Mass General Brigham says it will reduce spending by $70m annually

The corporate offices of Massachusetts General Brigham in Assembly Square in Somerville.Lane Turner/Globe Staff

Mass General Brigham said on Tuesday it will reduce total medical spending by $70 million annually through a combination of lowered prices, reduced hospitalization rates, and by shifting some hospital care to people’s homes.

The announcement is part of the hospital’s “performance improvement plan,” a document detailing how it will reduce spending as required by the state’s health care watchdog agency, the Health Policy Commission. The agency rebuked Mass General Brigham in January for what it said were years of spending above acceptable levels.

The health system was the first in the state to be required to file such a plan.

David Seltz, executive director of the Health Policy Commission, said in a statement that the agency would review MGB’s proposal and evaluate whether it would “achieve our shared goal of delivering meaningful and sustainable health care cost savings.”

For the last several years, the state has tried to keep the growth of total medical spending in Massachusetts under 3.1 percent annually.

Yet, according to the commission, Mass General Brigham’s total commercial spending on primary care patients was $293 million above benchmark limits from 2014 to 2019 — more than double that of the second-highest health system in Massachusetts.

Mass General Brigham has criticized the Health Policy Commission for being “short-sighted and unfair” in ignoring the system’s role in treating some of the sickest and most complex patients.

In its plan, MGB said it divided the $293 million in excess spending over the five-year period cited and made a goal to reduce spending by at least $60 million annually. The health system said in the document that the $70 million final target is a representation of the system’s willingness to “meaningfully address health care cost growth.”

According to its plan, submitted to the commission on Monday and made public Tuesday, Mass General Brigham said it will save $53.8 million annually, in part by committing to bringing outpatient rates — delivered at outpatient facilities tied to its academic medical centers — closer to others in the marketplace. The system will also change the prices at its outpatient facility in Waltham to be in line with rates it charges at its community hospitals.

The health system will also save $10.8 million annually by reducing avoidable hospitalizations, emergency room visits, post-acute care, and the use of high-cost outpatient imaging. As part of these plans, the system says it will increase enrollment in its care management program, which uses algorithms and teams of people to better manage the care of complex patients and keep them healthier. Currently 17,349 people are enrolled, and the health system said it hopes to expand that to 19,650. The system said it gathers feedback from physicians and patients to ensure the program is not negatively impacting quality. Some of the changes, such as reducing the use of MRIs, the health system said it had already undertaken thanks to its electronic medical record system; it didn’t count the savings those reductions would provide as part of its proposal.

The plans additionally outline $5.3 million in annual savings from delivering care remotely or in lower-cost hospitals and clinics. The health system said it had already negotiated commercial rates for hospital-at-home services that cost less than in-hospital care and would expand that program to save money. The system also says it will sustain its use of virtual care, which it scaled up during the pandemic, and was supportive of charging lower rates for remote care than for in-person visits. According to the document, the system would “proactively address discounted rates for telehealth specialty care” with commercial insurers to produce savings. MGB would also shift care to lower-cost community hospitals and ambulatory sites, though it said it didn’t include those savings as part of its estimates.

“Mass General Brigham’s plan commits to reduce our spending by $70 million a year, a level that will meaningfully impact the cost growth trend,” said Jennifer Street, vice president of external communications for Mass General Brigham, in a statement. “This plan is consistent with our commitment to transform the future of health care, making it more affordable and accessible, and ultimately lowering the cost of care for our patients.”

In addition to reducing its spending, the health system said it would hold itself accountable for controlling cost growth in the future, saying it was committed to moving more of its insured patients into plans with a reimbursement structure that pays for keeping patients healthy, instead of those that reimburse for every individual service. Those plans include having its insurer — AllWays Health Partners — offer products that incentivize patients to go to community-based providers.

Several experts who reviewed MGB’s performance improvement plan at the Globe’s request said it didn’t go far enough.

“It is wholly inadequate, and it would be such an incredible disappointment if somehow this was acceptable to the HPC,” said Paul Hattis, a former member of the commission and senior fellow at the Lown Institute, a Needham-based health care think tank.

Hattis was skeptical MGB would reduce its prices, saying the system might instead ask for smaller increases than it otherwise would have. Further, he said price reductions on the outpatient side wouldn’t guarantee that the health system wouldn’t raise prices on the inpatient side to offset the losses.

Even if the suggestions truly result in $70 million in annual savings, Hattis said, that represents a fraction of the $62.6 billion spent on health care in 2020 in Massachusetts and would represent merely days of revenue for an organization that raked in $11.4 billion in net patient service revenue last year.

John Freedman, chief executive of health care consulting firm Freedman HealthCare LLC, added that these reductions only would bring Mass General Brigham to the limit of spending increases allowed by the state, rather than meaningfully reduce spending. Because Mass General Brigham is already more expensive than other market participants, holding the percentage growth at the state’s benchmark would allow Mass General Brigham to grow spending more than smaller health systems.

“The price advantage they have stays permanently baked in,” Freedman said. “That, unfortunately, is the perennial problem.”