Peterson-Milbank
Program for Sustainable
Health Care Costs

Case Study
January 2021

 

Rhode Island's Cost Trends
Project: A Case Study on State
Cost Growth Targets

Erin Taylor, MPH, Michael Bailit, MBA, Megan Burns, MPP, and Justine Zayhowski, MPP

Policy Points

> Ahealth care cost
growth target
forms the basis for
accountability for
spending growth at
the state, provider,
and insurer levels.

> Rhode Island's
experience highlights
how a small team of
state staff, engaged
state and private
sector leadership,
and committed
stakeholders can
address rising health
care costs.

 

EXECUTIVE SUMMARY

State efforts to curb health care cost growth have largely focused on Medicaid and
public employee benefits programs because states have direct purchasing control over
those programs and responsibility to manage costs for individuals enrolled in them.
Governors and legislators are now considering strategies to constrain total health care
spending statewide, across all populations. As health care spending takes up a greater
portion of state and local budgets, employer budgets, and personal income, there

are fewer dollars for other uses. At the state and local level, health care spending can
crowd out funding for other public services, such as housing or nutrition, which are
both important to improve population health.

Addressing growth in health care spending requires a system-wide view and the col-
lective action of payers and stakeholders. States are leading the way by setting health
care spending targets, developing new capabilities to collect and analyze data, and
forging strong partnerships with stakeholders to make sure there is buy-in and trust in
the resulting actions.

Rhode Island is among a few states that have implemented a cost growth target to
stimulate action to improve health care affordability and curb health care spending
growth. Massachusetts and Delaware are the two other states that first established
a target for health care spending growth. A cost growth target is an expected rate of
annual per capita growth of total health care spending in a state. The target itself
forms the basis for accountability for spending growth at the state, insurer, and
provider levels.

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Setting a cost growth target alone is unlikely to slow the
rate of health care spending growth. Rhode Island recog-
nized this and pursued parallel strategies to analyze cost
growth and drivers of cost growth. The state engaged
leaders in the health care industry to develop the target,
pursue a complementary data strategy to analyze factors
contributing to health care spending growth, and then
take action.

Through a public-private partnership, and with funding
from the Peterson Center on Healthcare, Rhode Island
established the Health Care Cost Trends Project (Cost
Trends Project) in 2018 to address health care cost
growth and set a cost growth target. This partnership
underscored the commitment of state officials and
industry leaders to address the affordability of health
care for consumers, businesses, and the state.

The project has involved several key steps, from conven-
ing a stakeholder group to selecting a cost growth target
methodology to recommending policy actions based on
the data (Figure 1). Rhode Island's experience highlights
how the resolve of a small team of state staff, engaged
and effective state and private sector leadership, anda
shared commitment of stakeholders can address rising
health care costs. It also provides important insights for
other states considering a cost growth target, such as the

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value of providing reporting guidance on data submission
to insurers and developing a data validation process.

INTRODUCTION

Commercial health care cost growth in Rhode Island has
exceeded the growth rate of the state's economy, and
both employers and employees are seeing a greater por-
tion of their revenue and income go to health care.' State
budgets are also strained under rising health care costs,
which are crowding out investments in other public and
social services. This mirrors a national trend of health
care expenditures increasing at a faster rate than the
national gross domestic product." To cover ever-increas-
ing health care costs, states may face decisions about
cutting spending in other critical sectors that directly
impact health outcomes, such as housing and nutritional
programs.

Recognizing that rising health care costs restrict public
and private investments in other areas, Rhode Island
developed and implemented a strategy in 2018 to address
total health care spending in the state. Rhode Island
followed Massachusetts and Delaware to become the
third state to design and implement a health care cost
growth target.' A cost growth target is an expected rate
of annual per capita growth of total health care spending
in a state. Like those in Massachusetts and Delaware,

Figure 1. Key Components of Rhode Island's Cost Trends Project

Engaging Stakeholders in an
Advisory Role

Developing a Cost Growth
Target Methodology

Building Capacity to Analyze
Cost Growth Drivers and
Spending Growth

Using Data to Drive Action

 

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Public and private leadership signaling strong commitment to the project
Meaningful engagement of representatives from across the health care market
Shared understanding and pursuit of acommon goal to curb health care spending
Participant familiarity with cost growth target and related strategies

Choice of indicator (e.g., Consumer Price Index) to select to benchmark spending growth
Choice of populations to include and determination of whether there are reliable data
Options for state authority for the cost growth

Accountability for performance against target

= Data specifications and technical guidance
= Data sources for aggregate and detailed analyses
= Data validation processes for payer-reported and APCD data

= Development of a data use strategy with stakeholder input
= Production of meaningful and actionable information and reports
= Recommendation of targeted strategic interventions informed by data
Rhode Island's cost growth target is based on the state's
economic growth forecast.

