One of the iron laws of public policy is that regulatory agencies have an irresistible tendency to push the limits of their power and authority. Whether it’s the environment, transportation, or health care, the agency seems compelled to prove the purpose of its existence by reaching ever further into the regulatory arena.
We saw a classic example of that recently when the Health Policy Commission inserted itself into Boston Children’s Hospital’s determination of need application to upgrade its facilities. This is the first time that the HPC has chosen to comment on a determination of need application, and it did it 10 months after the hospital first submitted its application to the Department of Public Health, which had launched an extensive public process with widespread commentary and analysis.
The HPC is an independent state watchdog agency that monitors health costs. In its analysis, the HPC concluded that the hospital’s inpatient expansion would add between $8.5 million and $18.1 million annually for commercial insurance payers in Massachusetts. This conclusion strains credulity. Massachusetts spends $57 billion on health care annually, so the higher end of the HPC’s range is three-one hundredths of 1 percent (.03175 percent) of health care spending in Massachusetts. That amounts to a rounding error at best, and it is questionable whether any analyst could compute an impact that tiny with any degree of accuracy.
Yes, the HPC has the legal right to intervene, but let’s put that decision in context. Children’s proposed $1 billion capital project, largely to replace existing facilities, is subject to a highly detailed review by the Department of Public Health, a review that has been going on since last December. Earlier this month, DPH staff recommended approval of the project, with a series of strict conditions. The Public Health Council is set to rule later this month. As part of the review, Children’s was required to hire a consultant to conduct an independent cost analysis. The consulting agency, which issued its report in August, concluded, “The project is consistent with the Commonwealth’s efforts to meet the health care cost containment goals. The project’s short-term and long-term financing are affordable without utilization or pricing changes.”
Stuart Altman, chair of the HPC, now says that the conditions imposed on the project by the Department of Public Health address HPC’s cost growth concerns. This clarification underscores the point that the Health Policy Commission should never have inserted itself into the process in the first place.
Children’s Hospital is one of the preeminent pediatric medical centers in the nation, drawing research dollars, patients, and talent from across the world. It is an integral part of the crown jewel of the Massachusetts economy — the intersecting complex of world renowned hospitals, medical schools, biopharmaceutical companies, entrepreneurs, and venture capital. There is no way that Children’s, or any other large institution, can retain its stature without continually investing in technology, efficiencies, and improved customer services.
It’s not as if hospitals and insurers in Massachusetts are not already confronted with intense regulatory and public oversight. The health care sector deals with a veritable labyrinth of regulations at every level.
In the case of capital projects like that proposed by Children’s, the determination of need process is exceedingly rigorous and exacting. There will be strong conditions on any approval, including requiring major investments by Children’s in the community. The project will benefit Massachusetts in a variety of ways for years to come.
The HPC has an important role to play as Massachusetts undergoes major changes in the health care marketplace, but its credibility depends on choosing wisely where it exercises its authority. Overreaching helps neither the HPC nor the Commonwealth.
Mike Widmer is a former president of the Massachusetts Taxpayers Foundation and is on Boston Children’s Hospital’s Board Committee for Community Service.