By Steve Poftak
May 15th, 2012
The State of Rhode Island is working hard, very hard, to make sure that Curt Schilling’s 38 Studios remains a going concern. It appears the state of Rhode Island is on the hook for $50m+ if 38 Studios defaults on its loan that is backstopped by a state guarantee.
And let me be clear — no one wants the company to fail. Back when the deal initially went down, I said that Curt Schilling has every right to find the most lucrative deal for his company but that the state of Rhode Island was making a mistake. What the state did was make a big, concentrated, and multi-layered bet.
Big — $75m big. Concentrated – $75m of a $125m initiative in a single company. Multi-layered — the return on investment rests on the assumptions that 38 Studios has picked the right content, put it through the right distribution channel, and picked the right revenue model. Oh, and you’ve got to spend most of your money upfront to develop the content and build the distribution platform, before any customers show up.
Now, I know nothing about online gaming. Maybe Schilling’s on to something, maybe he isn’t. Do you think the folks working for the state of Rhode Island knew what they were getting into? An investment in a company like 38 Studios should be the domain of industry experts (risking private capital) or private investor with a high tolerance for risk and an interest in the field (like Schilling) not government bureaucrats using public funds.
And as an aside, nice work by Greg Bialecki and the rest of the Massachusetts economic development team in not responding to RI’s offer with one of their own.
I sincerely hope 38 Studios makes it. But the ongoing inability of the public sector to make investment decisions in volatile and complex markets should encourage us to get it out of the business of picking winners and losers.
Crossposted at Boston Daily.
By Joshua Archambault
May 14th, 2012
New Hampshire lawmakers have a long history of jeering Massachusetts over taxes, but it looks like they have moved to a much bigger sacred cow, health care.
The Boston Globe ($)recently reported that in New Hampshire there is a bill, “eliminating a state review process and exempting it [specialty destination hospitals] from a tax that New Hampshire’s nonprofit hospitals pay.”
By contrast, the two recently proposed payment reform bills on Beacon Hill move in the opposite direction. The bills “reform” the determination of need process to make it more government-centered and will severely limit any future expansion of similar facilities in the Commonwealth. Massachusetts policymakers should be watching our borders closely as they aim to significantly alter our local payment methods for health care.
The diametrically opposed directions being debated in these two states could have long-term implications for where patients receive their health care. As more health care institutions are forced to compete on price and quality, Massachusetts providers may lose out.
Not only will some patients living in Massachusetts go to these out-of-state practices, but the Commonwealth could also lose patients traveling to our state for medical tourism reasons. Companies like Patient advocates in Maine run on a business model of finding the lowest-cost highest-quality providers, and Massachusetts providers may soon have lots of new competition in our region.
Find me on twitter: @josharchambault
By Steve Poftak
May 11th, 2012
If you blinked over the past seven days, you might have missed the rollout of two major pieces of legislation that will dramatically restructure health care delivery here in Massachusetts. While the Governor put his proposal out over a year ago, it has taken the Legislature a long time to take up the issue.
Suddenly, everyone is in a rush. The House rushed their bill out the door at an oddly-timed late Friday afternoon press conference on Friday, May 4th. They plan on debating the bill in a month or so.
The Senate is in even a bigger rush — their bill came out on Wednesday, May 9th. Amendments are due by 5 PM on Friday. And debate begins on Tuesday of next week. Hope Senators can digest all 268 pages in time.
And all this activity will result in a final piece of legislation by the end of July if legislative leaders stick to their stated calendar.
Contrast this highly compressed round of healthcare reform with the 2006 effort — Both the Senate and the Governor had released their bills by April of 2005. The House put forward their bill in October 2005. Then the conference process and negotiations resulted in a bill signing on April 12, 2006, roughly a year after two versions were public and over five months after all versions were public.
This time around there will be dramatic changes to one of our state’s most important industries, healthcare (which accounts for close to 10% of gross state product), in less than three months. And the Legislature will have other major bills dealing with the budget, crime, and economic development (just name a few) to deal with over the same period.
That’s ripe environment for unintended consequences, mischief, and leaving hard decisions to the regulatory or administrative process. Keep a close eye.
Crossposted at Boston Daily.
By Joshua Archambault
May 10th, 2012
Are the House and Senate giving us a false choice for how to control health care costs in Massachusetts? Aren’t there other options?
