Catalyst for Payment Reform

Massachusetts Slams the Breaks on Mass General’s Expansion Plans: Insights into the Value of State Health Policy Commissions

Massachusetts Slams the Breaks on Mass General’s Expansion Plans: Insights into the Value of State Health Policy Commissions

Just last week, the State of Massachusetts made headlines when its Health Policy Commission (HPC) launched what the press called “a double-barreled attack” on Mass General Brigham’s (MGB’s) expansion plans.  MGB, already the largest and most expensive health care system in Massachusetts, wants to expand its flagship hospital, the Mass General, with 482 new inpatient beds and build new comprehensive ambulatory care centers in three suburbs west of Boston.  In the first of its one-two punches, the HPC concluded that Mass General’s $2.3B plan was “not consistent with the Commonwealth’s goals for cost containment.” It also ordered the health system to develop an 18-month Performance Improvement Plan to address the root causes of MGB’s high costs, which caused “greater cumulative commercial spending growth…than any other provider.”  

Massachusetts is one of the only states in the country with an oversight body like the HPC.   In 2012, the state passed legislation to create the independent government agency with a mission to “advance a more transparent, accountable, and equitable health care system through its independent policy leadership and innovative investment programs.” Although the HPC doesn’t have the authority to stop MGB’s expansion, it will be hard for the state Public Health Council, the agency that does have this authority, to ignore HPC’s position.  This shot across the bow marks the first time in the HPC’s 10-year history that the agency has exercised its authority to mandate a cost-cutting performance improvement plan.

So, why should we take notice?

Anyone who follows Catalyst for Payment Reform’s work has heard our rallying call: rising prices are the single biggest factor driving health care cost growth today.  There is broad expert consensus that provider consolidation — mergers among hospitals and between hospitals and physician groups — is responsible for the lion’s share of health care price inflation; when powerful health systems consolidate, they erode health plans’ and health care purchasers’ negotiating leverage and market power.

Traditionally, states have attempted to use antitrust enforcement to block provider mergers deemed likely to drive up health care prices.  But the reach and efficacy of this strategy is limited.  For one thing, in many markets the horse has already left the barn – 75% of US metropolitan statistical areas (MSAs) are already highly concentrated.   Second, the number of victories for states attempting to block health care mergers have been few and far between.  And finally, the consolidation activity has gotten tricky to prevent with existing laws.  For example, how do we address monopolistic behavior that occurs across markets or across state lines but doesn’t meet the definition of a monopoly within any one geography?  More on the button: while antitrust laws can sometimes prevent mergers, they have no teeth to prevent provider expansion.

The Massachusetts HPC has the data, funding and expertise to closely monitor costs and cost trend at the provider level, enabling the agency to project the financial impact of provider consolidation and expansion activities.  As such, although Mass General claimed that the expansion would lower costs for MGB patients by 25-35%, the HPC pushed back with its own analysis, demonstrating that MGB’s expansion would effectively “export” higher prices to the suburbs, stealing more lucrative commercial business from outlying safety-net hospitals; the HPC projected that the expansion would generate an additional $90M in health care spend per year, resulting in higher premiums for health care consumers.

Establishing a commission might sound like “weak sauce” compared to laws that ban bad behaviors or set prices.  But Massachusetts law equips the HPC with resources and authority to collect data on health system costs, study trends, and set benchmarks for the state. The Massachusetts state legislature may take it further: pending legislation would give HPC oversight authority over whether health systems can expand (right now their authority is limited to mergers).

These powers enable policymakers in Massachusetts to have insights that most other states can only dream about.  Maryland, which sets hospitals prices, Rhode Island, which gives authority to a unique health insurance commissioner to cap growth, and Oregon, which empowers the Oregon Health Authority to evaluate whether proposed health system mergers provide a net benefit to local communities, are examples of other states taking proactive stances on addressing health care cost growth.  These types of controls may become more prevalent when health care costs begin to rise more significantly again.  An ominous report from Mercer Consulting predicts that, “assuming that utilization returns to normal levels in 2022, we can expect that underlying wage pressures, labor shortages, and increased provider consolidation will result in accelerating [health care] cost growth.”  State governments may be the only force capable of protecting health care purchasers and consumers from being railroaded by cost inflation.

CPR’s Executive Director, Suzanne Delbanco, PhD, and CPR’s Director of Projects and Research, Julianne McGarry, MPP, wrote this blog post.

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