This case study offers insights for other states consid-
ering how to address unsustainable rates of health care
spending growth. It describes Rhode Island's experience
establishing a cost growth target and its major policy and
implementation decisions. The case study also reviews
Rhode Island's development of a complementary strat-
egy to analyze factors influencing health care spending
to inform action.

Establishing the Health Care Cost
Trends Project

Through a public-private partnership, and with funding
from the Peterson Center on Healthcare, Rhode Island
established the Health Care Cost Trends Project (Cost
Trends Project) in 2018 to address health care cost
growth. A primary feature of the Cost Trends Project

is Rhode Island's health care cost growth target.* In
developing its target, Rhode Island considered the
experience of other states with similar initiatives,
especially Massachusetts, which was the first state to
operationalize a health care cost growth target. States'
efforts to contain health care costs have largely focused
on their Medicaid or employee benefits programs, areas
in which states have direct purchasing control. Rhode
Island's Cost Trends Project sought to address total
health care spending across all populations and service
categories. The Cost Trends Project also endeavored to
leverage data and analytics to inform action by the state,
insurers, and providers to meaningfully address health
care spending and improve system performance.

Rhode Island's governor prioritized the development

of a cost containment strategy that included a cost
growth target as a mechanism to control spending. The
governor directed the Office of the Health Insurance
Commissioner (OHIC) and the Executive Office of Health
and Human Services (EQHHS) to lead the effort on behalf
of the state. External contractors, including a leading
research university in the state, provided technical assis-
tance, process support, and data analytics expertise.

The Peterson Center on Healthcare provided financial
support for robust analytic capacity to examine health
care costs, identify core drivers of cost growth, and
develop a plan for sustained data analysis.

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Peterson-Milbank Program for Sustainable Health Care Costs

Kick-Starting the Cost Trends Project

The Cost Trends Project was the result of
years-long stakeholder work and health care
sector collaboration with public officials. In
2014, a coalition of industry leaders issued a
set of health care reform recommendations,
including one that called for state and

health care leaders to "collect the necessary
data to establish a strategy to control costs
and examine various options, such as
linking health care inflation to Gross State
Product."° Using those recommendations as
a blueprint, Governor Gina Raimondo in
2016 convened a working group of the state's
health care provider and insurer leaders to
advise the administration on the adoption
of a cost growth target as a health care cost
containment strategy. Following a series of
five meetings, the working group submitted
recommendations to the governor, concluding
that the state should only pursue a cost growth
target strategy if it took parallel action to:

e rigorously analyze drivers of cost and cost
growth;

¢ facilitate collaborative action addressing
system performance improvement
opportunities; and

e supplement the cost target with other non-
cost performance targets such as population
health and clinical outcomes of care.

 

Convening the Cost Trends Project
Steering Committee

The governor's office, with input from OHIC and EOQHHS,
called on members of the state's health care community
to participate in a steering committee to quide the Cost
Trends Project work. The health insurance commissioner
and secretary of health and human services co-signed
individual letters to steering committee members
formalizing their participation and establishing clear
expectations about the role and tasks of the committee.
The state appointed a health insurance executive and

a medical group executive to serve as co-chairs with
the health insurance commissioner. The co-chairs
expressed strong support for the state's prioritization
of health care cost containment, and their past demon-
strated leadership in the state conferred additional
legitimacy to the project.

Steering committee members were intentionally
selected to represent diverse entities and perspectives
including government, business, consumers, and com-
munity leaders, though the composition of the commit-
tee is balanced more toward payers and providers.

Key Takeaways and Insights: There are many factors
that contributed to the steering committee's effective-
ness, including:

Public and private leadership: Steering committee
members included supportive, high-profile, and
respected leaders in the state's health care commu-
nity. At the state level, the governor, commissioner of
health insurance, and secretary of health and human
services all expressed strong support, with the com-
missioner taking the most active role as co-chair of
the steering committee. This conferred legitimacy to
the project and signaled the importance of addressing
health care spending through a cost growth target.

Shared purpose: Steering committee members
aligned around the goals of the Cost Trends Project,
particularly the development of a cost growth target to
curb spending growth and thereby support affordability.
This helped to focus the steering committee's work.

Culture of collaboration: Strong, pre-existing working
relationships and a culture of collaboration were
instrumental. Many steering committee members were
involved in the governor's 2016 working group, which

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shaped the Cost Trends Project. Early and ongoing
public and private collaboration and a willingness to
engage in a cooperative and productive way helped

the group acknowledge and work through policy
decisions. Familiarity and prior involvement of steering
committee members in discussions of a target allowed
the work to move faster than if the topic had been
introduced as a new concept.

As the state transitioned from development to imple-
mentation of the cost growth target, it expanded the
stakeholders involved to include representation from
large businesses, community non-profit organizations,
a long-term care organization, and the pharmaceutical
industry. The steering committee has also expressed an
interest in including an economist in future discussions.

