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The 190th General Court of the Commonwealth of Massachusetts

AN ACT RELATIVE TO EQUITABLE HEALTH CARE PRICING

     Whereas, The deferred operation of this act would tend to defeat its purpose, which is to establish forthwith equitable health care pricing, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience    

     Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same as follows:
     SECTION 1.  Section 7 of chapter 12C of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by inserting after the word “center” in lines 3, 6 and 37, each time it appears, the following words:- and for the other purposes described in this chapter which shall include any transfer made to the Community Hospital Reinvestment Trust Fund established in section 2TTTT of chapter 29.
     SECTION 2.  Said chapter 12C is hereby further amended by adding the following section:-
     Section 23.  Subject to appropriation, the center shall transfer annually $5,000,000 to the Community Hospital Reinvestment Trust Fund established in section 2TTTT of chapter 29, not later than June 30; provided, however, that such transfer shall not result in an increase in the assessment calculated under section 7 of this chapter.
     SECTION 3.  Said section 23 of said chapter 12C, added by section 2, is hereby amended by striking out the figure “$5,000,000” and inserting in place thereof the following figure:- “$10,000,000”.
     SECTION 3A.  Said section 23 of said chapter 12C is hereby repealed.
     SECTION 4.  Chapter 29 of the General Laws is hereby amended by inserting after section 2RRRR the following 2 sections:-
     Section 2SSSS.  (a) There shall be a MassHealth Delivery System Reform Trust Fund. The secretary of health and human services shall be the trustee of the fund and shall expend money in the fund to: (i) provide reimbursement for services delivered to MassHealth beneficiaries by acute hospitals participating in the MassHealth program; and (ii) make enhanced service payments and incentive payments to acute hospitals and other providers or care organizations under contract to provide MassHealth services pursuant to an approved state plan or federal waiver. There shall be credited to the fund: (1) any transfers from the Health Safety Net Trust Fund established in section 66 of chapter 118E; (2) an amount equal to any federal financial participation revenues claimed and received by the commonwealth for eligible expenditures made from the fund; (3) any revenue from appropriations or other money authorized by the general court and specifically designated to be credited to the fund; and (4) interest earned on any money in the fund. Amounts credited to the fund shall be expended without further appropriation.
     (b)  Money in the fund may be expended for Medicaid payments under an approved state plan or federal waiver; provided, however, that all payments from the fund shall be: (i) subject to the availability of federal financial participation; (ii) made only under federally-approved payment methods; (iii) consistent with federal funding requirements and all federal payment limits as determined by the secretary of health and human services; and (iv) subject to the terms and conditions of an agreement between acute hospitals, other providers or care organizations and the executive office of health and human services. To accommodate timing discrepancies between the receipt of revenue and related expenditures, the comptroller may certify for payment amounts not to exceed the most recent revenue estimates as certified by the secretary of health and human services to be transferred, credited or deposited under this section. Money remaining in the fund at the end of a fiscal year shall not revert to the General Fund.
     (c)(1)  Effective October 1 of each provider or care organization rate year, the secretary of health and human services shall expend money in the fund for MassHealth services provided by qualifying acute hospital providers under contract with the executive office of health and human services or under subcontracts with care organizations that contract with the office in connection with the MassHealth program.
     (2)(A)  The secretary of health and human services shall expend  $250,000,000 in payments to qualifying acute hospital providers or to care organizations for their payments to hospitals participating in their respective provider networks, subject to the terms and conditions of a payment agreement with the executive office of health and human services; provided, however, that the payments shall be in addition to the sum of: (i) the amount of reimbursement otherwise provided for and payable in each contract year to those hospitals under contracts executed pursuant to the request for applications issued periodically by the executive office of health and human services for the procurement of acute hospital services under the MassHealth program; and (ii) the portion, as determined by the secretary, of payments made under the contracts executed between care organizations and the executive office of health and human services which are projected to be needed by the care organizations for payments to hospitals contracted to participate in the provider networks of the care organizations.
     (B)  Money credited to and deposited in the fund that is not expended under subparagraph (A) may be expended for incentive payments to care organizations or other providers under contract with the executive office of health and human services to provide MassHealth services; provided, however, that all such incentive payments shall be consistent with the relevant provisions of the Medicaid state plan under Title XIX of the federal Social Security Act or any waiver of Title XIX provisions granted by the federal Centers for Medicare and Medicaid Services.
     (3)(A)  In addition, to the payments set forth above, the secretary of health and human services shall expend up to $15,000,000, subject to the availability of federal financial participation of not less than $7,500,000, in payments to qualifying acute hospital providers or to care organizations for their payments to hospitals participating in their respective provider networks, subject to the terms and conditions of a payment agreement with the executive office of health and human services; provided, however, that the payments shall be in addition to the sum of: (i) the amount of reimbursement otherwise provided for and payable in each contract year to those hospitals under contracts executed pursuant to the request for applications issued periodically by the executive office of health and human services for the procurement of acute hospital services under the MassHealth program; and (ii) the portion, as determined by the secretary, of payments made under the contracts executed between care organizations and the executive office of health and human services which are projected to be needed by the care organizations for payments to hospitals contracted to participate in the provider networks of the  care organizations.
