Pressure is on to find operational savings
Perhaps its’s real this time, and not just rhetoric.
I am referring, of course, to the recent media stories that Mass General Brigham, more than 25 years after its creation, is about to begin the task of crafting a unified and integrated health care delivery system—with some desire to obtain operational savings.
This effort is reportedly driven by wealthy businessmen Scott Sperling, Jonathan Kraft, and John Fish–the trio of board chairs of the parent system and the system’s two flagship hospitals – Massachusetts General and Brigham and Women’s. The “three amigos,” as the Boston Globe refers to them, are assisted by senior administrative leaders. Together, they are trying to project a new sense of inspired energy aimed at accomplishing something that the system has avoided up to now–true clinical integration and waste reduction.
The system (originally named Partners Healthcare) has been talking a good game about integration and working collaboratively across its hospitals and doctors ever since it was formed in the mid-1990s. I noted in a 2019 Commonwealth article that, at the beginning, true systemwide integration seemed to be under some consideration based on a consultant’s estimate that it could cut annual operating expenses by 12 to 28 percent.
Despite such talk, no real effort at integration across both major hospitals was made back in the 1990s or really ever since. The only real collaboration has been joint contracting with insurers leading to supranormal prices. A good number of my physician colleagues from Mass General and Brigham and Women’s have been fine with that reality—and have had little interest in working with academic colleagues from the “other” institution.
Why might it be different this time? Here are some factors that could be putting pressure on the leadership to reduce expenses more significantly through better care integration across the entire system—including integration between the two major hospitals:
Patient volumes are still depressed. Let’s start with a data point that was noted by the Center for Health Information Analysis in a recent hospital financials release. It shows that Massachusetts hospital admissions were 65,000-70,000 per month pre-COVID and, after recovering a bit from pandemic lows, are now stabilizing at a level of 60,000 per month. Even though Mass General Brigham had a good first quarter caring for higher acuity patients, they too experienced a volume drop and no system that still lives largely on fee-for-service payments likes to see that happen. Add a future worry that “hospital at home” may be an increasing popular care choice, and one has to think there has to be some worry here.
Coding gains may start to level off. Pre COVID, Mass General Brigham was leading the way among its peers, gaining additional revenue from higher reported patient acuity. Health Policy Commission data indicated that this was not likely because the system was caring for sicker patients over time; rather, the revenues came from enhanced coding that was possible with information gleaned from the system billion-dollar investment in an improved information system. HPC staff thought that the continued measurable increase in severity would plateau after a few years, but it didn’t. And during the pandemic, Mass General Brigham appears to have continued to care for patients with higher acuity scores, which is probably due to the fact that many patients delayed seeking care because of COVID and ended up being admitted with more advanced illnessws.
As pandemic-related hospitalization wanes, acuity-related revenue growth may now be less certain—especially when you add-in public policy calls for trying to rebase illness severity measurements to mitigate some of the outsized revenue growth that has been observed these prior years.
Expansion plans are less certain to succeed. Think of Mass General and Brigham and Women’s as hungry lions that constantly need to feed. The amount of food the hospitals need is even greater as they engage in more and more activity, including spending capital on new hospital buildings and ambulatory care sites or purchasing expensive equipment like proton beam therapy machines, surgical robots, and high-cost-imaging equipment. There’s also a need for money to pay for expanded behavioral health services, conduct research, or to front monies to help pay for a new COVID care site at the Boston Convention and Exhibition Center.
So year after year, as expenses grow, pressure mounts to bring in as much paying patient volume as possible to help pay for everything. So the hospital system is always looking to expand.
But not everything goes Mass General Brigham’s way. Its bid to acquire South Shore Hospital in 2015 was shot down by a local judge and Attorney General Maura Healey. A bid to acquire Rhode Island’s second-largest hospital failed to gain traction. And even the system’s push for a $200 million-plus ambulatory site expansion seems to be facing significant opposition from community groups and other providers—as evident from recent Department of Public Health hearings in the early stage of the review process.
Higher price margins may be at risk. Xavier Becerra, the new secretary of health and human services, comes to his new position from the attorney general’s office in California, where he successfully challenged the high prices of Sutter Health, leading to a $575 million antitrust settlement with the state. Could something similar happen in Massachusetts? An ongoing Rand study shows that some providers are paid commercial prices much higher than their competitors. And at last month’s Health Policy Commission hearing, Harvard economist Mike Chernew suggested the agency may want to consider advocating for policies that would target excessive provider prices, possibly by setting some sort of a price cap.
When you put all of these concerns together, it seems only prudent for Mass General Brigham to slow its expense growth in order to prosper in a world where continued high levels of revenue growth may be more uncertain.
Even this expense savings effort is not guaranteed. As Paul Levy, former Beth Israel Deaconess Hospital CEO noted in the Boston Business Journal, there are a fair number of clinical chiefs who may resist changes that force them to have to cooperate with people from the other major hospital, or that take away power that they have over resources and decision-making.
The next few years should be quite revealing as to whether this effort is serious and can deliver savings in how the hospital system runs its clinical operations.
Paul A. Hattis is a retired professor from Tufts University Medical School.