Developing a Cost Growth Target
Methodology

The primary task of the Cost Trends Project was to
develop a methodology for setting a cost growth target.
The steering committee accomplished this in four
months, an accelerated timeline. Familiarity with the
topic and a willingness to commit to the state's aggres-
sive meeting schedule enabled the steering committee
to complete required work in the short time frame.

The project's external contractor structured meetings
around a series of cost growth target "design decisions,"
including insights into other states' approaches, that
the steering committee discussed. Co-chairs reviewed
discussion documents in advance of each meeting so
that they were prepared to facilitate decision-making
and consensus-building.

There is a true desire to do something
different, and passion to do it collectively.
The governor commissioned us, but we are

driving our own destiny for the state. We are
leading and not having something done to us.

Kim A. Keck, former President and Chief Executive Officer, Blue Cross & Blue Shield of
Rhode Island, former Cost Trends Project Steering Committee Co-Chair

 

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Key Takeaways and Insights: The following contributed
to the steering committee's success in setting a cost
growth target ina compressed timeline:

« Prior awareness of a cost growth target;

« Application of experience and lessons of the ap-
proach in Massachusetts;

e Extensive meeting preparation, planning, and other
project management work; and

e Prioritization among participants of an intensive
planning and engagement process.

For most states, a six-month timeline would likely be
more feasible.

A description of the key design decisions the steering
committee made as it developed the cost growth target
methodology follows.

a. Scope of the cost growth target strategy

Acost growth target can stand alone or be pursued in
conjunction with other state strategies to constrain
health care costs. States should establish the scope of
a cost growth target and its relationship to other state
initiatives early in the planning process. The Rhode
Island Cost Trends Project adopted a singular strategy
to develop its cost growth target. (Notably, Rhode Island
employs complementary strategies to the cost growth
target, but they preceded the target.)

Standalone cost growth target strategy: States can
pursue a cost growth target as a standalone cost
containment strategy in which they set the value of the
target, and measure and report performance relative to
the target. A standalone cost growth target can, how-
ever, be accompanied by other activities to extend the
target's reach. These other actions may include: (a) an
extensive transparency strategy, (b) a "data use" strategy
to help understand cost growth drivers and to identify
opportunities for intervention and improvement, and (c)
stakeholder engagement in independent and collabo-
rative work to address underlying drivers of spending.
Rhode Island took this approach.

Singular component of a larger cost containment strategy:
Other states may take a broader view and integrate a
cost growth target with additional cost containment
strategies. For example, Oregon's legislation combined
a cost growth target with expanded use of value-based

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payment.® Similarly, Pennsylvania's Governor Tom Wolf
announced a health reform plan that includes increasing
affordability through a cost growth target strategy com-
bined with other initiatives to address health disparities
and increase affordability.'

Complementing a cost growth target with other cost-
focused initiatives may help with target attainment,
but it also places a larger administrative and political
challenge before the state.

b. Determining the basis upon which to set the target
After considering tying spending growth to household
income, personal income, or inflation growth, the
steering committee recommended basing the target
on per capita potential gross state product (PGSP)
growth, concluding that it most closely aligned with a
goal of making sure that health care did not take up an
increasing portion of the state's budget. The 2019-2022
cost growth target in Rhode Island is set to the value
of the state's PGSP(3.2% annually). (Table 1 presents
asummary of the considerations for the different
approaches.)

Before a state sets the value of a cost growth target, it
must assess the per capita rate at which health care costs
have been growing. This requires collecting and analyzing
the best available data to understand the full view of total
health care costs and comparing the data to the values
produced by the benchmarking indicator options.

c. Populations to include in the spending calculation
States need to determine the population(s) for which
spending will be measured relative to the cost growth
target. The size of different populations and the reliabil-
ity of the source of data are among the factors states
need to consider. The steering committee decided to
include Medicare, Medicaid, and commercial market
spending, which represents the majority of health care
expenditures in the state. The steering committee

also opted to include spending by the Veterans Health
Administration on state residents and the state's
correctional health system spending. States seeking to
obtain reliable and complete data on the self-insured
commercial market will need to request it from payers.
In Rhode Island, the self-insured population represented
42% of the commercially insured market in 2019.°
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Table 1. Benchmarking Options: Economic Growth versus Consumer Finance

Indicator

Implications of selecting indicator as a benchmark

 

Economic growth

 

Gross State Product (GSP)

Establishes that health care spending should not outpace overall state economic growth.

 

Consumer finance

 

Household Income

Establishes that health care spending should not grow more than household income, a more
consumer-centric concept than GSP.

 

Consumer Price Index
(CPI) All Items

Establishes that health care spending growth should not exceed growth in other consumer costs,
tying health care spending growth to price changes only.

 

CPI Less Food and Energy

Establishes that health care spending growth should not exceed growth in other consumer costs,

removing historically volatile food and energy price changes.

