Data from the Bureau of Labor and Statistics reveal that hospital prices have increased over 2% annually in the past decade, placing in hospital spending and costs in the U.S. today at an all-time high 1. This has ushered in – slowly – a new era of aggressive policy strategies aimed to limit hospital-associated healthcare costs.
Despite historically having the highest healthcare costs per capita, the state of Massachusetts has been able to reduce hospital-associated costs, representing a particularly interesting model of the state-wide implementation of policy strategies to this end 2. Not only has it developed a now decade-old system of monitoring healthcare costs, but it regularly sets benchmark spending rates for healthcare institutions, holding hospitals accountable when exceeding such targets.
To this end, the state’s Department of Public Health can veto large spending projects. In April 2022 for example, after learning that it would not be approved by the state Department of Public Health, an 11-hospital system which includes Massachusetts General Hospital canceled its $200+ million outpatient care expansion project proposal. It has been estimated that this expansion would have increased spending by nearly $30 million for commercially insured residents – skyrocketing insurance premiums.
In its decision-making, the state’s Department of Public Health is bolstered by the independent Massachusetts Health Policy Commission, which analyzes hospital-specific data, recommends whether to approve mergers and expansions, and can, in its own right, require providers or insurers to develop a targeted cost-reduction plan. This commission, for example, required Massachusetts General Brigham to submit an 18-month cost-control plan because its spending growth has far exceeded those of other hospitals – a major driver resulting in state health spending reaching 4.3% in 2019, exceeding the targeted 3.1% 3. This is a watershed act, reflecting the first time a state agency has successfully ordered a hospital to develop a plan to control its costs.
Additional analyses are further buoyed by the work of key consumer groups, such as Health Care for All. In 2022, the organization released a report that predicted that the shift of patients to the more expensive Massachusetts General Brigham sites would yield higher insurance premiums for both businesses and individual patients – adding an additional disincentive to the expansion of Massachusetts General Brigham 4.
Despite progress, some argue that the Massachusetts’ cost-control model still needs reinforcement to be as effective as possible. A bill proposed in 2022 would give the Health Policy Commission and attorney general a greater role in assessing the cost impact of expansions to this end. While passed by the House, the Senate has failed to take up the bill, however. In the meantime, the greater attention on the issue, well-researched analyses, and focus on transparency around health costs continue to be hugely beneficial to reducing hospital-associated costs.
In the 1980s, while most states required hospitals to obtain state permission for major projects under “certificate of need” laws, these tend to have been either loosened or entirely abandoned, quenching competition and failing to control costs as a result. Massachusetts’ model, while so far rather unique, may be a harbinger of changing trends5. Several states have created similar commissions with the authority to analyze the market impact of health care institution mergers and expansion. Oregon, meanwhile, passed a law empowering a state agency to assess health care mergers and acquisitions to ensure they maintain access to affordable care.
While significant progress has been made, additional research remains to be conducted to develop and successfully implement state-wide and perhaps federal legislature aimed to limit hospital-associated healthcare costs and ensuring affordable healthcare for all.
1. Costs of Caring | AHA. Available at: https://www.aha.org/costsofcaring. (Accessed: 23rd June 2022)
2. States Watching as Massachusetts Takes Aim at Hospital Building Boom and Costs | Kaiser Health News. Available at: https://khn.org/news/article/hospital-building-boom-massachusetts-reins-in-expansion-projects-and-costs/. (Accessed: 22nd June 2022)
3. Mass. General Brigham gets more time to file spending plan – The Boston Globe. Available at: https://www.bostonglobe.com/2022/04/13/metro/mass-general-brigham-gets-more-time-file-spending-plan/. (Accessed: 22nd June 2022)
4. STATEMENT: Health Care For All Responds to Health Policy Commission’s MGB Expansion Analysis and New PIP Requirement – Health Care For All. Available at: https://hcfama.org/statement-health-care-for-all-responds-to-health-policy-commissions-mgb-expansion-analysis-and-new-pip-requirement/. (Accessed: 22nd June 2022)
5. Health Care Cost Commissions: How Eight States Address Cost Growth – California Health Care Foundation. Available at: https://www.chcf.org/publication/cost-commissions-eight-states-address-cost-growth/#related-links-and-downloads. (Accessed: 22nd June 2022)