- Massachusetts Health Policy Commission
BOSTON — Today, the Massachusetts Health Policy Commission (HPC) Board set the Massachusetts Health Care Cost Growth Benchmark for calendar year 2025 at 3.6%, and considered agenda items including private equity in health care, recent notices of material change including the proposed transaction involving Stewardship Health Care, Inc. and Optum Care., and the 2023 Performance Improvement Plan (PIP) Process.
The health care cost growth benchmark, the cornerstone for the state’s cost containment efforts, is a statewide target for the rate of growth of total health care expenditures (THCE), the annual sum of all health care expenditures in the Commonwealth from both private and public sources, calculated on a per person basis. The benchmark does not cap prices or spending growth, but is instead a measurable goal to track the state’s progress and to motivate collective action to moderate spending growth over time.
In determining the 2025 benchmark, HPC commissioners considered testimony and data presented at the 2024 Health Care Cost Growth Benchmark Hearing, a public hearing the HPC held in conjunction with the Legislature’s Joint Committee on Health Care Financing. THCE increased 5.8% from 2021 to 2022, totaling $10,264 in average annual health care spending per resident. These rising costs were largely shifted to residents, as Massachusetts has experienced a 26% increase in patient cost-sharing combined over 2021 and 2022, and in 2024, four in ten residents reported delaying care due to cost in the last twelve months.
Considering these trends, commissioners voted to keep the benchmark at 3.6% for another year, in line with the potential gross state product established in the consensus revenue process.
“The benchmark allows us to evaluate our progress and reaffirm our commitment to addressing health care cost growth in the Commonwealth, functioning as a central target in our collective efforts to deliver accessible, equitable, and affordable health care for all residents,” said Deborah Devaux, HPC Board Chair. “The testimony and data presented at the benchmark hearing underscored the troubling reality the HPC has cautioned in recent reports – Massachusetts residents and businesses face increasingly unaffordable health care costs. Establishing the Health Care Cost Growth Benchmark at 3.6% provides a reasonable target for health care industry stakeholders to work towards.”
The data presented at the hearing also drew attention to the steep growth in pharmaceuticals as a major cost driver for the Commonwealth, with 7.3% growth – more than double the benchmark rate. The HPC found that if prescription drug spending grew at the benchmark rate of 3.1% from 2019 to 2022, rather than the actual rate of 7.3%, total commercial spending would have been nearly a billion dollars lower (-$978 million).
“When we are seeing pharmaceutical costs growing at a rate that is double the benchmark, and four in ten residents are reporting avoiding or delaying needed health care due to the cost, it is evident that, in addition to maintaining the benchmark, we must do more to prioritize affordability,” said David Seltz, HPC Executive Director. “These trends underscore the necessity of additional policy action to expand the state’s cost containment approach to meet the novel challenges facing our health care system.”
2023 Performance Improvement Plan Process
Commissioners also concluded the 2023 Performance Improvement Plan (PIP) Process review cycle, and received an update that the 18-month implementation of the Mass General Brigham PIP concluded on March 31, 2024. HPC staff will conduct an evaluation of the results and present findings to commissioners who will vote to determine the success of the PIP at a future meeting.
Private Equity in Health Care
Consistent with national trends, private equity investments have accelerated in Massachusetts since 2020, in volume and as a share of all health care transactions. In an HPC analysis of health care provider mergers and acquisitions from 2013 to 2023, 47% (85 of 182) of health care provider transactions involved private equity firms. Research indicates that private equity investment utilizes unique financial strategies to generate profit that can be destabilizing to the health care market, while being associated with worse outcomes and higher costs.
The presentation by HPC staff underscored that Massachusetts needs enhanced transparency and state oversight of these types of transactions, and outlined potential policy levers that the Legislature could enact.
HPC Policy Recommendations to Increase Oversight and Transparency of Private Equity Investment in Health Care:
Enhance health care market transparency and oversight through the HPC’s current authorities.
Enhance public transparency and oversight by amending the HPC’s Material Change Notice process to capture a broader range of transactions, reflecting emerging market trends, including:
- Substantial changes in capacity;
- Significant investment by private equity or for-profit in an existing health care provider;
- Substantial sale of assets for an ownership share or for the purposes of a lease-back arrangement.
Amend the HPC’s Registration of Provider Organization (RPO) program to:
- Include public payer revenue in the reporting threshold. This change will expand the type of entities that must file with the RPO program to include sectors frequently targeted by PE firms and provide more public insight into the structure and financial health of provider organizations.
- Establish enforceable penalties for non-compliance to ensure all required information is provided in timely manner.
Align state regulatory tools and enhance monitoring of health care resources.
Recent health care market activity, implicating both access and cost, have highlighted the opportunity to better align the range of state agency oversight processes and the need for a better understanding of the allocation of health care resources across the Commonwealth. The HPC recommends the Commonwealth should conduct data-driven assessments of service supply and distribution based on identified needs.
Consider additional state authority to approve or deny transactions, or impose conditions, to mitigate potential harms.
Similar to other states such as Oregon, further empower state oversight authorities (e.g., HPC, DPH, AGO) to ensure all proposed transactions are consistent with state goals on cost, quality, access, and equity (not limited to PE transactions). Potential conditions of approval could include:
- Efforts to maintain or enhance access to needed services,
- Quality standards and improvements,
- Ongoing financial and compliance monitoring including on staffing, and,
- Conditions on exit or sale.
The policy recommendations aimed at private equity investment can be found in the HPC’s 2023 Health Care Cost Trends Report. Recordings of the board meeting and benchmark hearing are available on the HPC’s YouTube page, as is a short video explainer of the annual benchmark setting process. The presentation and a Health Care Cost Growth Benchmark FAQ are available on the HPC’s website.
