LD 1959 Legislative Testimony of F. Johnson and P. Hayes

TESTIMONY OF FRANK A. JOHNSON
EXECUTIVE DIRECTOR, OFFICE OF EMPLOYEE HEALTH & BENEFITS
DEPARTMENT OF ADMINISTRATIVE & FINANCIAL SERVICES

BEFORE THE JOINT COMMITTEE ON BANKING AND INSURANCE
JANUARY 15, 2002

IN SUPPORT OF LD 1959, AN ACT TO ELIMINATE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION,
BUREAU OF INSURANCE TRAVEL RESTRICTIONS
FOR OBTAINING HEALTH CARE

PRESENTED BY REPRESENTATIVE MAYO
COSPONSORED BY SENATOR EDMUNDS AND SPEAKER SAXL,
REPRESENTATIVES CUMMINGS, DUDLEY, ETNIER, FULLER,
GLYNN, O'NEIL AND SULLIVAN

Senator LaFountain, Representative O'Neil, members of the Committee on Banking and Insurance, I am Frank Johnson, Executive Director of the Office of Employee Health & Benefits and a member of the Maine Healthcare Purchasing Collaborative. I am here today to offer our enthusiastic support of LD 1959, An Act to Eliminate Department of Professional and Financial Regulation, Bureau of Insurance Travel Restrictions for Obtaining Health Care.

You've already heard from Rep. Mayo and several of our private sector colleagues. I'd like to offer the perspective of the State employee group health plan representing employees, retirees, and dependents throughout Maine.

As most of you recall, the State Employee Health Commission serves as the plan's trustees. The mission of the Commission is to bring labor and management together in a partnership to ensure that our 41,000 members receive optimal health care services for the greatest value. In today's environment the challenge is daunting.

Like every other purchaser of healthcare we have experienced three consecutive years of double-digit premium increases. The Governor's revised budget provides for a 12% increase in premiums effective April 1, 2002. Assuming a 12% increase, premium rates will have increased 60% in the four-year period from April 1999 to April 2002. This year's upcoming 12% increase will require an additional $17.3 million in premium dollars. The State's obligation is roughly 88%, or $15.2 million with approximately $7.6 million coming from the General Fund.

While the more visible focus has been on escalating costs, much of our attention has been directed toward improving the quality of care delivered to our members. In recent years the State group has collaborated with providers and health plans to support quality improvement efforts. It was during the course of these early quality improvement initiatives that we adopted the principles of value-based purchasing.
Several years ago the Commission established a series of new and revised goals. A product of that exercise was the goal that the Commission:

"Develop a value-based strategy designed to produce the highest quality of care at the most efficient price."

That's a worthy but rather shapeless goal so we had to ask ourselves "what is value-based purchasing" and "what do we need to do to implement such a strategy." First, we agreed that value-based purchasing meant a departure from a practice where price was the determining factor. Improved health status, high quality clinical outcomes and member satisfaction had to be entered into the equation. Further, we concluded that a successful value-based purchasing strategy was contingent on four key requirements.

á Comparative information on provider costs
á Reliable, valid, comparative information on provider quality and performance
á Educated and informed members who would recognize that there are variances in cost and quality
á A commitment to use quality and cost information in purchasing decisions - designing and implementing methods to select providers for inclusion in networks, to induce members to choose high value providers, and to reward providers who demonstrate the delivery of high quality/high value services

While we have a very comprehensive claims database for utilization and payments there are limitations. That's why we supported a proposal last session to create the Maine Health Data Processing Center. With the enactment of that bill we are moving toward an all-payer, all-settings claims database that will go a long way to meeting our first requirement.

We continue to work with the provider community to establish comparative provider performance metrics. In collaboration with our colleagues in the Maine Health Management Coalition, we expect that 2002 will produce the initial measurements for hospital and physician performance. Quality indicators are clearly critical to any value equation.

We understand that we must sustain a long-term campaign to inform members about quality and cost issues. Our members have exhibited a hunger for information that helps them make decisions about what doctor to choose, which hospital to go to, and what treatment options to consider. We now have the obligation to provide that information in a meaningful and user-friendly manner.

If the first three ingredients are in the mix, we must honor the commitment to use the information in purchasing decisions. Identifying high-value providers is a wasted effort if we don't put that information to use.

Each of the four components of value-based purchasing (comparative cost and quality information, engaged consumers, and the commitment to use that information) is important in its own right but unless, and until they are integrated into a cohesive strategy we're looking at another fragmented system.

The Institute of Medicine's report of last year, Crossing the Quality Chasm, recommended that "Public and private purchasers should examine their current payment methods to remove barriers that impede quality improvement and to build stronger incentives for quality enhancement."

The IOM report further defined the role of purchasers in quality improvement.

á Create public awareness
á Measure comparative performance
á Inform and educate consumers
á Reward performance

Providers in Maine are investing millions of dollars to improve the quality of their institutions and practices but where is the reward for that effort? If we continue to support a payment system based exclusively on the volume of procedures and services rather than one based on performance, purchasers will have failed to assume a valuable role in improving quality. And if you accept the premise that quality costs less, we will have lost a key opportunity to contain the growth in premium expenses.

LD 1959 provides that the current geographic access standards of Rule 850 be overridden to allow health maintenance organizations to identify "centers of excellence." That means that quality indicators related to volumes, outcomes, clinical guideline compliance, and patient safety can be introduced into the purchasing equation.

How do we translate that into practice? Our vision is that comparative information will enable us to identify centers of excellence and inform our members accordingly. For example, if an employee is diagnosed with a specific condition and a surgical procedure is recommended, we should be in a position where objective, clinical information is available for the member to determine which hospital is likely to have the best outcomes for that procedure. The highest value hospitals may be rewarded with more patients.

