Testimony Relative to the Determination of Needs Regulations Before the Public Health Council

The Massachusetts Medical Society greatly appreciates the opportunity to provide comment on the Department of Public Health’s proposed revision to the Determination of Need (DON) regulations (105 CMR 100.000). The Medical Society commends the Department in its desire to reform the DON program; few can argue that it has not devolved into an antiquated, cumbersome process that no longer reflects the valuable intent upon which it was implemented nearly forty years ago.

The Medical Society supports many of the specific reforms proposed by the Department: a simplified process aligned with the Health Policy Commission’s cost and market impact reviews and a realigned and modernized evaluation framework that reflects the changing face of health care. These are both welcome changes. The Medical Society believes that many of the proposed improvements will allow for a more objective, transparent, and streamlined approach for determinations of need.

The ample improvements that could be gained through many of the proposed reforms are severely diminished, however, by what we believe are troublesome changes proposed to the ambulatory surgery center (ASC) provisions of these regulations.

The Medical Society strongly opposes the provisions in the proposed amendments that prohibit high-value, unaffiliated, freestanding ambulatory surgical centers from seeking the ability to apply for determinations of need to create, expand, move, or sell an ambulatory surgery center. As detailed below, this arbitrary distinction will negatively impact access and quality of surgical care in Massachusetts. It will also lead to increased health care costs- something everyone in the health care sector is working diligently to avoid.  The Medical Society strongly urges that the proposed changes to 105 CMR 100.740 and 105 CMR 100.730 both be amended to strike the distinction that applications only come from ambulatory surgery centers with affiliation, co-location, or joint venture with an acute care hospital.

The Triple Aim in Massachusetts

Massachusetts is the birthplace of the “Triple Aim,” a well-known framework to improve health care developed by the Institute for Healthcare Improvement that emphasizes the importance of concurrent improvements to the access, quality, and cost of health care. After substantially expanding insurance coverage and access in 2006 through the passage of Chapter 58, the Massachusetts legislature again endorsed the ”Triple Aim” through the comprehensive legislation, “Chapter 224, An Act Improving the Quality of Health Care and Reducing Costs through Increased Transparency, Efficiency and Innovation,” which was signed on August 6, 2012. Chapter 224 created the Health Policy Commission, an independent state entity whose main directive is to develop policy to reduce health care cost growth and improve the quality of patient care. Chapter 224 was passed with the ambitious goal of bringing health care spending growth in line with growth in the state’s overall economy by establishing the health care cost growth benchmark, a statewide target for the rate of growth of total health care expenditures.

Despite many positive trends in the health care system, the cost benchmark has been missed for two consecutive years, prompting yet more conversations about how to reduce costs and increase value in Massachusetts. Missing the annual cost benchmark comes with consequences to providers; the Health Policy Commission’s interim guidance on Performance Improvement Plans (PIP) outlines processes and requirements for entities whose increases in health status adjusted total medical expense are considered excessive and who threaten the ability of the state to meet the health care cost growth benchmark. These requirements are complex and require substantial resources of the individual provider organizations to establish and monitor these performance improvement plans. The state government should be supporting these payers, hospitals, and physician organizations by implementing policies that foster a high-value health care system which promotes the attainment of the healthcare cost benchmark. The proposed changes to the determination of need program, as evidenced below, would increase the total medical expenditures and unfairly subject more providers to the burdens of the PIP, as well as financially strain providers who are increasingly taking on larger downside risk in contracts.

Beyond the cost benchmark, cost and value in healthcare have been central tenets of many other governmental leaders including the Governor, the Attorney General, and leaders in the legislature. Physicians have increasingly appreciated the valuable role that cost plays in healthcare, especially in the new world of alternative payment contracts and accountable care organizations. These trends in attention to cost come with important advantages: they can allow for greater coverage and greater emphasis on prevention. They also come with disadvantages: as costs escalate, many institutions are forced to find alternative strategies to combat rising costs and cuts to their reimbursement through alternative, risk-based contracts. In today’s world, increases in cost can harm patient access, patient care, employment, and other capital improvements. Fortunately, ASCs provide an excellent model for reducing costs without sacrificing quality or population health in Massachusetts.

