Hospital Facilities Will Face Scrutiny

The Massachusetts Public Health Council unanimously approved legislation last week slapping stricter scrutiny on hospitals seeking to build new facilities—a move that is nearly certain to affect future expansion plans by Harvard Medical School’s 15 affiliated teaching hospitals.

The measure—which is driven by concerns of rising health care costs and competition placed on local community health centers by Boston’s many prestigious hospitals—forces companies to prove to state officials that their proposed facilities do not duplicate local services. Urban costs and overcrowding have made the suburbs prime turf for hospital expansion.

“Many [community hospitals] can benefit from an appropriate relationship with teaching hospitals, as long as it doesn’t lead to development of redundant facilities,” said Donald J. Thieme, executive director of the Massachusetts Council of Community Hospitals, a trade group. “Hospitals have relatively poor balance sheets and access to capital is very limited, and when they initiate building programs only to have someone come in and duplicate those facilities, the financial framework for those hospitals is jeopardized. And that’s what’s been happening.”

The new measures affect any company seeking to open outpatient clinics costing more than $25 million and all physician-owned day surgery centers.

In recent years, several of Boston’s city hospitals—including the HMS affiliated and top-ranked Massachusetts General Hospital, Beth Israel Deaconess Medical Center, and Children’s Hospital Boston—have planned and embarked on multi-million dollar expansion projects. MGH, the largest hospital in New England and the third oldest general hospital in the U.S., broke ground last September on a $144 million outpatient care facility in Danvers.

While the new regulations should not affect the Children’s Hospital’s proposed expansion plans in the North Shore, spokeswoman Michelle Davis wrote in an e-mail that the legislation would certainly affect “future but yet to be determined plans.”

“Our biggest concern is making sure that [state] resources are available for a timely review of projects,” Davis said. “We are operating close to maximum capacity and will need to expand in the future.”

Davis emphasized the Children’s Hospital’s historical collaboration with community hospitals, and said that the hospital “has always stepped forward, regardless of cost when help was needed.”

While Thieme said the Children’s Hospital may require special consideration because it deals with a substantial volume of national and local patients, he questioned the need to spend hundreds of millions of dollars on new facilities when local care “may be much more effective from a quality viewpoint.”

“It’s hard to say whether good facilities create better products coming out, and what we’re really trying to get is to produce the right product out of that expansion,” Thieme said. “The financing system has to change, and instead of favoring specialists, we should find a way to finance primary care. This is one bump in the road, allowing the Department of Public Health to put more scrutiny on the projects.”

But John Erwin, director of the Conference of Boston Teaching Hospitals, said he was confident that teaching hospitals bring mutually beneficial expertise and resources to community health care centers, and that the hospitals would be able to withstand the state’s scrutiny.

“Hospitals don’t make a $25 million decision without doing the research. They put a lot of thought into where it’s going to go, what services it will provide,” Erwin said. “They do all of that homework before they put the shovel in the ground, and if it gets that far along, they’ll be able to withstand the scrutiny.”

—Staff writer Peter F. Zhu can be reached at pzhu@fas.harvard.edu.