After pushing a major health system to cut costs, a Massachusetts agency wants more power

The Massachusetts Health Policy Commission reached an agreement with Mass General Brigham on a plan to reduce spending. The state agency wants more authority to control hospital costs, including financial penalties.

A Massachusetts state agency has signed off on a plan by Mass General Brigham to reduce spending, and the agency would like more authority to control healthcare costs.

The Massachusetts Health Policy Commission, an agency focused on reducing the growth in healthcare spending, voted this week to approve a plan by Mass General Brigham designed to produce $127.8 million in annual savings.

The Massachusetts commission hailed the plan as the first ever required by the agency and the first of its kind in the nation. Citing concerns about Mass General Brigham's spending, the commission ordered the health system to develop a performance improvement plan in January.

Mass General Brigham aims to generate most of the savings ($90 million) in price reductions. The rest of the savings are expected to come from reducing utilization ($32.4 million) and shifting care to sites with lower costs ($5.4 million). The proposal also calls for improving accountability through value-based care, the commission said.

The state commission and Mass General Brigham have wrangled over the cost saving plan for some time. Mass General Brigham initially proposed a plan that would have found $70 million in annual savings, but then revised the proposal at the behest of the commission.

Mass General Brigham is embarking on a nearly $2 billion plan to expand its facilities, a plan that was also modified after state officials expressed concerns. Mass General Brigham is also expanding its home hospital program.

The Massachusetts Health Policy Commission, which was formed 10 years ago, is also pushing for greater power to control healthcare prices.

The commission said in a statement that it should have “greater oversight tools, including authority to impose escalating financial penalties to deter excessive spending.”

In addition, the commission is calling for Massachusetts to take further steps to reduce the growth in healthcare costs, including caps on hospital price increases; more scrutiny of provider mergers and expansions; and greater oversight of the pharmaceutical sector, including prices. (Read the agency’s full report and recommendations.)

Massachusetts has greater hospital utilization than the national average, the commission said. Massachusetts inpatient stays are 7% higher than the U.S. overall, while emergency department visits are 11% higher, and outpatient visits are 42% higher than the national average. The commission said the difference has closed somewhat in recent years.

“The long-term systemic factors underlying high spending growth persist, and the ongoing impact of the COVID-19 pandemic has only added new headwinds,” Deborah Devaux, chair of the health policy commission, said in a statement. “We must continue to address affordability challenges or the Commonwealth will not be able to meet its cost containment goals. Today’s report makes strong recommendations for all stakeholders to address these challenges.”

The commission points to price increases as the need for more action. From 2018 to 2020, hospital prices for procedures in inpatient settings rose 7.9%, and they increased by 7.1% for services in hospital outpatient departments. Prices for services in physician offices rose 3.2% over that time.

From 2017 to 2020, consumers paid 50% more for a 30-day supply of prescription drugs for chronic conditions, according to the commission.

David Seltz, executive director of the health policy commission, said the agency is looking for new ways to constrain the rise of healthcare costs.

In a statement, he said the commission’s recommendations reflect “the willingness to change course and provide a new, progressive blueprint to address the most important challenges facing our health care system today.”

Hospitals have said they are facing serious financial difficulties.

Hospitals are projected to lose billions of dollars this year, and more than half of all hospitals are expected to finish 2022 in negative margins, according to a recent report by the American Hospital Association. Hospitals are reporting higher labor costs as well as staffing shortages around the country.