 

CPI Medical Care

More generous to health care payers and providers than other CPI measure options, recognizing that,

historically, health care cost growth has greatly exceeded All Items CPI.

 

d. Cost growth target authority

The steering committee established a multi-year cost
growth target through a compact signed by all commit-
tee members.° The target was subsequently codified
by executive order," which also directed executive
branch agencies to take necessary steps to implement
and support the cost growth target program. Rhode
Island's path - an executive order following a voluntary
compact - is unique among states that have pursued a
cost growth target and the direct result of stakeholder
convening, cooperation, and compromise. The steering
committee considered different authorities for the cost
growth target as shown in Table 2.

Steering committee members voiced different opinions
on which approach to pursue. The co-chairs initially
favored an executive order, but other members strongly
preferred a compact. They reasoned that it would signal
to the public the health care industry's cooperation

to reduce cost growth and it would reduce the role of
government. Committee members expressed concern
about the legislative approach, noting that it would

be difficult to pass legislation without evidence that a
target is effective in achieving its goals. Many members
indicated that future legislation might be a viable option
once the state had experience and results from the
target. In the end, the steering committee agreed toa

Table 2. Approaches to Authorizing a Cost Growth Target

Approach Advantages and Disadvantages

 

1. Executive Order

An executive order can be executed quickly relative to other approaches, for example, a statute. In Rhode
Island, the executive order sustained the momentum of the cost growth target development and allowed
for almost immediate implementation. However, executive orders are vulnerable to changes in adminis-
trations as priorities and policies may shift. They are also limited in their scope. For example, an executive
order alone does not provide funding to support program design and operations.

 

2. Statute

A statute establishes a cost growth target in law, making it more difficult to overturn or amend compared
to an executive order. Yet the legislative negotiation process can be lengthy, with a positive outcome
uncertain, and it can result in changes to the original policy intent.

 

3. Regulation (with-

New regulations directing the implementation of a cost growth target can be executed relatively quickly,

 

out new legislation) compared to legislative action. However, this approach requires that an agency have existing statutory
authority and state funding to proceed with program design and operations.

4, Voluntary A compact entered into voluntarily creates engagement and buy-in from stakeholders. Like an execu-

Compact tive order, it is vulnerable to shifting priorities, and without a mechanism for accountability, it may not

motivate widespread change. Other strategy options can compel action in ways a compact does not. A
compact also does not provide funding for program support.

 

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Peterson-Milbank Program for Sustainable Health Care Costs

A shared commitment to transparency regarding
cost performance of systems, payers, and larger
physician groups is a distinguishing characteristic
of this initiative that speaks to the level of

accountability that participants have been willing
to embrace.

G. Alan (Al) Kurose, President and CEO of Coastal Medical,

Cost Trends Project Steering Committee Co-Chair

 

hybrid approach whereby the cost growth target pa-
rameters would be established in a compact signed by
the members of the steering committee in conjunction
with an executive order, which references the compact
and its terms. Because of Governor Raimondo' role in
initiating the planning process, she wanted to make a
public statement in support of the cost growth target.
The governor also wished to apply the power of her
office and the resources of state government to support
the initiative.

The status of the steering committee as an advisory
body to the state, its express charge to support devel-
opment of a cost growth target, and the representation
of large health care system leaders, health insurers,
smaller provider organizations, and business and con-
sumer advocate members on the committee were all
critical factors for successfully translating the concept
of a cost growth target into policy.

e. Accountability for performance relative to the target
To bolster the potential impact of a cost growth target,
states should incorporate mechanisms to encourage
action by payers and providers to curb costs and
enforce performance relative to the target. Those
actions can take different forms. One approach is to
hold annual cost trends meetings (as in Massachusetts)
and require health plans and large providers to report on
cost performance. Another option is requiring payers

or providers to implement performance improvement
plans if the target is not met. Finally, states can take
more aggressive action by using their regulatory and
purchasing authority. Examples of this approach include

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influencing insurer premiums, provider rates, state
contract awards, or provider mergers, acquisitions, or
expansions, or levying fines.

The Cost Trends Project steering committee endorsed
a strategy of publicly reporting payer and provider
performance by entity name." Reporting of first year
(2019) performance will occur in early 2021, and a public
meeting to review and discuss findings will follow. This
transparency about performance is intended to hold
health care entities accountable for curbing costs while
providing valuable information about cost drivers to the
public to inform targeted interventions.

Neither the compact nor the executive order, by design,
incorporates additional accountability mechanisms,
such as the examples cited above. Omitting such mech-
anisms was a factor in garnering payer and provider
support for the initiative.

