Business & Tech

Governor backs Children’s Hospital expansion plan

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

Governor Charlie Baker on Monday threw his support behind a $1 billion expansion by Boston Children’s Hospital, a project that has sparked heated opposition over its potential to increase Massachusetts health care costs.

Also Monday, the hospital got the backing of the head of Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, and the former chairman of Partners HealthCare, Jack Connors.

A state watchdog agency, the Health Policy Commission, last month warned that the proposal is likely to increase medical spending by attracting patients from lower-priced competitors and could leave those hospitals financially weakened. Children’s, one of the top-rated pediatric hospitals in the country, is also the most expensive in Massachusetts. Separately, many patients’ families oppose the expansion because it means demolishing the much-loved Prouty Garden on the hospital campus.

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But the state Department of Public Health recommended approval of the expansion, which includes an 11-story building at the hospital’s Longwood campus and an outpatient center in Brookline. The department attached conditions designed to ensure that Children’s does not pass excessive costs of the new facilities on to patients and insurers. If the hospital doesn’t comply, it could face steep fines and limits to the number of new beds it can build.

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“I think the DPH’s recommendation — with the conditions that they included in the recommendation — is the appropriate one,” said Baker, a former chief executive of insurer Harvard Pilgrim Health Care. “But it’s going to be important for all of us to make sure that those conditions are met and complied with.”

Children’s has said that the expansion is necessary to meet demand from critically ill patients from other states and other countries, and that it will not have an impact on the local health care market, a position Baker said he accepts.

The Public Health Council, a body chaired by the commissioner of public health, is scheduled to vote on the proposal on Thursday. The council generally votes in line with the department’s recommendations. That vote is the final step in the state approval process, though Children’s is also facing a court challenge from Prouty Garden supporters.

As the vote nears, the number of organizations opposing the Children’s project has grown. The Retailers Association of Massachusetts, the National Federation for Independent Business, the Greater Boston Interfaith Organization, and the Massachusetts Association of Health Plans have all raised objections to the project, arguing it will increase health care costs.

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Two competitor hospitals, Tufts Medical Center and Massachusetts General Hospital, also have raised concerns that a larger Children’s will grow too dominant. Children’s already controls 46 percent of the statewide market for pediatric patients with commercial insurance, according to the Health Policy Commission.

Connors, who was chairman of the Partners board from 1996 to 2012, said he felt compelled to defend Children’s against a “piling on” from opponents, even though executives at Mass. General — the largest hospital in the Partners network — have raised concerns about it. He said that cost concerns are overblown and that patients will benefit from a larger, renovated Children’s.

“I don’t think it’s a fair point to say ‘you’re not allowed to grow,’” Connors said in an interview. “If you’re successful in business, you grow.”

Andrew Dreyfus, chief executive of Blue Cross Blue Shield of Massachusetts, also expressed support for the project, breaking with the insurance industry association that opposes it. Blue Cross is not a member of the Massachusetts Association of Health Plans.

“Every new project of this magnitude ought to be reviewed through the lens of both affordability and patient access,” Dreyfus said. “We believe the unprecedented restrictions that were placed on this proposal should limit or eliminate any costs being passed on to our members.”

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Children’s has 404 beds on its Longwood campus and is looking to add 71 more, most of them in intensive care. Hospital officials say they’re seeing growing numbers of patients who require increasingly complex care, from heart surgeries to intensive care for newborns. They have been planning to renovate and expand for several years and consider the project critical.

“We appreciate the governor’s voice of support,” Children’s chief executive, Sandra Fenwick, said in a statement. “We look forward to making our case to the Public Health Council later this week.”

The Children’s project is the largest ever to go before state regulators. Earlier this year, the public health department required Children’s to pay for an independent cost report on its project. That report concluded that the project would not be a threat to local health spending.

After many months of review, Department of Public Health officials said last month that the project should be approved because it would help modernize the hospital and improve care by expanding capacity and allowing all patients to have private rooms.

But in their 37-page report, they also noted concerns that the project could raise costs. They said Children’s must not pass the costs of its project on to patients and insurers “in excess of the Commonwealth’s cost containment goals.” The state has a target of keeping health spending increases to 3.6 percent a year.

Children’s also must provide information every year that shows whether its projections for attracting out-of-state patients are being met, and it must maintain care for children on Medicaid, the government insurance program for low-income families. If Children’s fails to comply, public health officials said, it could face unprecedented fines of up to $27 million.

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.