The strain on hospitals fighting on the front lines of the coronavirus pandemic has been on full display. But small community hospitals — such as Lawrence General Hospital and Holyoke Medical Center — have long endured impossible financial pressures, and the pandemic could prove to be their breaking point.
Community hospitals have a small footprint but an outsize impact on health outcomes in the localities they serve, particularly among the most vulnerable patient populations. They offer high-quality routine care at rates that are much more affordable than the larger teaching hospitals.
But community hospitals often operate on razor-thin margins and teeter on the brink of closure or of acquisition by larger hospital systems. A recent proposal by Mass General Brigham (formerly Partners HealthCare) to build outpatient surgery centers in Westborough, Westwood, and Woburn marks a troubling new threat to the survival of community hospitals and to overall health care costs for Massachusetts residents.
In my years as a state representative and in my role as speaker of the House, I have been working on solutions to save these hospitals. My focus doesn’t come just from my experience writing landmark health care legislation in 2006 and 2012 that serve as national models.
For me, it’s also personal. I represent Quincy, which became the largest city in the state without a hospital when the Quincy Medical Center shut its doors, in 2015. I’m all too familiar with the loss a community feels when its hospital closes, both in terms of access to health care for the most vulnerable as well as in the economic impact of losing a large employer.
The financial problems faced by community hospitals are due, in part, to the low rates they are paid for services, from both government and commercial insurance. The rates different hospitals are paid for the same service are highly variable because the price is determined by negotiations between the hospital and private insurers.
A market-dominant hospital system can threaten to exclude its hospitals from an insurer’s network, thereby forcing private insurers to give in to its demands. And when an insurer does pay these higher rates, they offset their losses by shortchanging the community hospitals, which have fewer commercially insured patients and therefore less bargaining power.
Insurance companies, like the newly formed Point32Health (formerly Harvard Pilgrim Health Care and Tufts Health Plan), have rushed to merge in order to counter ever-expanding hospital systems that charge escalating rates, like Mass General Brigham and Beth Israel Lahey Health, which together provide 41 percent of all hospital-based care in Massachusetts. The trend of consolidation that has defined the current market is nothing short of an arms race.
The state must strengthen existing review processes to promote a more balanced market. One tool in particular has been successful in the past. Just as Quincy Medical Center was winding down operations, I opposed Partners HealthCare’s efforts to acquire three community hospitals, including South Shore Hospital in Weymouth, and a superior court judge later blocked Partners’ bid.
It was a stunning and rare blow to Partners, and it began with a state “material change review,” which resulted in a strong report by the Health Policy Commission. The commission determined that the proposed acquisition threatened to increase health care spending, reduce market competition, and increase premiums for employers and consumers. The court agreed, ruling that more patients being treated in higher-cost Partners facilities by more expensive doctors was not in the public interest.
But Partners has adapted, and it’s not just the name change to Mass General Brigham. It is pursing a new strategy of building smaller-scale outpatient surgery facilities outside its core in Boston. These projects are being reviewed under the relatively more lenient “determination of need” process.
These outpatient surgery centers will syphon off the prized commercially insured patients from nearby independent community hospitals, leaving them even less leverage with insurers. If this proposal is approved, the result would be the same outcome the court rejected in 2015: even more patients in higher-cost facilities. More important, this is just an opening salvo in a potential new strategy for hospital growth that is being adopted by other dominant players in the health care market.
True structural relief for community hospitals will require a concerted effort spanning multiple pieces of legislation, but as a starting point the state oversight processes must be realigned to confront this new expansion strategy.
The House plans to debate legislation to broaden the category of projects that require closer scrutiny by the Health Policy Commission and potential intervention by the attorney general. The bill would also help ensure that the state’s review of facility expansions is more responsive to actual needs by more closely integrating state and regional health plans and inventories in the review process. Finally, the bill seeks to protect community hospitals from encroachment by establishing a buffer zone against new outpatient surgery centers to prevent these facilities from poaching patients.
These reforms, in addition to increased state financial support, would help ensure the survival of community hospitals. Massachusetts patients can’t afford to lose them.
Ronald J. Mariano, who represents the Third Norfolk District, is speaker of the Massachusetts House of Representatives.