Insurers urge state to reject $1b Children’s Hospital expansion project

A rendering of Boston Children’s Hospital’s proposed new building.Shepley Bulfinch

Health insurers are making a late bid to derail a plan by Boston Children’s Hospital to expand, urging state regulators to reject the building project because it would drive up medical spending.

The $1 billion proposal by Children’s to add an 11-story tower and 71 beds to its Longwood Medical Area campus would boost the hospital’s market share in the state, the Massachusetts Association of Health Plans said Monday in a letter to Public Health Commissioner Monica Bharel.

That could increase health care costs because Children’s, one of the country’s premier pediatric hospitals, is among the Bay State’s highest-priced providers.

“The impact it would have on costs and the delivery system seems to run counter to our cost containment goals,” the association said in its letter. “This will put additional burdens on a state that already has among the highest health care costs in the nation.”

The letter was released three days after the Department of Public Health recommended approval of the project, with several conditions. The Public Health Council, which is chaired by Bharel, is expected to vote Oct. 20. The council typically votes in line with the department’s recommendation.

Officials at Children’s say they need to renovate and expand the campus to care for more kids with complex problems, including babies born prematurely and children who need life-saving heart surgeries. The expansion would largely meet demand from patients outside Massachusetts and from other countries, they have said.

“Without a new clinical building and renewal of the existing campus at Longwood, Boston Children’s will be increasingly unable to meet the growing demand for complex care from within and outside the Commonwealth,” Children’s spokesman Rob Graham said in a statement. He said the hospital has taken steps to address costs and slammed the health insurers association for trying to block its efforts to meet patient demand.

“It would be interesting to know if they surveyed their member plans about the wisdom of undermining access to this world-class care,” he added.

The insurance group’s objections come after a state watchdog agency, the Health Policy Commission, last week raised concerns that the project would increase spending by $8.5 million to $18.1 million a year for patients on commercial health insurance, by drawing patients away from other lower-priced hospitals.

The commission, which monitors health costs, warned that a bigger Children’s could even contribute to other pediatric hospitals going out of business.

Children’s executives called the commission’s analysis speculative, flawed, and misleading.

Hospitals that compete with Children’s have voiced concerns, and an activist group has sued the hospital to try to stop the project and preserve the Prouty Garden, a beloved space on the Children’s campus that would be replaced under the hospital’s expansion plan. Children’s is also planning to build an eight-story outpatient clinic in Brookline.

“The data show that as providers get bigger, if they are building beds, they need to fill those beds, and that usually translates into higher prices,” Lora M. Pellegrini, chief executive of the insurers’ association, which represents most of the state’s major health insurers, said in an interview.

The Department of Public Health is recommending approval of the project with stronger than usual conditions. This includes fines of up to $27 million if Children’s raises costs for consumers and insurers beyond a target of 3.6 percent a year, and fails to maintain care for children on Medicaid.

“Examining questions about the impact on health care costs in the Commonwealth has been a major focus of the Department’s months-long assessment of Children’s expansion and renovation proposal,” DPH spokesman Tom Lyons said in a statement.