A few major themes have emerged from the two payment reform proposals and highlight the fact that they fail to align incentives for patients to be more involved in the purchase of their health insurance and their health care.
For example, even with full transparency of cost and quality (which is a huge lift on its own) for many patients, high-cost still correlates with higher quality in medicine. A recent report from Attorney General Coakley proved this theory wrong, but simply providing patients with cost data without placing the right incentives in their health plan to choose the low-cost high-quality provider will result in many selecting the most expensive care. As a result, these proposals will fall short of sustainably bending the cost curve. There is another way for the Commonwealth- patient-centered health plans, see Health Affairs($) for national savings estimates. The impact would be significant in Massachusetts as less than 3% of residents are on a form of these plans, compared to 13% nationally.
Any reform of payment methods must be aware of limits on the state’s power to regulate the 53% of Massachusetts companies that are self-insured (and are therefore regulated by the federal government), and of course Medicare beneficiaries in the state. The bills do not touch long term care, prescription drugs, hospital fixed costs, health plan reserves, medical devices or insurance overhead. So what does that leave us, an awfully small pool out of the roughly $60B to cut from. From a practical standpoint, are we looking to “fix” our health care problems by laying off workers or severely reducing their pay? That is one of the few options left. Is that a long-term sustainable and innovative approach?
The media and most stakeholders have missed this point completely. Instead of debating what arbitrary reduction in growth we would like to see, we need to be realistic and have a debate about how these proposals will play out in implementation, the unintended consequences, and how stakeholders will react to the incentives in the bill. (For example, how do we deal with those living in Massachusetts but receiving their care in another state. Or the other way around.)
My concern is that both houses of the legislature will pass their versions with some minor tweaks, and then in conference committee, behind closed doors and with lots of industry lobbying, a “compromise” will be struck taxing both insurers and providers.
From a consumer and long-term health sector perspective, this will be a raw deal.
It is built on two flawed assumptions. First that new taxes, assessments, and surcharges will not be passed onto consumers in some form. Second, that the answer to our health care problem is chasing previous flawed government intervention with more flawed government intervention. These two assumptions should not be the terms of debate for payment reform in Massachusetts. Is there a third pill to consider?
You can find me on twitter at: @josharchambault
By Jim Stergios
May 9th, 2012
In a previous job, I spent a lot of time in major Massachusetts cities outside of Boston. Cities like New Bedford and Fall River, with their stunning coastal views, and cities at the edge of Boston with so much potential like Lynn and Brockton, always intrigued me. But I have to admit to two favorites–Springfield and Lawrence. They are indeed among the most troubled, but they are both architecturally unique, with strong neighborhoods and muscular industrial histories.
Whenever in Lawrence, I would try to make it to Saint Anthony’s Maronite Church or eat at Cafe Azteca. The smells in each place are enough to keep you going for days. A sensation similar to the “beignet haze” you get walking within 50 feet of New Orleans’ Cafe Du Monde.
With the Lawrence Public Schools now in state receivership, a few recent posts have focused on what could and should be done there. I am decidedly against the idea of waiting for Superman and seeking a centralized solution from the new school receiver Jeff Riley, no matter how many good things I hear about him. We’ve seen that movie before with Michelle Rhee and other heroic reformers. They quickly get ahead of the local population and the embedded interests, and politically their attempts are pretty certain to meet resistance and failure. I’ve written extensively about the need to move away from that model of the heroic reformer who fixes all of the schools from the central office.
So, what to do?
#1. Recognize the problem
I have made it a point in recent posts to draw a direct parallel to Katrina, calling the Lawrence school receivership Massachusetts’ “Katrina moment.”
A few folks challenged that parallel, with, for example, Kevin Franck, communications director of the Massachusetts Democratic Party, tweeting this:
KevinFranck May 08, 2:13pm via TweetDeck
1,800+ people killed? RT @JimStergios: Lawrence district schools = Massachusetts’ Katrina #mapoli #edchat
So, Kev, let’s run the numbers. In Lawrence we have had dropout rates north of 30 percent for some time now.
And a lot of the above statistics are related to the fact that over 40 percent of Lawrence’s population has less than a high school diploma. Another 30 percent have only a high school diploma, which, if it is from the Lawrence Public School system, is not likely to have provided strong grounding for later learning. So you have nearly 80 percent of the population of Lawrence with either no high school diploma or no more than a high school diploma.
