Moment of truth for state’s health cost benchmark

How will state handle controversial Mass General Brigham expansion?

A MOMENT OF TRUTH is now here for Mass General Brigham, as well as for the Massachusetts Health Policy Commission, the Department of Public Health, and for health insurance premium payers across the state.  The immediate issue coming to a head by March is whether DPH will allow Mass General Brigham to further expand its ambulatory care and inpatient hospital footprints or not; the larger issue is whether the hospital system will develop a real improvement plan with the Health Policy Commission to bring its spending in line with the state’s cost growth benchmark.

On Tuesday we saw the release of the Health Policy Commission’s double-barreled review of Mass General Brigham’s expansion agenda and its imposition of a “performance improvement plan” on the state’s largest healthcare system—a first for any hospital in the state. Mass General Brigham’s massive multiyear financial growth has now triggered a public confrontation between the state’s premiere academic health system, and the state’s key health care regulators.

Let’s start with the non-surprise: the Health Policy Commission’s review of three Mass General Brigham expansion applications. These include: three proposed ambulatory care sites in Westborough, Woburn, and Westwood, as well as expansions of Massachusetts General and Faulkner Hospitals with inpatient bed increases of 20 percent at the former and 45 percent at the latter institution. Using precise legal language, the commission deemed these expansions “not consistent with the Commonwealth’s goals for cost containment.”

As Commissioner Don Berwick noted at the meeting—when the state’s largest and highest-priced health care provider decides to expand its ambulatory and inpatient bed footprints, health care spending will go up.

The Health Policy Commission projects that these expansions would bring MGB nearly $350 million in additional revenue and raise state commercial health care spending by as much as $90 million above current annual levels. Writing to DPH’s Public Health Council which must rule by March on the three expansion proposals, the Health Policy Commission gave an unmistakable thumbs down, characterizing its financial estimates as “conservative.”

It’s worth noting that the $90 million health care spending estimate is more than twice the estimated impact for Mass General Brigham’s 2014 proposed purchase of South Shore and Hallmark Hospitals.  Both acquisitions were rejected by a state court judge as not in the “public’s interest” based on the commission’s estimate of $43 million in new annual spending going to Mass General Brigham—then known as Partners Healthcare.

In its new report, the Health Policy Commission dismissed the findings of a so-called “Independent Cost Analysis” filed in late December with DPH by an expert approved by DPA but paid by Mass General Brigham. That study found no significant cost burden from the ambulatory care expansion proposals.  The Health Policy Commission commented that the cost analysis was limited in scope, and failed to address major spending drivers from new referrals, backfilling of care at Mass General Brigham hospitals, and spending impacts from Mass General Brigham’s negotiating leverage—all of which negated any savings from shifting care for existing Mass General Brigham patients to these new, lower-cost sites.

On Thursday, Mass General Brigham officials sent letters to DPH criticizing the Health Policy Commission’s findings and defending the independent cost analysis. The attorney general’s office sent in its own letter, characterizing the independent cost analysis as incomplete and off the mark.

What surprised at Tuesday’s meeting? Two things.

First, the magnitude of revenue losses to Mass General Brigham’s competitors is more substantial than we imagined. The Health Policy Commission estimates that these projects would take $152.9 million to $261.1 million annually from other Massachusetts providers—destabilizing lower-priced hospitals and systems that serve large shares of MassHealth patients and communities with high social needs. Those numbers will bother House Speaker Ron Mariano, who introduced legislation last fall to thwart market expansions out of concern for smaller providers. His bill passed the House last month and awaits action in the Senate.

The second surprise was the first item on the Health Policy Commission’s Tuesday agenda. For the first time in their 10-year history, the MHPC board voted to hold a health care organization accountable for its high spending growth relative to the state benchmark, requiring Mass General Brigham to institute a performance improvement plan to reduce its rate of spending.

The timing was telling. The vote came after months of discussions which failed to allay concerns that Mass General Brigham’s “total medical expenditures” are threatening Massachusetts’ ability to adhere to its cost growth benchmark.  Releasing the performance improvement plan and expansion analysis at the same time signals that the commission views Mass General Brigham’s spending as out of control over many years. The implication is clear: Until Mass General Brigham brings spending under the state’s benchmark any additional expansion is inappropriate.

Tuesday’s session was an important test for the Health Policy Commission and for the 2012 law that created it. That law directs Mass General Brigham and other providers to keep spending increases under the state benchmark through fair pricing and care management. The Health Policy Commission had to respond when Mass General Brigham failed to comply. If that framework fails, the only alternative to unrelenting and unsustainable cost growth is a return to more onerous 1980s-style cost regulation.

Meet the Author

Meet the Author

For the Department of Public Health to approve Mass General Brigham’s massive $2.3 billion expansion while the Health Policy Commission pushes for spending controls would be a massive contradiction and mixed signal that would make a mockery of the state’s health spending benchmark.  The expansion proposals should be rejected or postponed until Mass General Brigham learns to live within the benchmark.  And it may take intervention by Gov. Charlie Baker to sort out this mess.

Paul A. Hattis is a senior fellow at the Lown Institute and John McDonough is a professor at the T.H. Chan School of Public Health at Harvard University.