Analyzing Performance against the
Cost Growth Target: Early Insights and
Lessons

Once a cost growth target is established, it is neces-
sary to assess performance relative to the target. This
analysis is customarily conducted using aggregate data
reported by payers, rather than a state's all-payer claims
database (APCD) data. Like most state APCDs, Rhode
Island's APCD, HealthFacts RI, does not contain most
commercial self-insured claims payments, nor does it
capture non-claims provider payments or pharmacy
rebates. This data analysis is distinct from evaluating
cost growth and identifying cost growth drivers, which
do use the APCD. (See Figure 2.)
Peterson-Milbank Program for Sustainable Health Care Costs

 

Payer-Reported Aggregate Data

Primary purpose: Assess performance against
the cost growth target

Payer-reported data are provided in aggregate
and are limited in detail but do represent all health
care spending in the state (including spending in
self-insured employer benefit programs).

$

How much did spending increase or
decrease from one year to the next?

 

Figure 2. Purpose of Data Sources for Rhode Island's Cost Trends Project

APCD Analyzed Data

Primary purpose: Identify underlying cost and
cost growth drivers

APCD data are more detailed than payer-
reported aggregate data. Claims-level analyses
can be performed. While not all state spending
data are included, there is more than enough
information to understand underlying trends.

hd What is driving overall cost and cost

trends? Where are opportunities?

 

The Cost Trends Project staff developed payer data
specifications for reporting performance against the
target and prepared an implementation manual contain-
ing technical guidance to assist entities with reporting.
Specifications and technical guidance articulated the
types of claims and non-claims spending for payers

to report and the method for attributing spending to
members, primary care providers, and commercial

and Medicaid accountable care organizations (ACOs).
The state performed an initial analysis of 2017 and 2018
spending using data collected from the Centers for
Medicare and Medicaid Services(CMS), Rhode Island
Medicaid, and the major commercial, Medicaid managed
care, and Medicare Advantage insurers in the state.

The state then publicly reported state and market-level
spending in the summer of 2020. This process revealed
that some payers had difficulty interpreting the data
specifications, which resulted in inaccurate data sub-
mission. Thus, the state developed a set of procedures
for data validation for breaking down spending by service
and on a per-member-per-month basis to guide future
reporting. In the fall of 2020, OHIC collected revised 2018
data and new 2019 data. The state intends to publicly
report performance at the insurer and large provider
entity level in early 2021.

Key Takeaways and Insights: There are several lessons
learned from Rhode Island's experience collecting data
and analyzing total medical expenditure data, including:

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Reporting guidance: There is value in publishing an
instruction manual that describes how the state will
calculate performance relative to the target. The man-
ual should include specific details about data requests
of insurers. Those reporting guidelines facilitate more
accurate and efficient data submission, but states
should be prepared that it will take time for payers to
adapt their data reporting processes to respond.

Communication with insurers: Initiating conver-
sations early with insurers about the data needed

to assess performance and the collection process
ensures a mutual understanding of data requests and
open lines of communication to discuss data integrity
concerns. States should also review findings with
payers in advance of public reporting to allow for a final
quality check and discussion of any data concerns.

Process to validate data: Developing a validation
process to identify potential inconsistent reporting
promotes data integrity. In Rhode Island, completeness
checks were performed to ensure that there were no
obvious errors or omissions in the submitted data.

An example of an error is if a payer reports a claims
runout period that is different than the specifications.
An omission example is when a payer does not submit
data for all relevant lines of business. Reasonableness
checks were performed to ensure that data seemed
appropriate when compared to other sources and at
face value. For example, member enrollment reported

 
by the payers should be similar to enrollment reported
by CMS for Medicare Advantage patients.

Stakeholder input prior to the launch of the Cost Trends
Project included recommendations that the state
rigorously analyze drivers of costs and cost growth. This
would enable the state to explore factors contributing
to health care spending growth and then direct action
to address primary cost drivers. Setting a cost growth
target allows states to measure spending relative to an
established benchmark. The measurement of spending
alone, relative to a target, does not show what is driving
spending growth. Analyses must be done to identify
specific categories of high spending (e.g., pharmacy
spending) and drivers of growth to identify opportunities
for targeted interventions to reduce growth.

The state partnered with the Brown University School

of Public Health for expertise to conduct a thorough
analysis of claims data and assess the feasibility of using
HealthFacts RI to identify cost trends and cost growth
drivers and to deconstruct total medical expenditures by
volume and price. The assessment showed HealthFacts
RI to be a viable data source for analyses related to
drivers of cost, drivers of cost trends, and related
analyses that could support cost growth reductions and
quality improvement. This viability is despite the ab-
sence of most self-insured and non-claims data. While

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greater self-insured employer participation would make
HealthFacts RI a more robust data resource, there are
enough data to understand the underpinnings of most
health care spending in the state.

Prior to the Cost Trends Project, the state's APCD had
limited use and underdeveloped quality control mech-
anisms. Brown University's robust analysis of the APCD
uncovered data integrity issues that required investiga-
tion and correction."

