Dear DPH, here’s a strategy for handling MGB

Put off any decisions until hospital system contains its costs

 The following is an open letter to the Department of Public Health after Mass General Brigham’s decision on Monday to seek a postponement until May 16 in filing a performance improvement plan required by the Health Policy Commission.

THIS DECISION by Mass General Brigham is not a surprise. In fact, it’s likely a tactical move by Mass General Brigham to try to get you to move first by publishing your staff reports on the hospital system’s three determination of need applications before the system has to detail its performance improvement plan.

Mass General Brigham expects that you will have your analyses and determination of need recommendations completed by early April, in anticipation of a final Public Health Council vote coming in May.  MGB is hoping, of course, that your staff report will be favorable and allow all or most of what the hospital system has proposed:  rebuilding two hospitals (Mass General Hospital and Faulkner) and expanding its footprint by adding three ambulatory sites in Massachusetts (a fourth in New Hampshire has also been proposed).

You know well that these expansion projects have caused great worry at the Health Policy Commission. The commission’s analysis has estimated annual increases of tens of millions of dollars in total state commercial spending, and also found that regional competitors near these new sites may be greatly weakened by the hundreds of millions of dollars each year that will flow from their bank accounts to MGB as a net result of these projects—threatening the ability of some of the more financially challenged competitors to meet the needs of patients and communities that they serve.

Clearly these projects appear to be falling far short of your determination of need requirements that each project substantially evidence that it is furthering cost containment as well as system transformation goals for the state.

The worst thing that can happen now would be for you to come out with your analysis of the determination of need proposals before MGB has responded to the performance improvement plan, particularly if you accept the proposals as drafted or accept them with weak conditions. I say this because my fear is that MGB, by waiting for you to move first, will grab on to any conditions you impose as the hospital’s sole obligation for responding to the performance improvement plan

Of course, tough conditions would be a different story. I would recommend that Mass General Brigham be required to give back to some affected providers and premium payers any additional net revenues earned for hospital or specialty referrals for any new patients to their system who come to the ambulatory sites, or are taken in for backfill of patients who move out to these centers.

Mass General Brigham, in its letter to the Health Policy Commission seeking an extension, tried to marry the regulatory actions at the commission and at the Department of Public Health. “We recognize that the HPC has expressed concerns in its filed comments regarding our ambulatory expansion, notwithstanding the findings of the independent cost analysis that was commissioned by the Department of Public Health, which concluded that they were consistent with the Commonwealth health care cost-containment goals,” the hospital system wrote. “Nonetheless, we hope to be able to address the HPC’s concerns through the performance improvement plan process, and the extension we are seeking will have the added benefit of giving us all time to consider the DPH staff report(s) on our pending applications and Public Health Council’s deliberations, prior to finalizing MGB’s performance improvement plan proposal.”

I’m sure the Health Policy Commission will see right through this ridiculous suggestion, and instead be thinking more about a “fix” that is along the lines of a mandated five-year commercial price freeze applied globally across the MGB system.

As for DPH, we really need you as the peoples’ public health agency to fight back for our collective health care affordability by thwarting Mass General Brigham’s desire that you move first.  Accordingly, the heart of the recommendation that I offer for your consideration today is that your agency staff and the Public Health Council both need more time to decide how to handle the resolution of the three determination of need proposals now in front of you.

In fact, you need at least a couple of years before you finalize your determination of need decisions. That will allow you to see MGB’s performance improvement plan and, if it is approved, how well the hospital implements it. To grant the determination of need approvals now while we don’t yet know if the hospital system will adequately comply with the Health Policy Commission performance improvement plan mandate would make absolutely no sense from a good government oversight perspective.

Your determination of need regulations have the perfect answer for such a situation.  It is called “Preliminary Action by the Department” and found at section 100.62 in your regulations.  It allows you incredible flexibility with respect to both the substantive actions you decide to take about these applications, as well as the timing of those actions.

Normally, a determination of need proposal must have a final resolution within four months after an independent cost analysis is accepted by DPH,  a so-called Final Action.  But the regulations expressly note that, if the Public Health Council takes “preliminary action” under 100.62, that “constitutes final action”—and so your agency has met its statutory duty to give a final answer within the required time frame.

However, under the “preliminary action” section, I believe that your Public Health Council has incredible flexibility to utilize a timeframe that could take some years before finalizing all aspects of its determination of need decisions about a particular application.

What could that mean for these three proposed projects?

First, for the ambulatory care expansion proposal, your Public Health Council could say that it is going to wait 18 months to two years from now before rendering a final decision on the proposal, based on how MGB conducts itself with respect to its performance improvement plan. That is a very reasonable and defensible position. No provider organization ought to have a green light to expand when it is operating under a performance improvement plan.

As for the two hospital projects that both propose to rebuild and add beds, the Public Health Council could bless the initiation of the rebuilding at its May meeting, but hold off the final decision about exactly how many additional beds could be added to each hospital license until six to nine months before each rebuilt hospital is ready to open.  At that point, your agency would have more timely knowledge of overall inpatient demand across the market; where MGB pricing is with respect to competitors, and the demand for additional beds resulting from COVID or any other disease/conditions that could affect bed demand.   Remember, these hospitals gain nightly bed occupancy simply from rebuilding and converting rooms from doubles to private ones;  so with spending increases very much impacted by adding even more new beds, you should be mindful to not give a blank check for bed additions now when that judgment can be made more robustly at a time closer to when the beds would actually be going into service.

If your Public Health Councils addressed its decisions this way, it would show that the determination of need approval process is being accomplished in a way that is considering the entire state cost containment scheme, rather than allowing the decisions to be made in isolation from everything else going on. If your agency acts in ways that ignore the concerns of the Health Policy Commission and the attorney general’s office, you risk making the 2012 cost containment law and essentially the entire state scheme that is built around all market participants conforming their behavior so as to comply with living under a cost growth benchmark to be essentially moot.

Meet the Author

That is something that should be avoided at all cost.

Paul A. Hattis is a senior fellow at the Lown Institute.