If a member is diagnosed with a chronic condition, we should be able to identify the physicians that have the best systems in place to manage chronic disease, that comply with clinical guidelines, and have the best outcomes. We should be rewarding those providers with different payment methods.

We will not overstate the importance of LD 1959. It is not a health care panacea but it is a valuable tool that helps "remove barriers that impede quality improvement" as recommended by the Institute of Medicine. The ability to identify and reward "centers of excellence" is a tool that is desperately needed by the purchasers in this state.

We respectfully urge the Banking and Insurance Committee to report favorably on LD 1959.
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TESTIMONY OF PETER HAYES
HEALTHCARE BENEFIT STRATEGIST
HANNAFORD BROS. CO.
MEMBER OF THE EXECUTIVE COMMITTEE OF
MAINE HEALTHCARE PURCHASING COLLABORATIVE

BEFORE THE JOINT COMMITTEE ON BANKING AND INSURANCE
JANUARY 15, 2002

INSUPPORT OF LD 1959, AN ACT TO ELIMINATE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION,
BUREAU OF INSURANCE TRAVEL RESTRICTIONS
FOR OBTAINING HEALTH CARE

PRESENTED BY REPRESENTATIVE MAYO
COSPONSORED BY SENATOR EDMUNDS AND SPEAKER SAXL,
REPRESENTATIVES CUMMINGS, DUDLEY, ETNIER, FULLER,
GLYNN, O'NEIL AND SULLIVAN

Senator LaFountain, Representative O'Neil, members of the committee on Banking and Insurance, I am Peter Hayes, Healthcare Benefit Strategist, Hannaford Bros. Co., and a member of the Maine Healthcare Purchasing Collaborative. I am here today to offer my support of LD 1959, an Act to Eliminate Department of Professional and Financial Regulation, Bureau of Insurance Travel Restrictions for Obtaining Health Care and for a proposed amendment to allow "pilot programs". We passionately believe this legislation is the critical first step in laying a foundation that will lead to significant market changes that will create a win-win scenario for all stakeholders (i.e., patients, purchasers, and providers).

This issue of providing patients with appropriate information to utilize the highest quality providers is critical to Hannaford's continuing business success. The current market conditions will result in our healthcare cost doubling within 5 years. Like most other companies, our growth rate is significantly lower than healthcare so, this rate of increase is not acceptable or sustainable. We believe that the impact of our employees and families receiving care from the highest quality providers can dramatically decrease the rate of future increases with a similar savings in indirect costs and more importantly improve the quality of their life. We see no other healthcare reform proposal that offers the same potential to address quality and costs. This truly can be a win-win scenario for the citizens of Maine.

I would like to highlight some facts in an attempt to focus on the issue that should matter the most to all of us as a matter of public and social policy, which is patient safety.

á A critical component and measurement in the business environment is the defect rate or error rate per 1 million operations. In order to compete globally most manufactures adopt systems and goals to achieve less than a .1% failure rate. To put this in context the failure rate of Firestone Tires is 91 tires per million, airline crashes are .43 per million flights, healthcare is 2917 failures per million operations. This translates into a current political and social system that tolerates a failure rate in healthcare that is 32 times greater than what we will tolerate for tires (i.e., the Ford/Firestone example) and 7000 greater than that for airline safety.

á Medical error is the leading cause of preventable death in the United States.

á Institute of Medicine (IOM) estimates preventable inpatient medical error results in 98,000 deaths a year and approximately 500,000 disabilities. This translates in Maine to approximately 1 death and 5 disabilities occurring every day due to a preventable medical error.

á The Leapfrog Group determined that evidence based hospital referral can reduce mortality by 20% for 7 complex treatments.

á The 100 best-managed hospitals compared to the average hospital have 14% lower mortality and complication rates and 19% lower cost.

á The IOM report "crossing the Quality Chasm" concludes that the current system results in "needless mortality and morbidity", and that medical mistakes are frequent and serious. They further recommend that one of the critical components of improving this quality problem is to "provide incentives" to reward the high quality providers.

á Over 770,000 people are injured or die each year in hospitals due to adverse drug events, which may cost up to $5.6 million each year per hospital. Patients who experience adverse drug events were hospitalized 8 to 12 days longer than patients who did notÉand their hospitalization cost are $16,000 to $24,000 more (Source: Agency Healthcare Research and Quality, March 2001).

In considering this proposed legislation as public and social policy makers we ask you to carefully consider this bill and ask yourself as you listen to the arguments of the opponents of this bill, whose interests really being served, the patients or the providers?

á This bill does not direct care to Boston. We believe that Maine has providers that are delivering high quality care.

á This bill does not erode benefits or put the patient at greater financial risk. In fact the intent is to give the patient additional benefits and incentives to seek out the highest providers.

á This bill does not eliminate choice of provider. The intent is to continue to allow the patient to choose among the providers.

We are concerned about the lack of response from the healthcare community in taking a leadership role to deal with the quality issues and create public accountability for outcomes. Clearly, information and quality measures are becoming available to consumers. I would encourage you to reference www.healthgrades.com or www.selectquality.com for examples of consumer friendly outcome information (see attachments for other examples).

We ask you as policymakers to factor into your thinking the quality and patient safety issues as you consider the "access" issue. We believe that our system should continue to deliver as many services as possible locally as long as it can be done with high quality. However I fail to see how the patient is harmed if it is documented that a patient traveling 30 miles for a complex procedure could have a 20% lower expected mortality rate, a 85% reduced risk of an adverse drug reaction and receive a higher level of benefit reimbursement. In fact if this legislation is not approved, we are reinforcing that as a matter of public and social policy, we feel the "access" is more important than the health and safety of our constituents.
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