With confidence that the APCD could support robust
data analyses after data integrity issues were addressed,
the Cost Trends Project steering committee began
discussing how to leverage HealthFacts RI to enhance
the value of health care in Rhode Island. Specifically,

the Cost Trends Project sought to design and produce
reports from the APCD to inform and motivate improved
health care system performance. This is termed the "data
use strategy."* Consistent with the cost growth target
development, the state engaged key stakeholders and
the public in the development of a data use strategy. The
Cost Trends Project hosted a data use conference to
bring together officials from other states and organiza-
tions to share their data use strategies to facilitate learn-
ing. During the conference, steering committee mem-
bers and other invited members of the public talked with
national experts about opportunities for Rhode Island

to maximize use of its APCD. Following the conference,
the Cost Trends Project held two focus groups to gather

The Cost Trends Project provides an invaluable
opportunity to analyze the root causes of health care
spending growth in our state and utilize that data to
change behaviors and take steps to reduce the costs of
quality care in our state. The data analyses from the Cost

Trends Project will be instrumental in arming our health

care leaders with the tools needed to collaboratively
transform our health care system into one characterized
by maintenance of both high quality and affordability.

Marie Ganim, former Rhode Island Health Insurance Commissioner,

Milbank Memorial Fund «

former Cost Trends Project Steering Committee Co-Chair

 
input on meaningful analyses of the APCD, leveraged

the steering committee meetings to structure ongoing
conversation about a data use strategy, and hosted an
open meeting to publicly present draft recommendations
for leveraging HealthFacts RI.

Strategic Analyses Using Rhode Island's APCD

1. Cost drivers, including:
a. Utilization variation
b. Price and cost variation
c. Low-value services
d. Potentially preventable services

 

2.Cost growth drivers

 

3.Population demographics, including social
determinants of health

 

 

 

4.Quality of care

 

Key Takeaways and Insights: Several key themes that
emerged in the process of developing a data use strat-
egy offer an important roadmap as the state pursues
institutionalized analyses and reporting practices. They
include:

Stakeholder engagement is at the heart of leveraging
APCD analyses to promote health system change.
Stakeholder involvement from a project's inception is
essential to building trust and producing actionable
results. Community involvement in communicating and
framing results about cost in the context of quality;
ensuring data are accessible to stakeholders, noting
a tension with potentially exposing market-sensitive
information; and ensuring diverse voices are also key
considerations and should be addressed in the devel-
opment of analyses and reporting.

Producing actionable results is equally important.
Rhode Island's initial focus is producing reports for
providers and the public as the primary audiences.

To ensure reports are meaningful and actionable, it

is important to involve provider organization repre-
sentatives, state policymakers, and other intended
report users, including employer purchasers, to ensure
reports are effective for routine publication.

Sustainability planning is of the utmost importance
to ensure the implementation of the data use strategy
and ongoing analyses of the APCD.

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Finally, states with APCDs, particularly those without
robust analytics or collection processes, should not
wait until performance is ready to be assessed before
performing a thorough examination of their claims
data. This early analysis of the APCD may reveal where
data are missing or incomplete.

In late 2020, the state began analyzing three primary
cost drivers: pharmacy spending, outpatient hospital
spending, and specialist spending. Analysis of pharmacy
spending led to the identification of potential strate-
gies to address price growth, and steering committee
recommendations to the state on how it should proceed.
Rhode Island anticipates that these analyses will identify
opportunities for improved clinical care and is planning
to convene a provider collaborative in 2021 to focus on
the first prioritized opportunity related to outpatient
hospital or specialist spending.

Leveraging state APCDs to conduct sophisticated cost
analysis, and then translating those analyses to strategic
action on cost growth, constitutes both a significant
opportunity and a challenge.

Sustaining Cost Growth Target Work

The executive order initiating the cost growth target
does not (and cannot) appropriate funds for ongoing
implementation or sustainability. Although grant funding
from the Peterson Center on Healthcare provided the
necessary start-up investment to develop the target and
support data analysis, the state will need to determine an
ongoing financing mechanism to sustain the work. The
governor's FY22 budget will propose an assessment (i.e.,
a tax) on commercial insurers, Medicaid, and self-funded
businesses to provide sustaining funding to support the
program and to codify the work in statute. In addition,
the state has sought local foundation funding to support
aspects of program operations.

Key Takeaway and Insight: States that have operational-
ized a target through voluntary compact and/or execu-
tive order may often have more difficulty finding funding
to sustain the work than those with enabling legislation.

Cost Growth Targets and Health Care
Reform

A state health care cost growth target is a powerful way
to advance health care cost containment. Targets for
growth in total health care spending can help states

10
gain a clearer picture of spending and support targeted
policies and interventions to curb spending and improve
system performance.