ASCs Are a Model for Achieving the Triple Aim in Massachusetts

Massachusetts is a leader and model for national health care reform initiatives. Our reputation as a healthcare innovator is rooted in achieving the goals of the ”Triple Aim,” providing better care while improving population health and lowering cost through innovative legislation, including Chapters 58 and 224. These laws are working to improve the health of Massachusetts residents and future generations by designing a healthcare system in Massachusetts where the ”Triple Aim” is the law of the land, driving increased transparency, efficiency, and innovation in the Commonwealth. ASCs are essential to this mission, and any regulatory changes aimed at constraining the growth of ASCs will likely constrain the innovation, efficiency, and value they bring to Massachusetts’ healthcare system.

ASCs improve quality of care and patient experience while improving efficiency and driving innovation and transparency

ASCs drive innovation by providing a more patient-focused, patient-centered method for delivering surgical care outside of the hospital setting rendering more efficient and lower cost care to patients without sacrificing quality or safety.1   ASCs improve the quality of care for patients and how they experience that care by offering patients more convenient locations, shorter waiting times, and easier scheduling relative to hospital out-patient departments (HOPDs).2 Multiple studies have confirmed that “ASCs on average provide higher quality care for outpatient procedures than hospitals, and other research indicates that they do so at lower costs than hospitals.”3 Higher quality in ambulatory surgery centers is not surprising; greater specialization allows for higher concentrations of select procedures which in turn allows for better trained staff, more efficient, patient-centered processes, and less movement of technical equipment.

ASCs are often safer than HOPDs as evidenced by fewer wrong-site surgical procedures, less adverse events, and lower mortality rates.4 And quality of care extends to high-risk patients where research shows that ASC patient outcomes, including hospital admissions and the number of emergency department visits, are lower compared to HOPDs.5  In a move to further and continuously improve quality and transparency in ASCs, the American Association for Accreditation of Ambulatory Surgery Facilities implemented Internet-based quality improvement and peer review programs. Therefore, by regulating ASCs we risk negatively impacting their viability jeopardizing the innovation and improvements ASCs bring to the overall Massachusetts healthcare system.

ASCs reduce cost and increase value while meeting a higher demand for services and improving population health

Research demonstrates that ASCs are able to generate cost savings by moving outpatient procedures to a less expensive setting without sacrificing quality.7,8 In fact research shows that ASCs could save hundreds of millions of Medicare dollars over the next few years. ASC procedures often take less time than HOPDs in turn reducing cost and better meeting the rising demand for services,10 a demand fostered by a focus on preventive care, wellness, and increasing access to healthcare and, in turn population health, in both the state and nationally. In fact, increase in utilization of ASCs is likely the result of increased demand rather than ASC growth.11  In addition to saving the system money, the cost to patients is often lower in the form of ASC copayments that are often lower than HOPDs, a key finding when assessing the impact of ASCs on access and inequality,12 particularly during a time when a rise in high-deductible plans is having a negative impact on consumers in the Commonwealth. Over time, research demonstrates that ASCs are beneficial in keeping the price of surgical procedures steady, while HOPD prices have risen sharply.13,14  A recent analysis by the Health Policy Commission, as displayed in the chart below, from the 2015 Cost Trends Report, confirms these findings. Testimony on Determination of Needs Regulations Chart 350  

The Health Policy Commission analysis underscores our stance, that the value of care provided in non-hospital settings is important and impactful for Massachusetts’ consumers. For example, colonoscopies, a potentially life-saving and cost-effective preventive service, had a median price in a hospital outpatient department that was 56 percent above the median price in a non-hospital setting.

