Five states – Massachusetts, Oregon, California, Delaware, and Vermont – authorize state benchmark agencies to require performance improvement plans (PIPs) from payers and providers whose spending growth exceeds the state benchmark. If a PIP fails in curbing the excess growth, these agencies may also impose financial penalties, including fines.
In January 2022, after nearly a decade of implementing a cost growth benchmark, the Massachusetts Health Policy Commission (HPC) voted to require their first PIP for Mass General Brigham (MGB). In September 2022 HPC approved an updated PIP and MGB began implementation of the plan on October 1, 2022. In their notice to require a PIP from MGB, the HPC noted that the increase in MGB’s total medical expenses resulted in “greater cumulative commercial spending growth in excess of the benchmark from 2014-2019 than any other provider, totaling $293 million. MGB acknowledged that this spending growth was not driven by a worsening of the health status of its primary care population.” In its proposal, MGB says it will reduce healthcare spending by $127.8 million per year on or before March 31, 2024. This amount exceeds the $60 million that MGB estimates it exceeded the benchmark per year (a $293 million cumulative excess over the 5-year period from 2014-2019 is approximately $60 million per year). As of December 2024, the HPC found that the PIP required of MGB was successful due to its achieved savings target of $176.7 million. The success was primarily measured by the achieved savings target set forth in its approved PIP and the reduced overall spending growth which measured below the network average growth. Nonetheless, the ability of the HPC to enforce compliance with a PIP is limited. Massachusetts law limits any fine to a maximum of $500,000 (Mass. Gen. Laws Ch. 6D § 10). This fine would be less than 0.2% of the amount the HPC estimated that MGB’s cost increases exceeded the benchmark.
Recognizing this limitation, when Oregon and California passed laws establishing cost-growth benchmarks, they gave their oversight agencies the authority to impose meaningful financial penalties. Specifically, the implementation committee in Oregon, recommended that PIPs be the first accountability mechanism for payers or provider organizations who exceed the cost growth target with statistical certainty and without a reasonable basis, and that “meaningful financial penalties” be imposed any provider or payer that exceeds the cost-growth target with statistical confidence without reasonable cause in three out of five calendar years or for two consecutive years. California took a similarly graduated approach. Beginning in 2026, the Office of Health Care Authority (OHCA) director may first offer technical assistance to help an entity come into compliance. If the entity is still not in compliance with the set benchmark, the director can escalate the response by requiring public testimony regarding its failure to comply, mandating submission and implementation of PIPs (with board review and approval), and ultimately imposing escalating financial penalties for repeated or continuing failure to meet the targets.
Both Delaware and Vermont have created review boards to oversee compliance and enforce PIPs. In Delaware, hospitals that fail to meet the state’s cost-growth benchmark must work with the Diamond State Hospital Cost Review Board to adopt a PIP. If the hospital does not implement the plan successfully, the Board may go further by requiring that its future budgets receive Board approval. Vermont relies on the Green Mountain Care Board (GMCB), which monitors cost growth and uses a mix of accountability tools. These include requiring PIPs, providing technical assistance, and appointing independent monitors who review hospitals’ financial and operational data to ensure compliance.
