Do No Harm: Will the Health Policy Commission’s New Power Hurt or Help MA's Health Care System?

The legislation directs much of its attention on private equity and real estate investors that have largely moved on from the hospital sector. The calamitous Steward collapse is not likely to be repeated. At the same time, the state’s health care system has never been in a more precarious situation, and it’s not clear whether the new legislation will help to stabilize the system or add to the regulatory burden. This warrants close watching.

What is the Health Policy Commission?

The HPC has two principal responsibilities: (1) monitoring trends in Massachusetts health care costs and (2) conducting oversight of significant mergers and acquisitions involving Massachusetts health care providers.

To monitor costs, HPC sets a statewide health care cost growth benchmark (now 3.6%), publishes an annual report and hosts an annual public hearing with sworn testimony from payors and providers. HPC also has authority to require a payor or provider to implement a Performance Improvement Plan if it determines that the organization is exceeding the cost growth benchmark. Especially in this era of high inflation, rising labor costs, and increased patient demand, Massachusetts hospitals have pushed to reform the HPC’s use of cost growth benchmarks to monitor the performance of the health system.

To allow for market oversight, providers must file an MCN with HPC in advance of any material change to their operations or governance. After reviewing the MCN, HPC determines whether to conduct a cost market impact review (CMIR), during which HPC staff request and analyze data about how the proposed change will impact costs, access, and quality. Following the CMIR, HPC issues a report and may refer the transaction to the attorney general for further investigation. While there have been MCNs filed for more than 180 transactions with HPC since 2013, it has completed only six CMIRs, with one currently pending. Of note, HPC has only had authority to review mergers, acquisitions, and certain joint contracting arrangements or clinical affiliations—not all health system expansion, private investments, and real estate transactions.

Updates to HPC Commissioners

H.4654 makes minor adjustments to the appointment of HPC’s eleven commissioners. The Insurance Commissioner will now hold an ex-officio spot on the commission, replacing the Secretary of Administration and Finance. Where there had been three appointees each from the Governor, Attorney General, and Auditor, there will now be six appointees from the Governor and three from the AG. The auditor loses their appointment authority entirely—reflecting the fracture in the relationship between the legislature and the Auditor. One of the Governor’s appointees must now be selected from a slate of nominees from the Senate President and one from the House Speaker. The legislation also replaces the Governor’s appointee that had been reserved for a primary care physician with a hospital or health system expert. Additionally, the law adds a stipend for the commission, although it does not change the conflicts of interest rule, which precludes commissioners from serving while they are affiliated with a Massachusetts health care entity.

Cost Trends Monitoring

The bill significantly expands the scope of the annual cost trends hearings, which had been required to address payer and provider cost trends. H.4654 requires that the annual hearings also include testimony from pharmaceutical manufacturers and PBMs, and also examine the relevant impact of private equity investors, REITs, and MSOs.  The specific focus on private equity, REITs, and MSOs will also be new. Traditionally, HPC required pre-filed, written testimony at the hearings from a cross section of payers and providers, including academic medical centers, community hospitals, commercial health plans, and others. The new legislation requires that HPC also obtain sworn testimony from identified pharmaceutical manufacturers, PBMs, private equity investors, REITs, and MSOs, along with the Division of Insurance, Health Connector, and MassHealth, significantly expanding the breadth of information collected at the hearings.

Expansion of MCN and CMIR Authority

The bill expands the type of transactions that will be included in the MCN process. An MCN will now be required with respect to any significant expansion of a provider organization’s capacity. This was clearly aimed at the type of outpatient expansion Mass General Brigham proposed in 2021, which did not fall within the notice process at the time. The expanded authority, however, could subsume any number of provider expansions going forward.

Other transactions now coming under the MCN process include (1) those involving a significant equity investor, which result in a change of ownership or control of a provider, provider organization, or a carrier, (2) those involving significant acquisitions, sales or transfers of assets, including real estate sale lease-back arrangements (the kind used by the Steward Health Care System), and (3) those involving the conversion of a provider or provider organization from a non-profit entity to a for-profit entity.

The bill gives the HPC greater power with respect to the types of information it can request as part of the CMIR process. It can now require the submission of documents and other information from any significant equity investor or other party involved, including information about a significant equity investor’s capital structure, financial condition, and ownership and management structure. The HPC can now also request additional information from a provider or provider organization for a period of five years following completion of the material change.

Health Planning

The Massachusetts health care system has moved from one crisis to the next over the past few years. The state has been in a reactionary mode, and the system has suffered from the lack of an overarching plan. This bill tries to fix that.

It transfers responsibility for health planning from the Executive Office of Health and Human Services (where an existing Health Planning Council was dormant) to the HPC, where a new Office of Health Resource Planning is established. The office is made up of key state leaders and other appointees and is given responsibility for developing a state health plan. That plan must identify anticipated needs for health care services and facilities, outline the current resources that exist to meet those needs, and establish priorities. The plan will also include a comprehensive forecast of anticipated demand, supply, and distribution of health care resources during a five-year planning period. It establishes an advisory committee and requires at least five public hearings in geographically diverse regions of the state as the plan is developed. The office must file annual reports with the joint committee on health care financing.

Our Final Take

There are plenty of things in this bill that may help prevent future problems of the kind we saw in the Steward Health Care crisis, but most healthcare organizations in Massachusetts are nonprofit and lack many of the features at play with Steward. Private equity has already started to move on from hospitals and there is some risk that, in the legislature’s desire to regulate the horse that has already left the barn, it could harm the horses that remain.

One of us testified at the HPC’s 2023 hearings (at 7:26:45) and spoke in support of greater oversight over private equity and the other changes addressed by this bill. But we also made the point that government must continue to change and innovate as well. As HPC gets additional authorities to do more of what it’s done before, the bill also provides an opportunity for government to innovate through HPC’s Office of Health Resource Planning.

Massachusetts was a trailblazer when it created the HPC to monitor health care cost growth. A dozen years later, the Massachusetts health care system, especially its hospitals, is as fragile as it’s ever been. Hospitals will need to innovate and change in a significant way in order to survive. The agencies of state government will need to innovate and change as well—ensuring that they are promoting access to high quality, affordable health care for the long term and not stifling innovation, which could cause lasting harm to the health care system. That system is vital to the health of our communities and the envy of most other states.

We’ll be watching closely to see how implementation of this new law strikes that balance.