Preventative care (such as colonoscopies) is a particularly compelling example of why this spending disparity is so important. The Centers for Disease Control has pushed for increases in this type of screening to promote the prevention of costly disease. The Affordable Care Act at once increased health insurance coverage for millions of people in the U.S., and also eliminated cost sharing for such procedures. Ambulatory surgery centers hold great promise in meeting the increasing demand for such services, and the sustainability of the various payers’ ability to cover such services. As one article from Health Services Research notes:

Our study suggests that ASCs could play an important role in moving to a health-care system that offers greater value by producing high-quality care at lower cost. The policy debate should address the concern of physician ownership of ASCs in a broader context that includes recognition of the benefits of ASCs. Movement in Medicare toward value-based purchasing and delivery system reforms should work to increase the value of ASCs to Medicare and beneficiaries.15

Cost variation in instances such as preventative colonoscopies will be most acutely felt by the insurer or accountable care organization paying for the procedure. However, many trends in health care delivery will mean that cost variations for other procedures will directly affect the patient. The 2016 CHIA report on the Massachusetts Health Care System indicated that high deductible health plan membership in Massachusetts increased by 14% (118,000 members) between 2014 and 2015 to nearly one million members (21% of market membership).16  For patients with these high-deductible plans, price differentials matter; financial solvency of families can be at stake.

Price differentials between hospital-based surgery and surgery provided at ambulatory surgery centers also matters to many accountable care organizations and systems that are taking on increased downside risk through alternative payment contracts. In fact, among payers in Massachusetts reporting global payments in the commercial market, global payment contracts were overwhelmingly two-sided, at 88.3% of members in 2015.17  If the state continues to promote alternative payment methodologies, through MassHealth reforms and regulatory benchmarks, the DPH needs to foster a high-value health care delivery environment that allows ACOs and payers to control the cost of care to their patients.

Ambulatory Surgery Centers and the DON Regulations

To restate our position, the Medical Society strongly opposes the proposed change to prohibit determination of need applications from ambulatory surgery centers that are not affiliated with or have a joint venture with an acute care hospital. As evidenced above, national and Massachusetts-specific data indicate that freestanding ambulatory surgery centers provide higher quality, lower cost care. Their specialization can provide efficiencies unmatched in the hospital-based setting. For these reasons, the Medical Society strongly urges the Department of Public Health to strike the provisions of 105 CMR 100.740 and 105 CMR 100.730 that preclude ambulatory surgery centers unaffiliated or joint ventured with an acute care hospital from applying for a DON.

The use in the regulations of “acute care hospital” as the entity with which an ambulatory surgery center must have an affiliation or joint venture does not reflect the current landscape of health care in Massachusetts. Large health care systems that do not have a hospital function similarly to many other hospital-based health care systems in nearly every way- they care for hundreds of thousands of lives, including surgical care, they have risk-based contracting, and, in fact, they are often grouped with hospital-based health care systems by entities such as the Centers for Medicare and Medicaid Services and by the Health Policy Commission. For these reasons, the Medical Society takes even more issue with the proposed regulatory approach that draws the arbitrary distinction of requiring affiliations or joint ventures with acute care hospitals rather than the better term, health care systems.

The Medical Society further notes that striking this proposed acute care hospital linkage from the regulations would not result in an unfettered proliferation of freestanding ambulatory surgery centers. Any new or changing non-hospital affiliated ASC would go through the DON process and would be evaluated by the new factors outlined in 100.210 of the proposed regulations. These new factors include patient panel need, public health value, and health equity. The Medical Society believes that to best further the public health of the Commonwealth, the DPH should seek the applicant that best fulfills all of the ideals laid out in the new DON process, rather than selecting from the best among a significantly limited pool of only applications with an affiliation or joint venture with an acute care hospital.

The Medical Society appreciates the vital role of community hospitals in Massachusetts, and appreciates the challenges presented to them over past many years. The Medical Society strongly urges alternative strategies to support community hospitals that are evidence-based and support the ”Triple Aim” that has been so often referenced in conversations among legislators and regulators. The CHART program, for example, was a thoughtful display of how the government can help support community hospitals through improving efficiencies and improving quality and access to care. As one report indicates:

Efforts to restrict the ability of ambulatory surgery centers to enter and compete in rural markets may preserve the financial viability of community hospitals and those hospitals’ ability to cross--subsidize low margin, community beneficial services. However, such efforts will not encourage the innovation or cost efficiencies needed to continue meeting local health care needs.18

In conclusion, the Medical Society commends the Department for undertaking the unenviable task of Determination of Need reform. Many proposed reforms will improve the DON process, and, in turn, make for a more efficient and modernized process. The ambulatory surgery center portion, however, presents a step backward in the push from the legislature, regulators, and health care provider organizations to provide low-cost, high-quality health care in Massachusetts. The Medical Society urges striking this arbitrary distinction, and encourages the state to find evidence-based, efficient alternative policies to support community hospitals that are better aligned with the vision for broadly accessed, high-value health care in the Commonwealth.






