Commission’s report highlights inequity in hospital rates

STATE HOUSE – The current hospital rate system is ailing, and needs to be modernized to encourage improved patient health, equity between facilities and more efficiency, according to a report released today by a Senate commission that has studied the system for the last four months.

The Special Senate Commission to Study Cost Containment, Efficiency and Transparency in the Delivery of Quality Patient Care and Access by Hospital approved its final report, which recommends that the state enact changes that steer insurance companies away from the current fee-for-service model of payment to different models that promote efficiency, effectiveness and quality of care for patients.

“Hospitals are vital to Rhode Island both in terms of our citizens’ health and as a sector of our economy, so it’s in the best interest of the public to ensure they remain solvent. The rate system is not transparent and clear enough to ensure that all hospitals are being reimbursed fairly and equitably, and it may even penalize hospitals for getting patients healthy quickly,” said Sen. Joshua Miller (D-Dist. 28, Cranston, Warwick), who is chairman of the special commission. “The rate system should be fair to all hospitals, but even more importantly, it needs to encourage and reward practices that result in better patient health and are efficient.”

The report highlighted the inequities created by a system that sets rates by negotiation between individual insurers or other payers of hospital bills, and hospitals or hospital networks. As a result different payers – whether insurance, Medicaid, individual patients or other entities – pay different rates for the same services, and hospitals are paid differently for the care they provide.

The business of hospitals is changing, and the way rates are determined should change with it, the commission said, especially as the federal health care reforms change the way health care is delivered.

Since payment is made per service without regard to the health outcome, the current system doesn’t reward hospitals that efficiently improve patient health over those that don’t.

The report found that the state could do more to demand cost efficiency and quality improvement from health insurers by combining its powers as one of the largest purchasers of health care services for its employees and public health programs.

In the report, the commission recommended that the state begin transitioning completely away from the current fee-for-service payment model toward alternative models that promote better and more efficient health care. The commission recognized that the Office of the Health Insurance Commissioner announced in July that it would begin requiring such changes in new rate plans it approves, and the commission recommends that the state monitor and support the OHIC in that effort.

The commission also recommends that the state create a Provider Payment Reform Task Force within the executive branch that would study appropriate payment levels by payer, hospital, and inpatient/outpatient service type and monitoring payment reform efforts, among other task to ensure fairer pricing. Increasing transparency and public scrutiny in the rate setting process would also improve rate fairness.

Requiring individuals to designate a primary health care provider would also result in more efficient care that would reduce costs, the commission recommended. Having a primary health care provider who is familiar with the patient and who coordinates that patient’s health care services, has been shown to be an effective way to improve individuals’ health and prevent avoidable hospitalization. Additionally, the commission recommended promotion of the Hospital Safe Transitions program, which increases safety of patients transitioning out of hospital care and reduces unnecessary readmittance, and transitioning away from a policy of relying on emergency hospital visits for behavioral health care intervention toward less-expensive community-based options.

Permanently funding programs that increase statewide coordination of health care payments and health care planning were also recommended.

Senator Miller said he and other members of the commission expect to submit legislation to affect some of the changes recommended by the commission soon. The report is available at www.rilin.state.ri.us/SpecialReports/.

For more information, contact:
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State House Room 20
Providence, RI 02903
(401) 222-2457

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