BBJ: Group opposing Boston Children's $1B expansion faults state oversight 

By Jessica Bartlett  – Reporter, Boston Business Journal

Sep 10, 2018, 6:12am

Opponents of a $1 billion expansion at Boston Children’s Hospital say the state’s Department of Public Health is refusing to enforce a key condition it initially imposed on the project, a decision that could have broader ramifications in the Massachusetts health care market.

The state in 2016 approved the hospital's plan to construct an 11-story building, despite objections that the project would involve the demolition of the beloved Prouty Garden on the site. The DPH imposed a number of conditions as part of its approval, including that Children's demonstrate that the 77 new beds would be filled primarily by out-of-state patients — not those who would otherwise go to competing and less expensive hospitals in Massachusetts. In theory, if DPH found that Children's failed to demonstrate this, it could refuse to license the beds, potentially throwing the project into doubt.

But opponent group Friends of the Prouty Garden argued in a letter to the state last month that the hospital has not been providing assessments of its patient mix in annual filings with the state. The group has previously filed several lawsuits seeking to halt the project.

In a response on Aug. 29, the DPH acknowledged that it plans to wait until the project is completed before analyzing whether the hospital does indeed need the increased capacity.

“The reports provided to DPH prior to project completion are necessary to establish a baseline understanding of BCH’s current patient mix, but until the project has been completed, the Department has no need to determine whether there has been a material change in patient mix in order to determine the impact of the construction and increased capacity,” the DPH wrote in its letter.

In a separate statement to the Business Journal on Friday, a DPH spokesperson said the department "has determined that the data reported by the hospital to date is sufficient at this time.”

Jim McManus, a spokesperson for Friends of the Prouty Garden, said in an email that the decision defeats the purpose of the state’s oversight process, which was put in place to protect competing hospitals that might otherwise see their volume whittled away by Children’s.

“BCH told the department that the international patient population would grow by 260 percent from 2012-2022,” McManus said. “If international patients don't show up, as we said all along, then BCH will have no alternative than to attract patients from competitors, raising health care costs.”

Boston Children's Hospital showcases $1B expansion plans

Here are renderings of the 11-story clinical building that received final state approval in 2016.

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In fact, according to its annual financial filings, the hospital's net patient service revenue from international patients remained relatively stable in 2016 after ticking up for several years, only increasing $180,000 from 2015 to 2016, to $409.8 million. That compares to a massive jump seen in years prior; in 2013, net patient service revenue from international patients was just $190.4 million.

Children’s did not respond to a request for comment.

The decision is concerning to health care expert Paul Hattis, a professor at Tufts University School of Medicine. He said the state’s decision to delay oversight of the Children’s project could mean that the hospital may ultimately go after more Massachusetts patients. A larger Children’s would be able to enact higher prices from insurers, and would also destabilize competing providers.

“I think it’s hard once you’ve permitted a hospital to open the beds and borne expense to do that and trained staff," Hattis said. "It’s hard to say we see those beds won’t be occupied by out of state patients, take them out of service."

Hattis added that the state’s decision to delay enforcement of its condition boded ominously for the DPH's oversight more broadly, especially as the state reviews the proposed mega-merger between Beth Israel Deaconess Medical Center and Lahey Health.

While the Health Policy Commission, the state’s health care watchdog, has anticipated that the Children’s project could raise health care prices by between $8.5 million and $18.1 million annually, it said the Beth Israel-Lahey merger could raise health care prices by $168 million to $251 million.

“We had this huge transaction in front of us now that we don’t know what’s going to happen,” Hattis said. “The Health Policy Commission is going to issue a final report and if it goes forward with conditions, this Children’s letter makes me worried about the ability of the agency to follow up on whatever conditions it writes.”