     (B)  Money credited to and deposited in the fund that is not expended under subparagraph (A) may be expended for incentive payments to care organizations or other providers under contract with the executive office of health and human services to provide MassHealth services; provided, however, that all such incentive payments shall be consistent with the relevant provisions of the Medicaid state plan under Title XIX of the federal social security act or any waiver of Title XIX provisions granted by the federal Centers for Medicare and Medicaid Services.
     (d)  Not later than 30 days after the close of each hospital fiscal quarter, the executive office of health and human services shall submit to the house and senate committees on ways and means a detailed accounting of all money transferred, credited or deposited into the fund. The fourth quarter report shall include the amount remaining in the fund at the end of each hospital fiscal year and the reasons for the unspent amount.
     Section 2TTTT.  (a) There shall be a Community Hospital Reinvestment Trust Fund to be expended, without further appropriation, by the secretary of health and human services. The fund shall consist of money from public and private sources, including gifts, grants and donations, interest earned on such money, any other money authorized by the general court and specifically designated to be credited to the fund and any funds provided from other sources.  Money in the fund shall be used to provide annual financial support, consistent with the terms of this section, to eligible acute care hospitals.      The secretary, as trustee, shall administer the fund and shall make expenditures from the fund consistent with this section.
     (b)  The secretary may incur expenses and the comptroller may certify amounts for payment in anticipation of expected receipts; provided, however, that no expenditure shall be made from the fund which shall cause the fund to be deficient at the close of a fiscal year.  Revenues deposited in the fund that are unexpended at the end of a fiscal year shall not revert to the General Fund and shall be available for expenditure in the following fiscal year.
     (c)  The secretary shall annually direct payments from the fund to eligible acute care hospitals.  To be eligible to receive payment from the fund, an acute care hospital shall be licensed under section 51 of chapter 111 and shall not be a hospital with relative prices that are at or above 120 per cent of the statewide median relative price, as determined by the center for health information analysis.
     (d)  In directing payments, the secretary shall allocate payments to eligible acute care hospitals based on the proportion of  each eligible acute care hospital’s total gross patient service revenue  to the combined gross patient service revenue of all eligible acute care hospitals in the prior hospital rate year; provided, however, that payments shall be adjusted to allocate proportionally greater payments to eligible acute care hospitals with relative prices that fall farthest below 120 per cent of the statewide median price.  The secretary shall establish by regulation a formula to allocate payments pursuant to this subsection.
     (e)  The secretary may require as a condition of receiving payment from the fund that an eligible acute care hospital agree to an independent financial and operational audit to recommend steps to increase sustainability and efficiency of the acute care hospital. 
     (f)  The executive office of health and human services shall promulgate regulations necessary to carry out this section.
     (g)  Not later than 30 days after payments are allocated to eligible acute care hospitals under this section, the secretary for health and human services shall file a report with the joint committee on health care finance and the house and senate committees on ways and means detailing the allocation and recipient of each payment.
     SECTION 5.  Section 2SSSS of chapter 29 of the General Laws, inserted by section 4, is hereby amended by striking out subsection (c).
     SECTION 6.  Section 64 of chapter 118E of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by striking out the definition of “Total acute hospital assessment amount” and inserting in place thereof the following definition:-
     “Total acute hospital assessment amount”, an amount equal to $417,500,000, the sum of $160,000,000 and the amount transferred to the MassHealth Delivery System Reform Trust Fund under section 66, plus 50 per cent of the estimated cost, as determined by the secretary of administration and finance, of administering the health safety net and related assessments in accordance with sections 65 to 69, inclusive, including those assessments transferred to the MassHealth Delivery System Reform Trust Fund established in section 2SSSS of chapter 29.
     SECTION 7.  Said section 64 of said chapter 118E is hereby further amended by striking out the definition “Total acute hospital assessment amount”, as appearing in section 6, and inserting in place thereof the following definition:-
     “Total acute hospital assessment amount”, an amount equal to $160,000,000 plus 50 per cent of the estimated cost, as determined by the secretary of administration and finance, of administering the health safety net and related assessments in accordance with sections 65 to 69, inclusive.