That is a recipe for unemployment, and in fact the unemployment rate in Lawrence is a whopping 15.8 percent. The unemployed/Underemployment percentage is almost certain to be 1 of 5 people, and the number of those who have dropped out of the workforce completely only makes the number more alarming.
The unemployment problem in Lawrence precedes the recession and is structural. In 2005 the unemployment rate stood at 9.8 percent. (See page 11 of this report.)
Median household income in Lawrence stands at less than half the average in Massachusetts (in 2009, $31,000 vs. $64,000), and household income for Hispanics in Lawrence, by far the largest ethnic group in the city, has been flat since 2000.
Poverty is deep and broad in Lawrence. Fully 37 percent of households in Lawrence earn less than $20,000 a year (vs. 16 percent for Massachusetts). That embedded poverty, just like the embedded unemployment, feels a lot like the structural poverty “discovered” in New Orleans in the wake of Katrina.
In fact, New Orleans’ unemployment rate prior to Katrina was only 5.6 percent. Median household income in New Orleans prior to Katrina was $31,369; the percentage of individuals earning less than $20,000 was far lower than in Lawrence.
As is well known, the poor student achievement data and outrageous dropout data lead to poverty, embedded poverty, poor health outcomes and high crime levels, which can lead to death, physical and mental impairment, and the demise of a once-great city.
The toll in terms of crime has been enormous since 2000. There have been over 50 murders, 228 rapes (which are routinely underreported), 1,642 robberies, 4,080 assaults, 5,885 burglaries, and almost 10,000 thefts (not including the largest category of thefts, car thefts).
Take all of these factors and then remember that our Lawrence is a small, small city covering only 7 square miles and with only 76,000. New Orleans (the city and the parish) extends a massive 350 square miles; and boasted 450,000 residents just prior to the hurricane. Truth be told, Katrina affected the entire metro region (1.4 million residents prior to the hurricane) and well beyond.
The comparison stands. Perhaps people like Kevin would like to compare the state of Lawrence schools with those in New Orleans? Happy to have that conversation. They are as bad as anything in NOLA before the deluge.
#2. Think big but not centralizing
The solutions are there if we simply have the courage to avail ourselves of them. In places where the state chips in well below 50 percent of the local school budget, I can understand the pushback from local mayors, who complain about dollars lost to their big central school bureaucracies. I don’t agree with it for a minute, but I understand the (backwards) logic that the dollars belong to the adults in the system rather than to the students and parents.
But in Lawrence, the state is paying for almost the entire $135 million (soon to be $150 million) school budget. Moving to the New Orleans solution (with nearly all of its schools now public charter schools) has raised student scores and improved a number of key academic and school-based metrics. Doing the same in Lawrence is a no-brainer. There is little, if any, local money being put into the Lawrence schools and therefore no reason for the state to hold back on charterizing the entire district.
The blueprint is here — and the results for Lawrence’s kids would, over time, change not only their lives, but the trajectory of a once-great city.
It’s all possible, but our political and education leaders need to have the brass to choose that course.
Crossposted at Boston.com’s Rock the Schoolhouse. Follow me on twitter at @jimstergios, or visit Pioneer’s website.
By Steve Poftak
May 9th, 2012
Way back in 2006, Pioneer was interested in manufacturing. Our Measuring Up study on the cost of doing business in Massachusetts showed that manufacturing was still an important employer in the state and, importantly, was a source of good wages in the places it was located.
More recently, we’ve been intrigued by the possibility of a resurgence in the sector based on rising costs at some of our off-shore competitors.
Now, Brookings Institution has done a comprehensive study of manufacturing jobs across the country. In our major metropolitan areas (Boston, Springfield, Worcester) , manufacturing jobs account for 7% to 11% of total jobs. There’s been a roughly 30% decline in the number of these jobs over the last decade, but they remain ‘good jobs at good wages’ (about 30% higher than the median wage in each region).
Can we take advantage of our newly competitive global environment and build off this important base to create good jobs at good wages? Makes one wonder why we spend so much time on casinos and not on the potential to create many more, better paying jobs.
Crossposted at Boston Daily.