  1. Keyes GR, Singer R, Iverson RE, McGuire M, Yates J, Gold A, Thompson D. Analysis of outpatient surgery center safety using an internet based quality improvement and peer review program. Plast Reconstr Surg. 2004;113:1760–1770.
  2. MedPAC report on ASCs, page 124-125.
  3. Returns to Specialization: Evidence from the Outpatient Surgery Market Elizabeth L. Munnich* Department of Economics University of Louisville Stephen T. Parente Carlson School of Management University of Minnesota April 2014.
  4. J Bone Joint Surg Am. 2016 Apr 20;98(8):700-4.The Safety of Hand and Upper-Extremity Surgical Procedures at a Freestanding Ambulatory Surgery Center: A Review of 28,737 Cases.Goyal KS1, Jain S2, Buterbaugh GA2, Imbriglia JE2.
  5. https://louisville.edu/faculty/elmunn01/Munnich_Parente_ASC_Quality.pdf
  6. http://link.springer.com.ezp-prod1.hul.harvard.edu/article/10.1007%2Fs11999-009-0865-z
  7. Health Affairs 33, no.5 (2014):764-769 Down And Ability To Meet Demand Up Procedures Take Less Time At Ambulatory Surgery Centers, Keeping Costs Elizabeth L. Munnich and Stephen T. Parente C.
  8. Urology. 2014 Jul; 84(1): 57–61. Ambulatory surgery centers and outpatient urologic surgery among Medicare beneficiaries. Anne M. Suskind, Rodney L. Dunn, Yun Zhang, John M. Hollingsworth, and Brent K. Hollenbeck.
  9. Ambulatory Surgery Centers and Their Intended Effects on Outpatient Surgery. Brent K. Hollenbeck, Rodney L. Dunn, Anne M. Suskind, Seth A. Strope, Yun Zhang, and John M. Hollingsworth HSR: Health Services Research 50:5 (October 2015).
  10. Health Affairs 33, no.5 (2014):764-769 Down And Ability To Meet Demand Up Procedures Take Less Time At Ambulatory Surgery Centers, Keeping Costs Elizabeth L. Munnich and Stephen T. Parente C.
  11. Am J Gastroenterol 2013; 108:10–15; doi:10.1038/ajg.2012.183
  12. Ambulatory Surgery Centers and Their Intended Effects on Outpatient Surgery. Brent K. Hollenbeck, Rodney L. Dunn, Anne M. Suskind, Seth A. Strope, Yun Zhang, and John M. Hollingsworth HSR: Health Services Research 50:5 (October 2015).
  13. Helen Adamopoulos, The Outpatient Payment Rate Debate: What Lower Reimbursement Would Mean for Hospitals, Becker’s HospitalReview,http://www.beckershospitalreview. com/finance/the-outpatient-payment-rate-debate-what-lower-reimbursement-would-mean-for-hospitals. html (May 30, 2014)
  14. Med Care Res Rev. 2016 Mar 6. Ambulatory Surgery Centers and Prices in Hospital Outpatient Departments. Carey K.
  15. Ambulatory Surgery Centers and Their Intended Effects on Outpatient Surgery. Brent K. Hollenbeck, Rodney L. Dunn, Anne M. Suskind, Seth A. Strope, Yun Zhang, and John M. Hollingsworth HSR: Health Services Research 50:5 (October 2015).
  16. http://www.chiamass.gov/assets/2016-annual-report/2016-Annual-Report.pdf
  17. http://www.chiamass.gov/assets/2016-annual-report/2016-Annual-Report.pdf
  18. Gregg W, Wholey D, & Moscovice I (2010). The Impact of Freestanding Ambulatory Surgery Centers on Rural Community Hospital Performance, 1997–2006. Support for this report was provided by the Office of Rural Health Policy, Health Services Resources and Services Administration, PHS Grant No. U1CRH03717--‐06--‐01.








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