Hospital execs say industry in fragile state

Urge caution on efforts to rein in spiraling costs

THE CHIEF EXECUTIVES of the state’s top academic medical centers told the Health Policy Commission on Wednesday that they are doing everything they can to shift care to lower-cost settings and warned that any effort to cap their prices could destabilize what they described as a fragile industry.

Members of the commission, which was holding its annual cost trends hearing via Zoom, were openly skeptical of the claims by industry leaders during a tension-filled discussion with a panel of hospital leaders. Frustration is growing on the commission, as health care costs have exceeded the state’s benchmark of 3.1 percent growth the last two years, and the expectations are that the trendlines are continuing upward.

One chart in the packet of materials produced by the commission staff showed how the rising cost of health care is impacting families. The chart indicated annual premiums for family health insurance represented about a third of the cost of a new compact car in 2000, but exceeded the $20,830 cost of that same car by 2019. Commission vice chair Marty Cohen said those figures may be underplaying the size of the problem. He said the annual average cost of health insurance for each of the four employees at his workplace is now more than $34,000, which is the price tag of a luxury SUV.

Andrew Dreyfus, the president and CEO of Blue Cross Blue Shield of Massachusetts, said his insurance company is negotiating rates with a number of hospitals right now that are seeking price increases double and triple the size of increases they sought just a few years ago.

He said hospitals used to bargain with Blue Cross within the confines of the state’s health cost benchmark, but that’s no longer happening. He said the hospitals no longer view the benchmark as relevant. “We need to find some way to make it more relevant,” he said. “We have to try something different because the current situation isn’t working.”

Anne Klibanski, president and CEO of Mass General Brigham. (Photo courtesy of Mass General Brigham)

Many of the hospital executives on the panel portrayed the state’s health care industry as fragile, buffeted by a sharp increase in demand for care, inflationary pressures, and a crisis-level shortage of workers.

“I’m a little concerned we are having this discussion as if the pandemic is done and we can now move on to other things,” said Kevin Tabb, the president and CEO of Beth Israel Lahey. “I would really urge caution, real caution, when it comes to taking any actions that would adversely impact the state of the health care system because, as I see it, it’s at a breaking point right now.”

Anne Klibanski, the president and CEO of Mass General Brigham, the state’s largest hospital system and also its largest employer, said the commission is focused on charts and measurements from a couple years ago even though COVID “significantly and permanently changed our health care system.”

She noted her academic medical centers – Massachusetts General Hospital and Brigham and Women’s Hospital – have had occupancy levels greater than 100 percent several days a week over the last two months. She said inflation is rising, labor costs are skyrocketing, and staff turnover is at 20 percent.

“It looks so very different from the period of time captured in much of the data this morning,” she said. “We need to start from where we are today and, most importantly, what we’re going to look like in the future.”

She invited commission members to tour her hospitals and see the care being provided and the challenges being faced. “This goes well beyond charts and graphs,” she said. “We’re all very fragile right now and let’s just be cognizant of that.”

Commission member Don Berwick praised the care provided by the academic health care centers, but pointed out that almost every business is scrambling for workers and facing enormous pressure. “This claim of fragility, a fragile time, workforce turnover that’s high, enormous pressures, that’s every sector,” he said, adding that health care businesses have more resources and power to deal with the challenges than any other business.

He pointedly asked Klibanski whether she was going to do anything about the fact that Mass General Brigham’s prices are higher than any other hospital system. “Is there some hope or plan or intention you have to get back into the mainstream in terms of your cost structure?” he asked.

Klibanski said Mass General Brigham is aggressively moving patients out of academic health centers and into lower-cost community health and telehealth settings. “This is a very, very new world for us. It is a very, very new world for everyone,” she said.

David Cutler, an economics professor at Harvard University who serves on the commission, asked whether the hospital executives were in favor of setting an upper limit on hospital prices, as Harvard Business School professor Leemore Dafny suggested in her keynote presentation. “Do the panelists all agree that that would be a good idea?” he asked.

None of the hospital executives did.

Stuart Altman, the chair of the commission, said he believes academic medical centers should receive higher rates for the teaching and research services they provide. But he said the executives need to take a hard look at the hundreds of millions of dollars in costs associated with these non-patient services and find savings.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

“We are hurting all over the country. We have to do something about overall health care. The idea that if we touch a nickel it immediately negatively impacts on patient care I really find hard to believe,” he said. “Your patient care is second to none … but you can’t keep coming back to us and telling us we can’t do anything about overall spending.”

Dreyfus said it appeared Mass General Brigham and Beth Israel Lahey are working internally to become more efficient and having some success. “But the question for the Health Policy Commission is, is the health care system in Massachusetts more efficient and the answer in your report is that it is not,” he said. “We have to think about what’s going to make the health care system in Massachusetts more efficient.”