By Joshua Archambault
May 9th, 2012
Before digging into the Senate bill this afternoon, I wanted to express my concern about early media coverage of the payment reform debate. The spotlight has become focused on 3 or 4 points, all contained in press releases.
No one can knowledgably comment on the Senate bill since they have not seen the full language- as they are still finalizing parts of it this morning.
It is easy to say the two bills look the same from the press release, but are they?
The debate over somewhat arbitrary cost growth goals is pointless, unless there is a debate about the mechanisms to get there. Did we forget that DHCFP data tells us 53% of employers are self-insured in our state and therefore not regulated at the state level?
I am worried, after talking with a number of health care industry folks over the last 4 or 5 days, that each is looking at their slice of the pie and failing to see the big picture… or even questioning how these proposals will play out in implementation.
On the flip side, I worry that folks on Beacon Hill see this debate more as an academic exercise or a political battle, and not establishing comprehensive and sensible reforms that engage consumers.
Early media reporting on the bill is very important because it is often the only coverage the public pays full attention to, and frames the debate for most public figures. Are we to accept the supposition that the only viable options are taxing providers or insurers– or both– and government intervention to correct past flawed government intervention?
Find me on twitter: @josharchambault
By Jim Stergios
May 8th, 2012
The 2010 Achievement Gap bill that was passed by both the House and the Senate and signed into law by Governor Patrick lifted the limits on charter schools and the number of students in them in districts that were failing to see improvements in student achievement. Rather than limiting the number of students to 9% in these largely urban districts, the law allowed up to 18% of students to attend charter schools.
The six-year period for the expansion up to 18 percent of students was not coincidental. It aligns with the six-year reimbursement schedule for districts, by which districts:
• receive 100% of the per-pupil funding for in the first year after a student leaves for a public charter;
• continues to be reimbursed for the “phantom” student in years 2 through 6 at 25% of the student’s per-pupil funding.
That’s a lot of extra state funding, which is in part why many parents and district educators in Lowell feared negative impacts from the closure of a charter school in the city a couple of years back.
So, what to make of today’s front page Globe story ballyhooing the state’s decision to release 1,000 charter seats in Boston and 360 in Lawrence as a “charter school cap lift?
Is that good news and something to be pleased about? Yes, on the practical impact, but not so much on the politics and policy of the decision.
On the practical impact, there is plenty of evidence of the strength of Massachusetts’ public charter schools, and even greater evidence of the strength of public charters in Boston. Massachusetts’ and Boston’s charters are in fact pretty unique in the level of consistency they have, which is testimony to the good vetting process in place for many years (something that needs closer scrutiny given reason to believe that political considerations have played a fairly significant role in charter approvals and rejections in Gloucester and Brockton).
So applaud the practical impact, with proven schools likely to expand in Boston and also in Lawrence.
On the politics, I can’t say that the release of the seats was a story for any reason except that the Commissioner of Education Mitchell Chester complied with the 2010 law. I am not grateful for that. He is expected to do that – it’s called the public trust.
The fact that he held up seats in the initial expansion was altogether understandable – but when the Department would make those seats available should never have been in question. It’s the law, and the fact is that the commissioner should have given a time certain for the release of the additional seats from the beginning.
Policy-wise, there is not much here. Lawrence has some of the worst-performing schools in the state—low student achievement in math, English, and science; scores that are not moving to anywhere close to acceptable levels; it has 30+% dropout rates. We know that’s not sustainable – and those facts affect most people and make them want to take real action, not just temporize and avoid responsibility.
But even from a purely financial perspective, the right policy is to take actions that have been proven successful. As Mark Vogler of the Lawrence Eagle Tribune recently reported:
Lawrence Public Schools’ annual payroll will go over $100 million for the first time in the city’s history in fiscal 2013.
A $4.8 million hike in overall salaries for the city’s 2,000 School Department employees — due to step increases negotiated before the state placed the district in receivership — accounts for more than half of the $8.3 million increase in the proposed education budget for the 2013 fiscal year that begins July 1.
Nearly that entire eye-popping amount is paid for by the state. In addition, the state Board of Education stripped the local school committee of most of its powers and put the district in receivership, naming former Boston Public Schools official Jeffrey C. Riley Superintendent/Receiver. We own the problems of the Lawrence public school district.
