Insurance as Percent of 2004 Median Family Income in Massachusetts Source: Division of Insurance and US Census Bureau. Median income =$68,700

30. The Quality Landscape Is Crowded and Quite Uncoordinated Alliance for Health Care Improvement EOHHS Cost and Quality website GIC/Mercer project Mass e-Health Collaborative Mass Coalition for Prevention of Medical Errors Mass Health Data Consortium Mass. Health Quality Partners MassPro AHRQ Bridges to Excellence IHI 100K Lives JCAHO Leapfrog National Quality Forum NCQA/HEDIS

31. Big Issues in Next 12 Months Health reform Costs, costs, costs Growth of underinsurance Federal Medicaid reform Health disparities Quality