States Watching as Massachusetts Takes Aim at Hospital Building Boom and Costs

A Massachusetts well being value watchdog company and a broad coalition together with customers, well being programs, and insurers helped block the state’s largest — and costliest — hospital system in April from increasing into the Boston suburbs.

Advocates for extra inexpensive care hope the choice by regulators to carry Mass Normal Brigham accountable for its excessive prices will usher in a brand new period of aggressive motion to rein in hospital expansions that drive up spending. Their subsequent goal is a proposed $435 million expansion by Boston Youngsters’s Hospital.

Different states, together with California and Oregon, are paying shut consideration, eyeing methods to emulate Massachusetts’ decade-old system of monitoring well being care prices, setting a benchmark spending price, and holding hospitals and different suppliers chargeable for exceeding their goal.

The Massachusetts Well being Coverage Fee examines hospital-specific knowledge and recommends to the state Division of Public Well being whether or not to approve mergers and expansions. The fee can also require suppliers and insurers to develop a plan to cut back prices, because it’s doing with MGB.

“The system is working in Massachusetts,” mentioned Maureen Hensley-Quinn, a senior program director on the Nationwide Academy for State Well being Coverage, who burdened the significance of the state’s strong data-gathering and evaluation program. “The give attention to offering transparency round well being prices has been actually useful. That’s what all states need to do. I don’t know if different states will undertake the Massachusetts mannequin. However we’re listening to elevated curiosity.”

With its many educating hospitals, Massachusetts traditionally has been among the many states with the very best per capita well being care prices, although its spending has moderated in recent times as state officers have taken intention on the situation.

On April 1, MGB, an 11-hospital system that features the famed Massachusetts Normal Hospital, unexpectedly withdrew its proposal for a $223.7 million outpatient care growth within the suburbs after being advised by state officers it wouldn’t be permitted.

That growth would have elevated annual spending for commercially insured residents by as a lot as $28 million, driving up insurance coverage premiums and shifting sufferers away from lower-priced opponents, in response to the fee.

This marked the primary time in many years that the state well being division used its authority to dam a hospital growth as a result of it undercut the state’s targets to regulate well being prices.

Different elements of MGB’s $2.3 billion growth plan additionally met resistance.

The well being division employees really useful approving MGB’s proposal to construct a 482-bed tower at its flagship Massachusetts Normal Hospital and a 78-bed addition at Brigham and Ladies’s Faulkner Hospital. However they urged rejecting a request for 94 extra beds at MGH.

The division’s Public Well being Council, whose members are largely appointed by the governor, is scheduled to vote on these suggestions Might 4.

The well being coverage fee, which works independently of the general public well being division however supplies recommendation, has additionally required MGB to submit an 18-month cost-control plan by May 16, as a result of its costs and spending development have far exceeded these of different hospital programs. That was a serious purpose the expansion in state well being spending hit 4.3% in 2019, exceeding the fee’s goal of three.1%.

That is the primary time a state company in Massachusetts or wherever else within the nation has ordered a hospital to develop a plan to regulate its prices, Hensley-Quinn mentioned.

MGB’s $2.3 billion growth plan and its refusal to acknowledge its excessive costs and their influence on the state’s well being prices have united a usually fractious set of stakeholders, together with competing hospitals, insurers, employers, labor unions, and regulators. Additionally they had been angered by MGB’s lavish promoting marketing campaign touting the buyer advantages of the growth.

Their struggle was bolstered by a report final 12 months from state Legal professional Normal Maura Healey that discovered that the suburban outpatient growth would improve MGB annual income by $385 million. The nonprofit MGB reported $442 million in operating income in 2021.

The Massachusetts Affiliation of Well being Plans opposed the MGB outpatient growth.

Lora Pellegrini is the CEO of the Massachusetts Affiliation of Well being Plans.(Patrick O’Connor Pictures)

The well-funded coalition warned that the growth would severely harm native hospitals and different suppliers, together with inflicting job losses. The patron group Health Care for All predicted the shift of sufferers to the costlier MGB websites would result in greater insurance coverage premiums for people and companies.

“Having all that opposition made it fairly simple for [the Department of Public Health] to do the fitting factor for customers and price containment,” mentioned Lora Pellegrini, CEO of the well being plan affiliation.

Republican Gov. Charlie Baker, who has made well being care value discount a precedence and who leaves workplace subsequent January after eight years, didn’t need to see the erosion of the state’s pioneering system of worldwide spending targets, she mentioned.

“What would it not say for the governor’s legacy if he allowed this large growth?” she added. “That will render our entire cost-containment construction meaningless.”

MGB declined to remark.

Massachusetts’ aggressive motion inspecting and blocking a hospital growth comes after many states have moved in the wrong way. Within the Eighties, most states required hospitals to get state permission for main tasks underneath “certificates of want” legal guidelines. However many states have loosened or deserted these legal guidelines, which critics say stymied competitors and failed to regulate prices.

The Trump administration really useful that states repeal those laws and depart hospital growth tasks as much as the free market.

However there are indicators the tide is popping again to extra regulation of hospital constructing.

A number of states have created or are contemplating creating commissions much like the one in Massachusetts with the authority and instruments to investigate the market influence of expansions and mergers. Oregon, for instance, just lately handed a legislation empowering a state company to evaluate well being care mergers and acquisitions to make sure they preserve entry to inexpensive care.

Regardless of the defeat of MGB’s outpatient growth, Massachusetts Home Speaker Ron Mariano, a Democrat, mentioned the state’s cost-control mannequin wants strengthening to forestall hospitals from making an finish run round it. A invoice he backed that handed the Home would give the fee and the lawyer common’s workplace an even bigger position in evaluating the price influence of expansions. The Senate hasn’t taken up the invoice.

“Hospital growth is the largest driver in the entire medical expense kettle,” he mentioned.

In the meantime, cost-control advocates are desperate to see how MGB proposes to regulate its spending, and the way the Well being Coverage Fee responds.

“Except MGB someway agrees to restrict will increase in its supranormal pricing, like a five-year value freeze throughout the system, I don’t know that the [plan] will accomplish something,” mentioned Dr. Paul Hattis, a former fee member.

Hattis and others are additionally ready to see how the state guidelines on a bid by Boston Youngsters’s Hospital, one other high-priced supplier, to construct new outpatient services within the suburbs.

“For these of us on the affordability aspect, it’s just like the sheriffs rediscovered their badge and realized they actually might say no,” he mentioned. “That’s a message to different states that in addition they ought to constrain their bigger supplier programs, and to the programs that they’ll now not do no matter they please.”

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