Lawrence has some great charter schools, including the Lawrence Family Development Charter School and the Lawrence Community Day School. Given that, why are we just expanding 360 seats when there are 13,000 kids in the district?
Lawrence is Massachusetts’ “Katrina moment.” Let me put it another way to Massachusetts’ education officials: How would you respond to this crisis if your kids were in the Lawrence district schools?
They would respond just as the country did after Katrina, insisting on a new path for New Orleans schools – and one that has served the kids well, giving parents real choices and expanding charters to encompass nearly all the schools in the city. So here’s the question I asked a couple of weeks ago – and it’s a good one:
Lawrence has very good charter schools and could line up more charter operators very quickly. It also has the advantage of an existing network of high-quality parochial schools that could play a key role in changing the prospects of kids — not after the successful execution of a five- or ten-year improvement plan but immediately.
Do we really have to wait for an act of god before we act?
Crossposted at Boston.com’s Rock the Schoolhouse blog. Follow me on twitter at @jimstergios, or visit Pioneer’s website.
By Joshua Archambault
May 7th, 2012
The House version of payment reform creates a new mega agency, the Division of Health Care Cost and Quality. To be fair, the House collapses a few other state agencies into the new Division, but there is no question this entity is given far-reaching and broad regulatory power. The Division will be independent and “not subject to the supervision and control of any other” public entity. (Section 29, subsection 2(a))
The controversial federal Affordable Care Act drew negative attention for how many times the Secretary of HHS was instructed to act on major policy, roughly 700 times in 2,700 pages.
The House’s bill outdoes the ACA by requiring the division to take action 163 times in 178 pages, or almost once every page. The mandate approach results in 941 instances in which the House mandates action in the bill, by using the word “shall.”
A sample of the dizzying and expansive Division’s responsibilities includes but is not limited to:
- Assessing a number of penalties, fines, and surcharges. I counted 26 in the bill. Some are one-offs, others reoccurring and some are sticks to be utilized to guarantee compliance. Of course, most of the cost of these will be passed onto patients one way or another.
- Setting acceptable standards for alternative payment methodologies.
- Overseeing and being involved with alternative payment contracts.
- Developing quality metrics including parameters for clinical outcomes, but limiting insurer’s use of quality data outside of division approved metrics.
- Defining and overseeing accountable care organizations on many levels.
- Designing and managing the state-wide health technology infrastructure needed to meet the mandated 5-year window for Health IT.
- Monitoring and participating in workforce development and planning. Including multiple student loan forgiveness programs, and other recruitment and retaining programs to keep doctors in state or practicing in under-served areas.
- Setting out extensive mandated transparency mechanisms for consumer education on cost and quality data and trying to improve administrative simplification.
- Surveying patients annually for their perception of access to services, including many subgroups such as the homeless.
Yet many questions about implementation remain, and policymakers should look very closely at the following:
- Will transparency without the correct tools and incentives for consumers backfire? For many patients, high-cost correlates with higher quality. Of course the Attorney General’s report proved this theory wrong, but if you provide patients with cost data but their health plan is not set up to incentivize the use of low-cost high-quality providers, you will have many seeking out the most expensive folks. (The direct opposite goal of this legislation.)
- As the Division sets up uniform reporting of revenues, charges, costs, and utilization (that by statute will need to be in line with federal reporting standards) will the state follow the federal government’s ACA lead of 140,000 coding categories? For example, if you’ve been bitten by a turtle for the second time you would use code W5921XD.
- Will the Division have the expertise and technological knowledge to implement the many goals laid out in the legislation? Even with numerous expert advisory committees, many of the functions the Division will be conducting are replicating what the private sector currently does. One only has to look at the Health Care Cost and Quality Council to see an example of a great public advisory board that has struggled to produce a meaningful product that has wide market penetration. Policymakers should ask if is a good investment to ask a public entity to run so much, when you are trying to reduce spending.
- The issue of privacy and health information technology is complex and expensive. The bill currently waves its hand on this issue, and serious thought is required.
- What will the Division cost to run? The most likely smaller Connector costs roughly $30 million a year to run. How much more should we expect this mega-agency to cost?
