1. State of the State’s Health Care Seventh Annual Leadership Forum Measuring Cost and Quality: Is There a Benefit? October 26, 2006

2. The Massachusetts Health Care Environment: An Overview Kenneth R. Peelle, M.D. President Massachusetts Medical Society

3. U.S. Health Insurance Premiums Source: Kaiser Family Foundation 3.8% 3.5%

4. 2006 Premium Increase by Company Size Source: Kaiser Family Foundation

5. High-Deductible Plans Provided Small Businesses With Only Minor Relief Source: Kaiser Family Foundation

6. Lower Costs of High-Deductible Plans Accrued Mostly to Big Firms Source: Kaiser Family Foundation

7. Source: Mass. Hospital Association 3% Margin line Massachusetts Hospital Margins Median Margins: 1998 – 2006(2Q)

8. Massachusetts Hospital Margins Weighted Average: 2Q 2006 34% of Community Hospitals (15 of 44) and 6% of Teaching Hospitals (1 of 16) Had Negative Total Margins 48% of Community Hospitals (21 of 44) and 31% of Teaching Hospitals (5 of 16) Had Negative Operating Margins

9. Massachusetts Hospitals Total Margin Trend, FY00-FY06 (2Q) Source: Mass. Hospital Association

10. Major Health Plans Are Profitable Profit Margin 2000-2006(2Q) Source: Division of Insurance reports

11. Health Plan Membership As of June 2006 Source: DOI filings; Mass. members only *Insured members only; does not include members in self-insured accounts

12. Health Centers More practice sites: 52 organizations, 184 sites Financial condition: Fragile but stable Disturbing growth in number of patients without insurance Some Medicaid rate relief –Unmet capital needs How will health centers fare in health reform?

13. Home Health and Hospice Care Discharges to home care up, especially hospice Fee increases not keeping pace with operating cost increases 2005: Medicare update cut by 0.8% 2006: Medicare update of 3.6% was eliminated No increase in Medicaid rates since 2004

14. Home Health and Hospice Care Medicare home health quality improvement project State progress on supporting community- based long term care State legislation: “Equal Choice in Long Term Care Setting” Nov. 2006: An expansion of state’s CMS waiver to be submitted

15. Nursing Homes and Long-Term Care Eight nursing facilities have closed in 2006 so far Medicaid gap continues –Average cost per patient per day: $192 (2006 est.) –Average Medicaid reimbursement: $177 Medicare days still increasing: 16.5% in 2006 Median occupancy: 93%-94% Nursing vacancy rate (15%) better, but still problematic Old physical plant Sources: Mass. Extended Care Federation; BDO Seidman

16. Health Care Reform

17. Where we stand so far … Commonwealth Care opened on Oct. 1 for residents under federal poverty level (FPL) –5,200 registered and eligible for coverage (as of 10/11/06) –Expected: 60,000 Residents at 100% to 300% of FPL to begin enrollment in Jan. 2007 –Expected: 100,000 Will it be affordable? How will it affect employers?

18. MassHealth Enrollment & Total MA Uninsured Sources: Health Care for All; Mass. Division of Health Care Finance and Policy

19. MMS Index: The long, slow slide Source: Massachusetts Medical Society

20. Physician Workforce Study, 2006 Critical or severe shortages New Family Practice Internal Medicine Continued Anesthesiology Gastroenterology General surgery Neurosurgery Orthopedics Psychiatry Radiology Vascular surgery

21. Physician Workforce Study, 2006 Difficulty filling physician vacancies Community hospitals 92% Teaching hospitals 67% Labor retention more difficult Community hospitals 68% Teaching hospitals 44%

22. The Medicare “cliff” Source: American Medical Association

23. Transparency and the P4P Movement The world demands transparency It can address variation in care Puts providers in control of our own destiny Our value becomes apparent and visible

24. IOM’s Six Principles Safe Effective Patient-centered Timely Efficient Equitable

25. IOM Principles Compromised if … Safe … Continuity of care is interrupted Effective… Tiering discourages appropriate care Patient-centered… Physicians are disincented from attending to patient preferences Timely… Care delayed due to changing physicians, or access decreased for unusual or expensive care Efficient… Care becomes more costly Equitable… Severely ill patients are inaccurately charged higher co-payments IOM’s Six Principles

26. State of the State’s Health Care Seventh Annual Leadership Forum Measuring Cost and Quality: Is There a Benefit? October 26, 2006