State toughens rules for building new clinics

Teaching hospitals could find it harder to expand in suburbs

Hoping to tame soaring healthcare costs and prevent unfair competition, Massachusetts regulators yesterday significantly strengthened their oversight of medical building projects, a decision likely to reverberate broadly in the state's largest industry.

The measures, adopted unanimously by the Public Health Council, could substantially constrain Boston teaching hospitals from colonizing the suburbs, territory viewed by the city hospitals as prime terrain for growth.

Companies that want to open outpatient clinics costing more than $25 million will have to prove to state officials that their services won't duplicate what's already there and won't imperil existing facilities.

Physician-owned day surgery centers will undergo the same review, regardless of cost.

For at least two decades, such outpatient facilities have been exempt from the scrutiny applied to hospital expansions. But as Boston's resource-laden teaching hospitals opened satellite centers in the suburbs, community hospitals reacted with alarm, fearing for their survival. The regulations approved yesterday are designed, in part, to address those concerns.

At the same time, the architects of the state's campaign to extend health insurance to virtually all residents are increasingly concerned about the price of that endeavor and seeking ways to reduce the unchecked growth in medical costs more broadly.

"As public health folks, we believe it's critically important for healthcare reform to succeed," said John Auerbach, the state's public health commissioner. "So we have to pay attention not only to access and quality of care, but cost."

The expanded oversight of outpatient clinics was a provision of a sweeping cost-control law sponsored by Senate President Therese Murray and passed by legislators over the summer. The council's approval yesterday means the new rules will go into effect next month.

In July, the Public Health Council also tightened its oversight of hospital outpatient projects with some overnight beds.

"Clearly, the intent of the Department of Public Health is to draw a line in the sand," said Donald J. Thieme, executive director of the Massachusetts Council of Community Hospitals, a trade association. "We're in favor of this attempt to put some boundaries around the inappropriate growth of the large teaching hospitals."

John Erwin, executive director of the Conference of Boston Teaching Hospitals, acknowledged that the state was driven by "the perception that the large teaching hospitals are moving out into the suburbs and taking business away from the community hospitals."

But in certain cases, he said, the teaching hospitals can scarcely be regarded as interlopers: Children's Hospital Boston, for example, collaborates with facilities such as Caritas Hospital Norwood, providing emergency care, treatment for respiratory ailments, and other services.

Still, there's no denying that the Boston hospitals, lacking the real estate to expand and responding to patients' aversion to venturing into the city, have increasingly planted their flags in the suburbs.

One of the biggest projects is a sprawling outpatient facility that two affiliates of Partners HealthCare are building in Danvers. North Shore Medical Center and Massachusetts General Hospital began construction last year of an outpatient center expected to cost more than $140 million.

Executives from Children's Hospital Boston said it is unclear whether an expansion the hospital is planning on the North Shore will need Department of Public Health approval or if it is far enough along that it will be exempt. Hospital spokeswoman Michelle Davis said that Children's had outgrown an existing outpatient clinic in Peabody.

"We've been scoping out and planning this for years," said Davis, who did not have an exact cost for the project but said it exceeds $25 million.

Erwin, of the confederation of teaching hospitals, and a representative of the Massachusetts Hospital Association said they remain concerned that the Department of Public Health might not have enough staff to handle the expanded responsibilities.

"We need to just make sure there are enough resources to keep the process moving expeditiously," said Catherine Bromberg, spokeswoman for the hospital association.

A Department of Public Health spokeswoman said that the agency believes it has enough workers to deal with the expanded demands but that as applications for outpatient clinics and physician-owned surgery centers arrive, it will evaluate whether more help is needed.

In the past, if a hospital wanted to open an ambulatory surgical center on its campus, it typically had to prove there was a demand for the services, such as eye, orthopedic, or urologic operations. A facility across the street owned by doctors didn't. The new rules change that.

The president of the Massachusetts Medical Society, Dr. Bruce Auerbach, said his group "supports efforts to rein in the untenable and unsupportable trend in healthcare spending" and that reducing duplication of services is key to that goal.

But he acknowledged that some doctors, especially those hoping to open surgical centers, may be less enthusiastic about the oversight.

Stephen Smith can be reached at stsmith@globe.com.