BOSTON (SHNS) – Mass General Brigham will work to slash its annual spending by $127 million under a first-of-its-kind plan regulators approved Tuesday after flagging the state’s largest hospital system for excessive cost growth.

The Health Policy Commission voted unanimously in favor of a revised performance improvement plan MGB submitted last week, which bulked up the targeted spending cuts significantly over the $70 million figure in an earlier version of the proposal the system filed in May.

To achieve the savings, MGB will work over the next 18 months to reduce its prices, adjust rates, reduce utilization, and shift care to lower-cost sites. The system will need to report periodically to the HPC, which must determine at the end of the process if the plan was successful. If not, the panel can vote to extend the plan’s implementation.

HPC Executive Director David Seltz characterized the commission’s deliberations about the measure as “sober and serious,” noting its “unprecedented nature.” This is the first time since the HPC was created in a 2012 health care cost containment law that it has fully subjected a provider or payer to spending cuts through a performance improvement plan.

One key feature in the updated plan, HPC Chair Deb Devaux said, was MGB putting in writing its “clear commitment to sustaining the cost savings” beyond the March 2024 expiration of the plan, rather than rolling out short-term changes that might allow spending to rebound once the stretch of greater scrutiny ends.

“There are always going to be questions about is this enough and could more be done,” Devaux told reporters after the meeting. “We thought long and hard about where to set the bar on that, and reasonable people can disagree.”

The vote on the final plan came about eight months after the HPC ordered the hospital system to pursue cost controls. Seltz said Tuesday the commission will continue to weigh performance improvement plans on a case-by-case basis and “will not promise we will be using this more often.”

“If the facts warrant it, we absolutely will, and if the standards are met, we will,” he said, adding that improved data reliability and analysis will “strengthen our process moving forward.”

MGB President and CEO Anne Klibanski said the system — which describes itself as the largest private employer in Massachusetts with about 74,000 workers — is “very pleased to receive approval from the Health Policy Commission on our plan to make health care more affordable for our patients.”

“The pandemic has profoundly changed our lives, our economy, and it has permanently changed health care. Hospitals and healthcare systems across the state, including Mass General Brigham, continue to operate over capacity, seeing more patients than they have beds for,” Klibanski said in a statement. “Patients are sicker from delayed care, and we have no choice but to care for people in the hallways of our Emergency Departments. Combined with labor and supply chain shortages, this can make it difficult to provide the right care, at the right time. Despite the challenges we encounter in our work, we remain committed to transforming how care is delivered and lowering the cost of that care, while improving quality of life for our patients.”

Over the five-year period from 2014 to 2019, MGB had $293 million in cumulative commercial spending in excess of a state-set health care cost growth benchmark, more than any other provider, officials said.

Former HPC Chair Stuart Altman said in January that MGB’s growth “is such as to pull the whole state up,” making it “almost impossible for the state to meet its obligations of staying within the benchmark.”

While the inaugural PIP aims at the largest hospital system in the state, officials said they do not expect it to be enough on its own to rein in statewide health care spending costs that are projected to continue growing after a pandemic-fueled year of decline in 2020.

“No one action, including this PIP, will put us on a reliable path to stay within the cost growth benchmark, particularly because of the changes in our environment in terms of the costs of labor and of other inputs,” Devaux said. “This is one important intervention and set of actions, but this does not solve our concern about the outlook.”

HPC member David Cutler said he gives the work with MGB a “green light,” but cautioned that PIP as a tool to contain statewide medical spending is “probably a yellow light.”

“There’s absolutely some good things that come here, but this process by itself is fairly blunt relative to the whole set of things that have to go on in the state, some of which can be done internal to institutions and some of which need to be done through activities that are central, either through legislation or through our actions or the state’s actions,” he said.