Yet targets alone are unlikely to contain cost growth,
improve health care system performance, and better
population health. Rhode Island and its participating
stakeholders are well aware of this. As a result, the state
has undertaken multiple other initiatives, including

a Medicaid accountable care program that involves
shared savings and risk contracting with large provider
entities, regulation of commercial insurer hospital rate
increases, targeted increases for accountable care
organization budgets, greater adoption of alternative
payment models, and support for broad-scale primary
care transformation.

The Cost Trends Project complements these and other
initiatives, largely by identifying the underlying, core
drivers of cost and arming the state, providers, and
payers with information to take meaningful action.
Investments in analytics extend beyond the cost growth

Milbank Memorial Fund « www.milbank.org

Peterson-Milbank Program for Sustainable Health Care Costs

target, yielding additional value. Lastly, there is the
long-lasting impact of stakeholder collaboration to
address systemic issues, a benefit that the state hopes
will pay dividends as it faces other challenges.

Rhode Island's cost growth target development and
design were specific to the state, its culture, and its
environment. Other states will need to customize their
process and design, cognizant of the extent of state
personnel and data resources to support the work,
stakeholder perspectives on cost containment asa
public good, and the extent to which there is a procliv-
ity for collaborative effort in the state. Despite these
state-specific considerations, the policy and technical
questions any state considers will likely be similar to
those Rhode Island faced. Just as Rhode Island learned
from Massachusetts, other states will now benefit from
Rhode Island as they design and implement their own
cost growth initiatives.

This work was funded by the Peterson Center on
Healthcare.

Nl
Notes

1.

Between 2015 and 2017 the per capita growth rate of fully insured commercial allowed spending in Rhode Island
was between 5.0% and 5.5%, as calculated from the Office of the Health Insurance Commissioner's rate templates.
The average annual rate of gross state product between 2015 and 2017 was 2.3%, as calculated from data supplied
by the U.S. Bureau of Economic Analysis.

National health care expenditures (NHEs) in the United States continue to grow at rates outpacing the broader
economy: Inflation- and population-adjusted NHEs have increased 1.6% faster than the gross domestic product
(GDP) between 1990 and 2018. US national health expenditure growth as a share of GDP far outpaces that of com-
parable nations in the Organization for Economic Cooperation and Development (17.2% versus 8.9%). Cahan EM,
Kocher B, Bohn R. Why isn't innovation helping reduce health care costs? Health Affairs Blog, June 4, 2020. https://
www.healthaffairs.org/do/10.1377/hblog20200602.168241/full/. Accessed January 21, 2021.

Pearson E, Frakt A. Health care cost growth benchmarks in 5 states. JAMA. 2020;32.4(6):537-538. doi:10.1001/
jama.2020.12437

Rhode Island's health care cost growth target is 3.2% per capita for 2019-2022. This is equal to the rate of long-
term projected state economic growth.

Press release from the office of U.S. Senator Sheldon Whitehouse of Rhode Island. RI health care leaders send re-
form recommendations to Raimondo and General Assembly leaders. December 23, 2014. https://www.whitehouse.
senate.gov/news/release/ri-health-care-leaders-send-reform-recommendations-to-raimondo-and-general-as-
sembly-leaders. Accessed January 21, 2021.

The Oregon legislature through Senate Bill 889 (2019 Laws) has established the Sustainable Health Care Cost
Growth Target Program within the Oregon Health Authority. https://olis.leg.state.or.us/liz/2019R1/Downloads/
MeasureDocument/SB889/Enrolled. Accessed January 21, 2021.

Rubinkam, M. Wolf seeks commission to rein in health care spending. Associated Press, October 2, 2020. https://
apnews.com/article/pennsylvania-health-care-costs-tom-wolf-df2bbcO0f5e1la25759f0ed3fle41078b. Accessed
November 16, 2020.

Share of Private-Sector Enrollees Enrolled in Self-Insured Plans. Kaiser Family Foundation State Health Facts.
2019. https://www.kff.org/other/state-indicator/share-of-private-sector-enrollees-enrolled-in-self-in-
sured-plans-2018/?currentTimeframe=0&selectedRows=%7B%22states%22. Accessed January 21, 2021.

State of Rhode Island: Office of the Health Insurance Commissioner. December 19, 2018. http://www.ohic.ri.gov/
ohic-reformandpolicy-costtrends.php. Accessed September 20, 2020.

' Rhode Island Executive Order No. 19-03. February 6, 2019. https://governor.ri.gov/newsroom/orders/. Accessed

December 3, 2020.

- The steering committee established a minimum population size of 5,000 attributed lives (Medicare) and 10,000

attributed lives (commercial and Medicaid) for public reporting of performance.

- This work was supported by a committed team of researchers and liaisons with the state's APCD vendor and the

state. This support helped the state work through challenges encountered throughout the process, including not
anticipating the amount of time it would take to transfer data using the APCD vendor's business practices. There
was also a learning curve to fully understand the state-specific APCD features and operational capabilities. The
Cost Trends Project leveraged the state's APCD in a way it had not been used before, and this first significant
analysis of the APCD uncovered the need for data scrubbing and revealed that the time to access data was longer
than anticipated.

