Health cost regulator signs off on Mass General Brigham $128M cost savings plan

Updated on Sept. 28

A state health cost regulator has voted to approve a proposal from Mass General Brigham (MGB) about how it will work to contain healthcare costs, according to a Tuesday news release. 

The Massachusetts Health Policy Commission (HPC) had ordered the system in January to submit a proposal that identifies the causes of spending growth and lists steps the organization could take to meet a savings goal.

An initial "performance improvement plan" MGB submitted in May that targeted a $70 million savings was sent back to the system for revision, HPC said.

The now-approved version was resubmitted on Sept. 20. It outlines $127.8 million in targeted annual savings and included "commitments to sustain their comprehensive market solution to address pricing beyond the 18-month [performance improvement plan] implementation timeline," the regulator wrote. 

A review conducted by HPC had raised "significant concerns regarding MGB's spending performance" and the impact on statewide prices.

The review had found that MGB has more cumulative commercial spending growth above annual spending benchmarks (a cutoff set by the HPC under state law) than any other provider organization in the state, totaling $293 million in excess of the benchmarks from 2014 to 2019. 

The new performance improvement plan's annual spend reduction is primarily driven by price reductions ($90 million). It also calls for reduced care utilization ($32.4 million), a shift to lower cost care sites ($5.4 million) and enhanced accountability via value-based care. 

"Based on a review of the plan and confidential supporting data and information, the HPC’s Board found that the proposed plan met the standard for approval, and that it was reasonably likely to meaningfully improve MGB’s cost growth," the regulator wrote in the announcement. 

MGB has also agreed to provide data and reports on the plan's progress to HPC, which will monitor the system's compliance.

Following a unanimous vote by the Massachusetts Health Policy Commission (HPC)’s board, MGB will have 45 days to propose a plan that identifies the causes of its spending growth, outlines a savings goal and lists specific steps the system will take to reach that goal, the commission said Jan. 25.

Should the proposal be approved, MGB will have 180 days to implement a performance improvement plan and report its outcome to the commission. The regulator’s board can assess a fine of up to $500,000 for noncompliance.

“Mass General Brigham has a spending problem,” Stuart Altman, chair of the HPC, said in a statement. “Its spending performance and plan for new expansions at their flagship hospitals and into the Boston suburbs raise significant concerns, as documented by the HPC today. In fact, 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.”

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The HPC decided to issue its first-ever performance improvement plan after an examination of MGB’s spending from 2014 to 2019, according to the commission.

The review found that MGB has more cumulative commercial spending growth above annual spending benchmarks (a cutoff set by the HPC under state law) than any other provider organization, totaling $293 million in excess of the benchmarks over six years.

MGB’s hospital and physician prices are also higher than “nearly” every other provider in the state, the commission found, while simultaneously controlling the largest amount of market share and “consistently” posting strong financial performances.

The HPC’s review found that price and mix were bigger drivers of spending growth than utilization increases. Additionally, despite providing numerous high acuity services, the HPC found that the organization’s case mix index “is not significantly higher” than other providers in the state with lower prices.

The HPC said it was unconvinced that ongoing cost-control strategies shared by MGB have sufficiently reduced the system’s commercial spending growth.

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MGB contested the HPC’s findings on its case mix, saying in a statement that the commission’s review was “selective” in its use of medical expense metrics that “ignore” the complex patients seen at MGB’s academic health centers.

“The HPC’s refusal to acknowledge the acuity of our patients in its judgment of health care spending is short-sighted and unfair, especially to patients,” the organization said in a statement. “While we strongly disagree with the HPC’s decision, we are committed to working alongside them to address the challenge of healthcare costs in Massachusetts while continuing our efforts to overcome the multiple crises brought by the pandemic.”

Alongside the performance improvement plan, the HPC also weighed in on MGB’s plans to expand and renovate two of its major Boston hospitals and open new ambulatory sites elsewhere in the state.

The commission found that these projects would “likely” increase healthcare spending by tens of millions, drive a “substantial” amount of patient volume and revenue away from other lower-cost providers and negatively impact healthcare access, equity and market function.

MGB’s expansion plan has taken flak over the past year, with several local providers, chambers of commerce, health equity organizations and others mounting a resistance to the $2 billion road map. An independent cost analysis conducted by a third party and released in December, however, concluded that the expansion plans fall in line with Massachusetts’ cost containment requirements.