     SECTION 8.  Subsection (b) of section 66 of said chapter 118E, as appearing in the 2014 Official Edition, is hereby amended by striking out the second sentence and inserting in place thereof the following 2 sentences:- The office shall transfer the greater of $257,500,000 or the amount expended in payments under section 2SSSS of chapter 29 to the MassHealth Delivery System Reform Trust Fund established in said section 2SSSS of said chapter 29. The office shall expend amounts in the fund, except for amounts transferred to the Commonwealth Care Trust Fund or the MassHealth Delivery System Reform Trust Fund, for payments to hospitals and community health centers for reimbursable health services provided to uninsured and underinsured residents of the commonwealth, consistent with the requirements of this section, section 69 and the regulations adopted by the office.
     SECTION 8A.  Said subsection (b) of said section 66 of said chapter 118E is hereby amended by striking out the second sentence, inserted by section 8.
     SECTION 8B.  Section 279 of chapter 224 of the acts of 2012 is hereby repealed.
     SECTION 9.  There shall be a special commission to review variation in prices among providers. The commission shall consist of: the senate chair of the joint committee on health care financing who shall serve as co-chair; the house chair of the joint committee on health care financing who shall serve as co-chair; the attorney general or a designee; the secretary of administration and finance or a designee; the secretary of health and human services or a designee; the executive director of the group insurance commission or a designee; 1 person who shall be appointed by the senate president; 1 person who shall be appointed by the speaker of the house of representatives; 1 person who shall be appointed by the minority leader of the senate; 1 person who shall be appointed by the minority leader of the house of representatives; 8 persons who shall be appointed by the governor, 1 of whom shall be a health economist, 1 of whom shall represent a high-Medicaid and low-income public payer disproportionate share hospital, 1 of whom shall represent a hospital with not more than 200 beds, 1 of whom shall represent a hospital with at least 800 staffed beds, 1 of whom shall have demonstrated expertise in representing the health care workforce as a leader in a labor organization, 1 of whom shall be a representative of an employer with not more than 50 employees, 1 of whom shall be a representative of an employer with more than 50 employees and 1 of whom shall be a representative of an ambulatory surgical center; 1 person who shall be a representative of the Massachusetts Council of Community Hospitals, Inc.; 1 person who shall be a representative of the Massachusetts Association of Health Plans, Inc.; 1 person who shall be a representative of Blue Cross and Blue Shield of Massachusetts, Inc.; 1 person who shall be a representative of the Massachusetts Hospital Association, Inc.; and 1 person who shall be a representative of the Conference of Boston Teaching Hospitals, Inc.  In making appointments, the governor shall, to the maximum extent feasible, ensure that the commission represents a broad distribution of diverse perspectives and geographic regions.
     The commission shall conduct a rigorous, evidence-based analysis to identify the acceptable and unacceptable factors contributing to price variation in physician, hospital, diagnostic testing and ancillary services. The analysis shall include, but not be limited to, an examination of the following factors: quality, medical education, stand-by service capacity, emergency service capacity, special services provided by disproportionate share hospitals and other providers serving underserved or unique populations, market share of individual providers and affiliated providers, provider size, advertising, location, research, costs, care coordination, community-based services provided by allied health professionals and use of and continued advancement of medical technology and pharmacology. The analysis shall also include a comparison of price variation between providers in the commonwealth and providers in other states and a review of the feasibility of requiring insurers to separately contract with all provider locations for a multi-location health care provider, rather than contracting only with the individual provider locations, and a review of contracting practices that require payers to pay the same or similar prices to all provider locations for a multi-location health care provider where geographic differences in the provider’s site do not support charging the same or similar prices.
     After identifying the factors contributing to price variation, the commission shall recommend steps to reduce provider price variation and shall recommend the maximum reasonable adjustment to a commercial insurer’s median rate for individual or groupings of services for each acceptable factor. To conduct its review and analysis, the commission may contract with an outside organization with expertise in the analysis of health care financing and provider payment methodologies. The center for health information and analysis and the health policy commission shall provide the commission and any contracted outside organization, to the extent possible, relevant data and analysis necessary for the evaluation; provided, however, that such data shall be confidential and shall not be a public record under clause Twenty-sixth of section 7 of chapter 4 of the General Laws.
     The commission shall hold its first meeting not later than September 15, 2016 and shall meet not less frequently than monthly thereafter.
     If the commission determines that legislation is necessary to address price variation issues identified during its deliberations, the commission, as part of its final report, shall file proposals for such legislation not later than March 15, 2017 with the clerks of the house of representatives and the senate, who shall forward a copy of the materials filed by the commission to the house and senate committees on ways and means and the joint committee on health care financing.
     SECTION 10.  Section 3 shall take effect on July 1, 2017.
     SECTION 11.  Section 3A shall take effect June 30, 2021.
     SECTION 12.  Sections 4, 6 and 8 shall take effect on October 1, 2016.
     SECTION 13.  Sections 5 and 7 shall take effect on October 1, 2022.
     SECTION 14.  Section 8A shall take effect September 30, 2022


Approved, May 31, 2016.