Opposition to a Boston hospital enlargement focuses on rising costs

A fierce political battle over a proposed expansion of Massachusetts’ largest and most expensive hospital system is raising questions about whether similar expansions of large health care systems across the country are driving up health care costs.

Mass General Brigham, which owns 11 hospitals in the state, has proposed a $2.3 billion expansion, including a new 482-bed tower at its flagship Massachusetts General Hospital in Boston, and an expansion of the Brigham and Women’s Faulkner Hospital with 78 beds. The most controversial element, however, is a plan to build three comprehensive outpatient care centers offering medical services, surgery and diagnostic imaging in three suburbs west of Boston.

On Jan. 25, the state’s 11-member Health Policy Commission unanimously concluded that these expansions would increase spending by up to $90 million per year for commercial insureds and raise health insurance premiums.

The commission also ordered Mass General Brigham to develop an 18-month “performance improvement plan” to slow cost growth. The action, believed to be the first time in the country that a hospital has been ordered to develop a cost-control plan, reflects concerns about the role of giant hospitals in rising healthcare costs.

Other states, including California, Delaware, Oregon, Rhode Island and Washington, have created or are considering creating healthcare expense commissions with the power to analyze the market impact of mergers and expansions. This is happening because the traditional “needs assessment” process for approving health facility expansions, which still exists in nearly three dozen states, has not been effective in the current era of health care giants, said Maureen Hensley-Quinn, a senior program director at the national Academy for Public Health Policy.

Mass General Brigham’s health care system, which generates $15.7 billion in annual operating income, said the massive expansion would better serve its existing patients, including 227,000 who live outside of Boston. Its leaders said the new facilities would not increase healthcare spending in the state, where policymakers are alarmed that cost growth hit 4.3% in 2019, beating the state’s target of 3.1%.

The hospitals’ cost analysis report, submitted to the state last month, concluded that the system’s existing patients would pay lower rates in the new suburban locations than in the downtown locations. John Fernandez, president of Mass General Brigham Integrated Care, predicted that rates at the new centers would be 25% lower, and he said patients at the new outpatient locations would not have to pay additional hospital fees.

“With populations aging, we’re all going to see a tsunami of patients over the next 20 years, and everyone must strive to meet that demand,” he explained of the expansion.

But a well-funded coalition of competing hospitals, unions and chambers of commerce argues that Mass General Brigham’s invasion of the Boston suburbs would boost overall spending as patients would be drawn to cheaper doctors and hospitals. They cite the health system’s own planning forecast, uncovered by the attorney general’s office in a November report, that the expansion would add $385 million to annual profits.

“How could you be fooled?” said dr Eric Dickson, CEO of UMass Memorial Health Care, a safety-net healthcare system that serves cities west of Boston and is part of the anti-expansion coalition. “If you let the state’s most expensive system grow wild, it drives up the cost of care.”

The controversy signals a shift in concern about the cause of rapidly escalating healthcare costs. State and federal policymakers addressing the impact of hospital growth on costs have primarily focused on hospital mergers and doctor’s office purchases. Studies have shown that these offers significantly increase prices for consumers, employers and insurers. State and federal regulators have increased antitrust scrutiny of mergers and acquisitions.

Step-mother hospital systems are increasingly turning to solo expansion to gain greater market share. These extensions are outside the legal powers of the antitrust authorities.

Health systems are building outpatient satellite care centers to attract more well-insured patients and direct them to their own hospitals and other facilities, said Glenn Melnick, a health economist at the University of Southern California.

“The result is the same as with a merger — attracting and retaining patients,” he said. “That’s not necessarily good for consumers in terms of access to care or cost-efficiency.”

Critics of Mass General Brigham’s plans also warn that the expansion would financially destabilize providers serving high-income and minority groups because some of their more affluent patients would move to the new facilities. These patients’ commercial insurance plans pay nearly three times what the state Medicaid program pays.

“This is a very, very good business move for MGB,” said Dickson, whose system serves a large percentage of Medicaid patients. “But they know full well that this will affect our ability to care for vulnerable populations.”

The Health Policy Commission agreed with opponents of the expansion and said it would tell the state Health Council – which will decide on the three expansion proposals by April – that the proposals fall short of the state’s cost-cutting goals.

“We strongly believe that this would significantly increase spending,” said Stuart Altman, professor of health policy at Brandeis University and chair of the commission. In addition, “there is a clear indication that this would reduce revenue for the institutions we count on to provide services to low-income and historically excluded communities.”

In a written statement, Mass General Brigham called the commission’s findings erroneous. It also disagreed with the commission’s decision to require a cost improvement plan, but said it would work with the agency to address the challenge.

As part of Massachusetts’ needs assessment process, Mass General Brigham must demonstrate to the Public Health Council that his proposed expansions would contribute to the state’s goals of containing costs, improving public health outcomes and transforming the care system.

In its almost 50-year history, the council has never blocked a project for cost reasons, said Dr. Paul Hattis, former member of the Health Policy Commission. He argues that Massachusetts needs more explicit statutory powers to decide whether expanding the health care system is good for the public because he doesn’t think the council understands its own regulation.

A bill passed by the Massachusetts House of Representatives last fall would give the commission established in 2012 more powers to study the cost and market impact of such expansions. His legislative fate is uncertain.

Raising the Stakes in the Fight for Massachusetts Expansion: Massachusetts General Hospital charges the highest rates in the state by far, and Brigham and Women’s Hospital is not far behind.

According to the Health Policy Commission, patients with a Mass General Brigham family physician had the highest total spend per member in 2019, nearly $700 per month. That was 45% more than spending on patients served by physicians at Reliant, which is part of UnitedHealth Group’s Optum unit. Average payments for major outpatient surgeries at Massachusetts General and Brigham and Women’s were nearly double those at the state’s lowest-paying, high-volume hospital.

This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health policy research organization not affiliated with Kaiser Permanente.