After three rounds of health care reform legislation in Massachusetts, the effects of a fourth law are starting to be felt locally, with the rest of the nation watching to see how a new set of mandated requirements unfolds.

The law, informally called Chapter 224, makes some changes that have potentially major implications for hospitals in the Bay State. And like the state's previous health reform legislation, it could serve as a test case for implementation of the Patient Protection and Affordable Care Act.

Some of the bigger changes in Chapter 224 include the creation of what could become a powerful health policy commission, a limitation on total health care cost growth to a measure of growth in the state's economy, and a mandate that the state's Medicaid program move away from a fee-for-service payment approach.

Chapter 224 focuses more on reforming the state's care delivery system than previous reform laws, which were focused on the payment system, says Tim Gens, executive vice president for the Massachusetts Hospital Association. Though some are taking a wait-and-see attitude about the law's many provisions, others say there are already signs of negative consequences for hospitals.

Jeanette Clough, president and CEO of Mount Auburn Hospital in Cambridge, says the law represents a general turn toward heavier regulation and away from market-driven solutions. "Chapter 224 was meant to really build on 'health reform,' " Clough says. "The reality is, it created a lot more regulation."

In addition, "there's not a lot in there about quality. That's disappointing."

The commission, with one of its charges being oversight and containment of health care cost growth, set a growth limit of 3.6 percent in 2013, leaving hospitals in the position of having to negotiate with insurers around that number. "That [provision], I think, is the biggest part of the law that has people concerned," Clough says, noting that some have questioned the enforceability of the law.

Under the law, the state also is to collect a targeted $135 million from large hospitals or systems and insurers for a distressed hospital fund.

A provision governing mergers and acquisitions, which went into effect Jan. 1, represents a marked shift in regulatory oversight, says Clough. The law requires potential M&A partners to give 60-day advance notice before a deal is closed to allow the state or the attorney general to review the cost and market impacts.

The state's Medicaid program also is in for a revamp under the law's provisions, with the public program shifting to more of an accountable care model. Gens of the MHA says the Medicaid change raises concerns because hospitals will be required to take on patient health risk while getting reimbursement from a payer that already underpays. "We are concerned about [whether hospitals have] the resources to take on that risk," Gens says.

But Ceci Connolly, managing director of PricewaterhouseCoopers' Health Research Institute, says it's too early to pass judgment on the latest law given that it has been in place such a short time. Massachusetts' approach of using its buying power to push a shift away from fee-for-service and to limit price growth could be effective, and is being adopted elsewhere. "We're pretty excited that cities and states are flexing their muscles," Connolly says. She notes, though, that the state may be moving too quickly with its growth targets. "We think it's going to take some time to get down to those targets," Connolly says. "It's a little like turning around an ocean liner."


• Creates health policy commission with a variety of regulatory oversight duties

• Limits health care cost growth in the state to a benchmark tied to state economic growth

• Requires that the state Medicaid program begin the process of adopting an accountable-care style of reimbursement

• Requires providers, including accountable care organizations, to register with the state

• Protects statements of apology and error from discovery and admissibility in medical malpractice lawsuits

• Requires 60-day advance notice of substantive governance changes with a providers, such as mergers or acquisitions, to allow for a review by the state commission or attorney general

• Creates a $135 million distressed hospital fund backed by payments from large hospitals or health systems and by insurers

• Requires the creation of certification standards for patient-centered medical homes

Sources: Massachusetts Hospital Association and the Improving the Quality of Health Care and Reducing Costs through Increased Transparency, Efficiency and Innovation Act