fb-pixel Skip to main content

Health care watchdog pushes to hold down spending despite pandemic

An empty room is set up and ready for a patient.Erin Clark/Globe Staff

Despite two years of unprecedented disruption in the health care market, Massachusetts has ordered insurers and providers to keep health care spending low.

On Wednesday, the state’s Health Policy Commission set a 3.6 percent benchmark for health care spending growth in 2023. That number is up slightly from the 3.1 percent benchmark the state has had in place since 2018.

The low spending growth goal comes despite requests from state hospital lobbying groups that the state pause the benchmark for a year to account for massive disruptions in the market.

Commissioners said at a virtual hearing Wednesday that they weren’t interested in bankrupting health systems by holding down their spending growth, and acknowledged that spending would likely escalate well above the 3.1 percent benchmark in 2021 and 2022, as the industry grappled with the pandemic. Yet commissioners said the system needed constraints.

Advertisement



“On the one hand, we cannot take our foot off the brake and we need to continue to slow the growth in spending if we are going to have a health care system which is affordable for all of our citizens,” said Stuart Altman, chair of the commission. “But we also can’t be unmindful of these currents which are not normal in any stretch of the imagination, nor do we want to shortchange our health system as it copes with these problems.”

Since 2013, the benchmark has been used by the commission to investigate high health care spending by market participants and is one of the main mechanisms the state has used to corral growing health care costs. According to state law, 2023 was the first year the commission and Legislature could set the benchmark to any rate they chose.

The benchmark has helped the state stay below national growth rates for total health care spending since 2013, though the state hasn’t always met its own goals. According to a presentation delivered Wednesday, health care spending grew 3.6 percent in 2018 and 4.1 percent in 2019 — above the state’s 3.1 percent benchmark.

Advertisement



The pandemic prompted health care spending to drop for the first time since the state began tracking the figures, down 2.4 percent in 2020, the most recent year for which data are available.

With record inflation growth and escalating labor costs, hospital groups have warned health care spending would likely grow.

Providers and payers that exceed the state’s benchmark could be at risk of penalty by the commission, forced to develop a state-approved plan to rein in spending or face a fine.

Commissioner David Cutler said the commission should be flexible about how it applied the benchmark to providers and payers given the pandemic. But there would be less tolerance for high spending growth for organizations that had traditionally had high spending increases and were more expensive.

The Massachusetts Association of Health Plans, which represents 15 of the largest insurers except Blue Cross Blue Shield of Massachusetts, applauded the benchmark rate, saying it was a check on health care spending.

“Setting the benchmark at 3.6 percent allows us to continue our fight to contain health care costs while recognizing some of the pressures put on the health care system due to the pandemic,” said Lora Pellegrini, CEO of the Massachusetts Association of Health Plans.

In a statement, Massachusetts Health & Hospital Association CEO Steve Walsh said that the benchmark needed reform.

Advertisement



“Our health care organizations are still operating under extraordinary circumstances,” Walsh said. “This reality must remain front-and-center whenever we evaluate the performance of the system or make decisions that influence how hospitals operate. MHA and our members have made it clear: we strongly support a cost growth benchmark. But it is a critical tool in critical need of evolution.”

As the state maintained its focus on constraining health care spending, the commission said it was also keeping a watchful eye on consolidations and affiliations. Most notably, the commission said it was reviewing several of Boston Children’s Hospital’s plans.

The hospital’s parent corporation has proposed acquiring specialty pediatric hospital Franciscan Children’s, which will require commission review. Commission staff said they had already begun to analyze Boston Children’s proposed $435 million outpatient expansion into three suburban communities. At the same time, the commission was eyeing Tufts Medical Center’s plans to close its 41 pediatric inpatient beds and shift care to Boston Children’s, which may trigger HPC oversight, staff said.

“What we’re winding up with is a gigantic consolidation of all of the children’s health care in the Commonwealth under Boston Children’s,” Altman said. “And there are going to be significant cost and spending implications that we need to look [at] … I think we’re gonna have a serious discussion about this in the coming weeks and months.”


Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her on Twitter @ByJessBartlett.