Mass General Brigham must reduce spending, commission orders

Mass General Brigham’s excessive spending jeopardizes the entire state’s healthcare system, the Massachusetts Health Policy Commission warned Tuesday.

The largest health system in the state has spent $293 million in excess of Massachusetts’ cost growth benchmark from 2014 to 2019, which was the highest trajectory among Massachusetts providers, HPC’s analysis of Center for Health Information data shows. Prices and its payer mix were the main drivers of Mass General Brigham’s spending growth, not utilization.

As a result, the commission unanimously voted to issue a performance improvement plan to Mass General Brigham—the first of its kind. MGB, which did not immediately respond to a request for comment, has 45 days to provide a performance improvement plan, request a waiver or apply for an extension.

“Mass General Brigham has a spending problem,” said HPC Chair Stuart Altman, noting his concerns about its proposed expansions of its flagship hospitals and into the Boston suburbs. “Continuing in this manner is likely to impact the state’s ability to meet its spending benchmark and could do serious harm to the structure of the state’s delivery system.”

The Boston-based health system proposed an expansion of Mass General Hospital and Brigham and Women’s Faulkner Hospital as well as three new ambulatory sites in Westborough, Westwood and Woburn, totaling nearly $2.3 billion.

Those projects would increase commercial healthcare spending by up to $90 million a year and boost insurance premiums for Massachusetts residents, according to the HPC’s analysis. It would also strip other area providers of up to $261 million in commercial revenue each year.

“This would substantially increase spending and have a clear indication of reducing revenues to those institutions we count on to provide services to lower-income and marginalized communities,” Altman said.

Mass General Brigham said it plans to shift more care to ambulatory settings to reduce its spending. But that notion wasn’t consistent with the system’s plans to expand its hospitals, commissioners said.

MGB executives expect the new ambulatory sites to boost its margins by $385 million per year and increase its tertiary inpatient admission market share by up to 4%, according to the system’s internal documents. There was limited detail on its proposed behavioral health services, which generally generate lower margins, at its ambulatory sites.

The inpatient expansions Mass General and Brigham and Women’s would increase systemwide inpatient prices 0.9% to 1.7% compared to the status quo, which could inflate spending by up to $17.3 million, the commission estimates.

Past HPC reports have shown that hospitals are increasing their coding severity to boost revenue even though patients aren’t sicker.

“Year in and year out, it became clearer that patients weren’t actually sicker—they were using coding mechanisms,” Altman said.

The merger that created Beth Israel Lahey was expected to help hold Mass General Brigham in check. While Beth Israel Lahey overtook Mass General Brigham in outpatient volume as of 2019, MGB had a significant advantage in inpatient volume, HPC staff said, noting that the Beth Israel Lahey only merged in 2018.

Even though Mass General Brigham treated fewer patients in its outpatient facilities in 2019—18% of discharges compared with Beth Israel Lahey’s 22.3%—MGB captured 28.1% of the statewide outpatient revenue compared with 18.1% for BIL. That is a direct reflection of Mass General Brigham’s higher-than-average prices, HPC staff said.

About 46% of Massachusetts residents said in a recent survey that they have avoided healthcare due to cost, said David Seltz, executive director of the HPC.

As for the performance improvement process, non-compliance would result in a maximum penalty of $500,000. That is only 0.11% of Mass General Brigham’s $442.5 million 2021 operating income. It recorded nearly $16 billion in operating revenue last year.

“We fully expect Mass General Brigham to be compliant,” said Seltz, adding that the penalty is a last resort.

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