Health panel raises concern on Children’s expansion

Says $1b project could increase market share, increase spending

STATE HOUSE NEWS SERVICE

PROPOSED EXPANSIONS at Boston Children’s Hospital carry a likelihood of increased health care spending in Massachusetts and could potentially drive competing providers out of business, according to the state’s Health Policy Commission.

In a letter the commission voted Tuesday to submit to the Department of Public Health, chairman Stuart Altman wrote that the $1.068 billion expansion could increase the hospital’s “already substantial market share” and that shifting patients from other Massachusetts hospitals to Children’s “would be cost-increasing.”

The patient shifts could “destabilize competing local pediatric care programs,” the letter said, potentially leading those programs to close.

Altman said the commission’s analysis of the expansion “suggests that there’s a possibility, and not an insignificant possibility, that if a disproportionate amount of these admissions were to come out of one institution, it could lead to another major, lower-cost provider going out of business.”

“Now, I don’t think we’re in the business of picking winners and losers in and of itself, and I believe in markets, and if left alone, that’s the way the market works, and, you know, it’s because one institution is perceived to be better than the other, and that’s OK,” Altman said. “But we can’t rule out the implication that would have on costs.”

Children’s is seeking to build a new 11-story tower on its Longwood Medical Area campus, renovate existing campus buildings, and redevelop a Brookline property into an ambulatory care facility, according to the letter. The expansion would add 71 new beds to the now 404-bed hospital, along with four operating rooms and two magnetic resonance imaging, or MRI, machines.

The commission’s analysis estimates that the expansion could increase spending by $8.5 million to $18.1 million annually for commercial payers in Massachusetts.

Altman said cost growth “in and of itself is not necessarily a bad thing” and does not necessarily indicate an expansion is inappropriate.

Through a process known as determination of need, state public health officials must review expansions or service changes that hospitals propose. The Health Policy Commission is not required to weigh in during the review, but regulations give it the authority to submit comments on any application.

Health Policy Commission executive director David Seltz said Tuesday marked the first time the commission, which was created under a 2012 law, has ever offered comment on a determination of need application.

Altman said the commission elected to comment on this particular project because of the size of the proposed expansion.

“It’s the biggest by far. We’ve not seen anything even close,” he told reporters. “I mean, it’s not Children’s in and of itself, it’s the size of the project and its potential implication. The others have been much, much, much, much, much, much smaller. Much, much, much.”

The state Public Health Council will make the final decision on whether to approve Boston Children’s Hospital’s application.

The proposed expansion has generated backlash, drawing a lawsuit from a group of patients, doctors, donors and parents who argue the plans include demolition of a popular healing garden at the hospital. Children’s officials have said no permanent closure of the Prouty Garden is planned.

Dr. Carole Allen, a retired pediatrician who serves on the commission, said the last time she visited Children’s a few years ago, it was “obvious that they do need to renovate and upgrade,” and that many of her colleagues were divided on the specific changes proposed.

“It’s a little distressing to me, because this is a divisive issue in the pediatric community and especially within the hospital staff itself, and that is distressing to hear,” she said.

An independent cost analysis Children’s submitted to the Department of Public Health in August said the expansion project was driven by a combination of factors, including desires to enhance “family-centered” care, create a more cost-efficient campus, and “address the development of a global market for complex care services.”

The analysis mentions an expected growth in regional, national, and international patient populations, noting continued expansion of the hospital’s international medicine program. Data included in the report shows that while the portion of patients from the local area declined from 72.1 percent to 67.4 percent from fiscal year 2011 to fiscal year 2015, the percentage of international patients rose from 2.5 percent to 5.6 percent over the same time period.

The Health Policy Commission’s review found that while out-of-state and international patient volume is growing, “the rate of increase does not appear to be sufficient to fill all of the proposed new” intensive care unit capacity.

The commission voted unanimously — with Health and Human Services Secretary Marylou Sudders and Lauren Peters of the Executive Office for Administration and Finance abstaining — to submit its comments to the Department of Public Health after agreeing to a tweak in the wording.

In its original form, the letter concluded that there would be a “significant risk” of increased health care spending with the expansion.

Meet the Author

Katie Lannan

Reporter, State House News Service
Wendy Everett, the commission’s vice chair, and Sudders raised concerns about the use of the word “significant,” with Everett describing the letter’s language as “quite strong” and arguing the estimated cost increase of up to $18 million “does not constitute a significant increase” when taken in the context of the total $20 billion spent in the state on commercial patients.

The revised letter now advises of a “likelihood that the expansion will lead to increased Massachusetts health care spending.”