- State of Rhode Island: Office of the Health Insurance Commissioner. May 17, 2019. http://www.ohic.ri.gov/

ohic-reformandpolicy-costtrends.php. Accessed September 20, 2020.

Milbank Memorial Fund « www.milbank.org 12
AUTHORS

Erin Taylor, MPH, is a senior consultant at Bailit Health with experience in public health, health care policy analysis,
and payment and delivery system reform. Ms. Taylor has researched and evaluated value-based payment strategies
for individuals with complex care needs, including seniors and individuals with disabilities enrolled in managed care.
Ms. Taylor supported the process for developing the Rhode Island Cost Trends Project data use strategy, including an-
alyzing how states use their all-payer claims databases to improve health care system performance. Ms. Taylor earned
a Bachelor of Science degree from the University of Florida and a Master of Public Health degree with a concentration
in health law, bioethics, and human rights from Boston University.

Michael Bailit, MBA, is founder and president of Bailit Health. Mr. Bailit's professional interests focus on how purchas-
ers and regulators can influence health care markets to operate as effectively and efficiently as possible. He serves
as lead consultant to Rhode Island for its Cost Trends Project and has worked with an array of state agencies and
employer purchasing coalitions in more than 30 states. Mr. Bailit has worked with several state clients on cost growth
target development and payment and delivery system reform, including accountable care organizations, medical
home and episode-based payment strategy design and implementation, performance measurement, value-based
purchasing, and multi-stakeholder change process guidance and facilitation. Mr. Bailit earned a Bachelor of Arts
degree from Wesleyan University and an MBA from the Kellogg School of Management at Northwestern University.

Megan Burns, MPP, is a senior consultant at Bailit Health with a decade of state health care policy consulting experi-
ence and has developed expertise in state health care cost growth benchmark policies. Ms. Burns has helped Rhode
Island, Delaware, Oregon, and Connecticut develop their health care cost growth target programs. Ms. Burns also has
expertise in payment reform, value-based purchasing, regulatory review, and behavioral health integration strategies.
She has performed both applied and research work for states, health plans, providers, and non-government clients.
Ms. Burns earned a Bachelor of Arts degree in political science from the State University of New York at Cortland and
a Master of Public Policy degree from the Terry Sanford Institute at Duke University.

Justine Zayhowski, MPP, is a consultant at Bailit Health who supports state work to establish cost growth and quality
targets, to enhance performance measurement, and to maintain multi-payer aligned measure sets. Ms. Zayhowski
has provided project management support and analyzes performance against the cost growth target for the Rhode
Island Cost Trends Project. She assisted in the development of Delaware's quality benchmarks for its cost growth
benchmark program. Ms. Zayhowski also supports state work to enhance performance measurement and to main-
tain multi-payer aligned measure sets. She earned a bachelor's degree in Health: Science, Society, and Policy from
Brandeis University and a Master of Public Policy degree from the Heller School at Brandeis University.

Milbank Memorial Fund « www.milbank.org 3
About the Milbank Memorial Fund

The Milbank Memorial Fund is an endowed operating foundation that works to improve the health of populations by
connecting leaders and decision makers with the best available evidence and experience. Founded in 1905, the Fund
engages in nonpartisan analysis, collaboration, and communication on significant issues in health policy. It does this
work by publishing high-quality, evidence-based reports, books, and The Milbank Quarterly, a peer-reviewed journal
of population health and health policy; convening state health policy decision makers on issues they identify as
important to population health; and building communities of health policymakers to enhance their effectiveness.

About the Peterson Center on Healthcare

The Peterson Center on Healthcare is a non-profit organization dedicated to making higher quality, more
affordable healthcare a reality for all Americans. The organization is working to transform U.S. healthcare into a
high-performance system by finding innovative solutions that improve quality and lower costs, and accelerating
their adoption on a national scale. Established by the Peter G. Peterson Foundation, the Center collaborates with
stakeholders across the healthcare system and engages in grant-making, partnerships, and research. For more
information, visit petersonhealthcare.org.

 

The Milbank Memorial Fund is an endowed operating foundation that engages in nonpartisan analysis, study, research, and communication
on significant issues in health policy. In the Funds own publications, in reports, films, or books it publishes with other organizations, and
in articles it commissions for publication by other organizations, the Fund endeavors to maintain the highest standards for accuracy and

Jairness. Statements by individual authors, however, do not necessarily reflect opinions or factual determinations of the Fund.

© 2021 Milbank Memorial Fund. All rights reserved. This publication may be redistributed digitally for noncommercial purposes only as

long as it remains wholly intact, including this copyright notice and disclaimer.

 

 

 

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