- Finally, policymakers should take a serious look at the wide-ranging authority given to the Division. On multiple occasions, the Division is instructed to “take actions necessary to ensure….” or “promulgate regulations or guidelines to implement the findings of this section.” We must ask if we are comfortable with bureaucrats holding the reins to 18% of our state’s economy, that may not have the expertise, resources, or shared values that we do to balance the trade offs associated with government centered cost controls. They decide where billions of dollars will be directed or granted from trust funds. Do we trust their judgment and are we confident that industry influence will not sway these few government officials?
Much more to come.
Find me on twitter: @josharchambault
By Jim Stergios
May 5th, 2012
Massachusetts is a wealthy place. We are among the wealthiest states in the country, and the educational attainment of Massachusetts parents is well beyond that of parents in every other state. All this should point to high-powered students and schools in the Bay State.
In fact, “big thinkers” in education policy often point to those factors to explain why Massachusetts does so well on national and international assessments. In part, that’s true. But what these big thinkers fail to see is that Massachusetts not only has risen from around 11th in the country on the national assessments to number one, but also that the performance of all Massachusetts student groups has gone up. In fact, Massachusetts’ improvement in performance among Hispanic students is very much in line improvements in the states that have most concentrated on this issue, such as Florida (Florida’s improvement among Hispanics is a hair better and, ironically, they end up higher today in part because they started out ahead of Massachusetts due to pockets of highly educated immigrants).
Either way, the search for bragging rights is misplaced. We all have a lot to learn in terms of which state experiments have worked or not worked, for whom, and where our weaknesses persist. The Bay State’s weaknesses are clear: we need more focus on high achievers as well as low achievers, and we need to expand choice options for parents in those poor districts that have failed students for decades now through charters and an anything-it-takes approach.
Here are some basic facts on poverty in Massachusetts. Overall, we rank 8th among the states in household income. With the baseline of about 10 percent of the overall population living below the poverty line, around one in three students statewide qualify for free or reduced price lunches. The extent of poverty varies wildly, with FRPL eligibility by district ranging from a miniscule 0.1 percent to an eye-popping over 90 percent.
Poverty in Massachusetts is concentrated in urban areas, and only one state has a lower percentage of rural students qualifying for FRPL, but the percentage of the commonwealth’s urban students who qualify is higher than in 35 states. The highest poverty rates are in Suffolk and Hampden Counties, home to Boston and Springfield, where about one quarter of school-aged children are below the poverty line.
There are also pockets of rural poverty in Massachusetts. More than half the students qualify for free or reduced price lunches in the Greenfield, North Adams, Gill-Montague and Ware school districts. Orange, Athol-Royalston, Hawlemont, Ralph C. Mahar, Flordia, and Winchendon all have almost half their students on FRPL.
So let’s disaggregate the big, broad measures we too often use, and understand that we need to avoid lumping poor with poor, thinking that poverty makes for a monolithic set of individuals, motivations, aspirations, and challenges. Let’s ask:
How have urban and rural poor students fared, respectively, since the start of the landmark 1993 education reform act, which infused school with more money, set high academic standards, required testing of students, insisted on higher quality teachers determined by tests tied to the state’s standards, and introduced competition into the system through charter schools?
A recent report entitled Urban and Rural Poverty and Student Achievement in Massachusetts does just that. The author of the paper, Salem State professor Ken Ardon, begins:
Massachusetts still has a significant share of its population living in poverty – approximately 600,000 people in the Bay State live below the poverty line. While low-income families are often concentrated in urban areas, rural areas also have deep pockets of poverty.
A few takeaways from the paper:
- Using national assessment data, the poor overall in Massachusetts have improved fast on math than their counterparts around the country. The same is not true on English language arts.
- Using MCAS data, the scores of high and low-income students have risen in the Commonwealth, whether in urban, suburban or rural areas.
Finally, as Ardon notes, “Low-income rural students have made slightly larger gains than low-income urban students and modestly reduced the performance gap.” Why is that important? Just 10 years ago, the performance gap was larger in rural areas than in urban areas.
Today, the performance gap between low- and higher- income students is roughly the same in rural and urban areas of Massachusetts. That is, poor students have improved more rapidly and closed the achievement gap as measured by both the MCAS and graduation rates faster than their urban counterparts.
Finally, Ardon suggests that the difference in performance between low-income students in rural and urban areas may be attributable to the urban students being poorer and less likely to speak English.
Crossposted at Boston.com’s Rock the Schoolhouse. Follow me on twitter at @jimstergios, or visit Pioneer’s website.
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