EVERYONE IS TALKING about the Dana-Farber Cancer Institute’s decision to abandon its long-term affiliation with Brigham and Women’s Hospital and partner instead with Beth Israel Deaconess Medical Center, which is offering the institute the opportunity to build a much larger free-standing cancer care hospital on the Beth Israel campus.
It’s a really big deal, raising all sorts of interesting questions about the direction of health care in Massachusetts. For example, Dana-Farber is jumping ship from an institution that is part of the state’s largest health care system (Mass General Brigham) to join forces with the flagship institution of the second-largest system (Beth Israel Lahey).
Does that help even the playing field, or does it set off a battle between the state’s two health care giants over cancer care and the huge dollars at stake?
The current affiliation between Dana-Farber and Brigham and Women’s won’t expire until 2028. It’s like a messy five-year divorce. How will that affect care in the interim?
Dana-Farber is the most expensive academic hospital in the state. With this deal, it is planning to expand from 30 beds to as many as 300. What impact will that have on the state’s rising health care costs?
While these could all be interesting issues to explore, I’m focused elsewhere – on whether Dana-Farber’s planned move could actually reduce the growth in health care spending. Though admittedly speculative, I think it is important to explore the possibility that we could bootstrap on top of this cancer care realignment the creation of health plan offerings that could positively impact overall health care pricing by somehow breaking the Mass General Brigham stranglehold over our health care market in Massachusetts.
This idea has more to do with people fearing getting cancer, rather than those that have already been diagnosed with it.
Specifically, people with commercial insurance through work or on their own face decisions each year about which health insurance plan they want to sign-up for. What if, starting in 2028, a health insurance plan offered in-network access to all of the Boston-area health providers (except Massachusetts General and Brigham and Women’s) plus the two major specialty hospitals — Boston Children’s and Dana-Farber?
That package, at the right price, could entice people to buy a health plan that leaves out Massachusetts General and Brigham and Women’s as in-network providers. In other words, with the Dana-Farber/Brigham and Women’s partnership dissolving, there is an opportunity to lessen the market clout of Mass General Brigham.
At present, if adults get seriously ill with cancer and choose Dana-Farber for managing their care, they may need Brigham and Women’s to offer them needed cancer-related services such as surgery or radiation. So they cannot really cut Brigham and Women’s out of being an in-network provider without risking much higher out-of-pocket payments should they need these sort of cancer services.
In 2028, the involvement of Brigham and Women’s would be gone. And if individuals or families could save 20 percent on their annual insurance premium and still have access to Dana-Farber for specialty cancer care and Children’s Hospital for specialized pediatric care, they might jump. And if enough of them jump, that could rein in the pricing power of Mass General Brigham.
For this to work, there needs to be sufficient premium savings in the plans that exclude Mass General Brigham providers as in-network; this means that all providers, and especially Beth Israel Lahey Health and Dana-Farber, will need to keep their commercial prices in check.
That is a tall order right now at Dana-Farber, which has the highest relative price for inpatient care in the Boston area, higher than Massachusetts General, Brigham and Women’s, and even Boston Children’s.
For commercial outpatient services, the Health Policy Commission has recently published data showing that, along with Boston Children’s, Dana-Farber has some of the highest prices for 50 outpatient services they looked at as part of a comparative bundle for outpatient services pricing.
Despite these high commercial prices, and the enhanced cancer center rates that government payers give them, Dana-Farber still loses money most years on its operations because of its high operating expenses. Yet it hasn’t had to worry about those deficits because of the organization’s incredible fundraising through the Jimmy Fund. Altogether, its net assets have doubled to over $3 billion since 2017.
Beth Israel, the future partner of Dana-Farber, is in a different situation. To gain support for the creation of Beth Israel Lahey Health, it agreed to a seven-year agreement constraining price increases. Notwithstanding those price growth constraints, the system has been able to not only hold its own, but has grown its net assets since the time of the merger. To me, this is a sign of good management that says when revenue growth is constrained, a system that can be careful about its expenses can do just fine.
Beth Israel and Dana-Farber are looking forward to the new revenue that will likely arise starting in 2028 from the new affiliation. I have heard talk that Beth Israel Lahey Health may be paying a billion dollars toward the construction of this new hospital, which tells you that it expects to see a lot more patient care dollars flowing from this new affiliation.
Buy my hope is that they don’t raise their prices much higher when their agreement with the attorney general’s office expires. The additional volume coming their way should help them keep their prices in check—especially if they buy into my idea for more affordable health plan offerings which could also help them financially in the non-cancer care area.
As for Dana-Farber, there is no consumer victory if all this realignment leads to even higher cancer inpatient spending than at Brigham and Women’s, especially as Dana-Farber grows from 30 to as many as 300 inpatient beds at the new hospital.
We really need the state to be on top of its game in reviewing whatever comes its way for approvals that would allow this new realignment to go forward. It would be great if the Health Policy Commission could prepare a baseline report on cancer care in Massachusetts the same way it did recently for pediatric care. I would bet such a report would show that Dana-Farber already is incredibly dominant in outpatient cancer care—having bought or affiliated with all sorts of private oncologists across the state. Such a look at the cancer market could help inform the ultimate regulatory decisions that will need to be made here—whether approvals are given or not and what conditions must be in the mix. One can only imagine that approval should require some constraints on Dana-Farber commercial prices for both inpatient and outpatient care.
A lot can happen in the next five years that could make or break this proposal going forward. But if it does, there has to be a real win for cancer patients and premium payers. With the right intentions of providers and prudent oversight by government, there is a chance for that to happen.
Paul A. Hattis is a senior fellow at the Lown Institute.