State says Boston Children's $1B expansion could close competitors

State says Boston Children's $1B expansion could close competitors

By: Jessica Barlett

The state’s health care watchdog has raised new questions about the proposed $1 billion expansion of Boston Children’s Hospital, saying the plans could lead to the closure of smaller competing hospitals.

In a report released during a meeting on Tuesday, the state’s Health Policy Commission said it believes that the plans would raise health care spending in Massachusetts between $8.5 million to $18.1 million annually, and could even close competing pediatric hospitals.

Commissioner Wendy Everett said she didn't believe an $18.1 million increase over the total of $20 billion in total commercial health care spending in the state is significant. But the commission's chairman, Stuart Altman, said "it could lead to another provider going out of business."

"We’re not in the business of picking winners and losers. And I believe in markets, and if left alone that’s the way the market works, and it's because one is perceived to be better, that’s ok," said Altman. "But we can't rule out the implication that would have on cost... we're trying to do our job in a way that's appropriate. The ultimate decision is with the Public Health council.”

Among the problems the commission cited regarding the project:

The commission criticized Children’s projections that new patients would come from out of state. It said that historically, patients have come mostly from Massachusetts, and that the pediatric hospital is expanding the number of hospitals that refer to the hospital, which is likely to increase local patients going to the hospital.
Children’s Hospital is among the most expensive pediatric hospitals in Massachusetts, even more expensive than pediatric services at Tufts and Massachusetts General Hospital, commission analysis shows. The commission argued that if patients are sent there from lower-cost facilities in Massachusetts, overall spending would increase.
Children’s already cares for 46 percent of the state’s commercial pediatric discharges, according to 2015 data. That size is more than three-and-a-half times larger than its closest competitor. Taking pediatric patients from other hospitals in Massachusetts would only make the hospital larger, allowing it to possibly leverage higher prices with insurers.
Growing Children’s could destabilize competing hospitals, stealing some 24 to 44 percent of current commercial pediatric volume. That could lead to closures of pediatric programs, further strengthening Children’s market dominance.

Boston Children's Hospital spokesman Rob Graham said the hospital "vehemently disagrees with the analysis and conclusions around cost, patient volume and market share."

"Boston Children's has consistently and aggressively taken strong steps to address costs and we are committed to adhering to the state cap on healthcare cost growth. Further, we've undertaken a broad strategy of helping to keep less complex care in the local community whether at community hospitals Boston Children's partners with or through collaborations with pediatricians among others," Graham said in a statement. "The data used by HPC is flawed, misleading and speculative. Even if HPCs worst case scenarios plays out, the cost impact would equal a 0.033% increase in costs to Massachusetts consumers per HPC math."

Boston Children's seeks to construct a new 11-story clinical tower in Longwood, redevelop a property in Brookline for an outpatient center, and renovate existing buildings on the Boston campus.

In total, the project would add 71 new beds, four new operating rooms, and two MRI machines. Children's operating expenses are projected to increase approximately $137.5 million annually.