The thrust of the House health care bill — to stabilize the finances of lower-cost community hospitals by pouring money into their operations for the next three years — may only be a stop-gap measure intended to put smaller providers back on their feet.
What happens after that might be up to them.
“We don’t intend to get into subsidizing these hospitals forever, but in (Chapter 224) the goal was to drive folks out of the fee-for-service into global payments and make people more responsible for health care dollars, and in order to do that you have to have lower cost options,” said House Majority Leader Ron Mariano, one of the authors of the new bill that the House will debate next week.
The House bill, months in the making, proposes to levy $450 million in assessments on insurers and larger hospitals that tend to command higher prices for their services because of their market clout. Those assessments, which could be paid in either one lump sum or in installments over three years, would be deposited into a trust fund for the secretary of health and human services to dole out to hospitals with lower rates and higher volumes of patients on Medicaid.
The bill also proposes to generate an additional $46 million through $75 surcharges on professional licenses for doctors, nurses, dentists and other health professionals that will expire after three years.
While not a cost-control bill in the traditional sense, Mariano said that by spending money now the House hopes it can keep community hospitals afloat so that in the long run patients have lower-cost options for care that will reduce health care spending over time.
“We don’t think it is going to drive costs up all that much, but make no mistake this isn’t a cost savings bill. We don’t proclaim it will save tons of money in health care, but what it will do is stabilize the market,” the Quincy Democrat said.
Mariano continued, “If we lose these low-cost hospitals, the only other option is these high-cost teaching hospitals. We’re hoping that by putting these hospitals on their feet and allowing them to stabilize themselves over three years that they will get some semblance of a stable revenue source that they can build on.”
House Democrats plan to gather Monday in private to review the bill, but the 127-page proposal that was released by the Health Care Financing Committee this week and was being polled through Ways and Means Thursday has been scheduled for debate beginning Tuesday.
The House’s approach differs from that pursued by the Senate in its bill passed last November and from the recommendations of the Provider Price Variation Commission, on which Mariano sat along with House Ways and Means Chair Jeffrey Sanchez. The Senate bill calls for a rate floor for hospital payments from insurers at 90 percent of statewide average.
Twenty-seven hospitals are currently paid less than 90 percent of the statewide average commercial rate, accounting for 20.3 percent of all commercial payments. Six of those hospitals that also serve diverse “gateway cities” like Lowell, Lawrence, Brockton and Holyoke with large minority and low-income populations were paid 85 percent or less in 2016. The cost of bringing all hospital payment rates up to 90 percent of the statewide average has been estimated to cost an additional $180 million a year.
Mariano said that the House opted against pursuing a rate floor because it wouldn’t necessary help hospitals like Holyoke Medical Center that have such a small percentage of commercial payers that even higher rates wouldn’t generate much new revenue.
“We didn’t want to get into rate setting with a solid floor and a cap,” Mariano said.
The annualized cost of the two approaches, however, is similar and Mariano said the House’s goal is still to get most hospital payment rates up to 90 percent of the state average, but with a little more flexibility to consider an institution’s overall economic health.
The bill also proposes a mechanism through which the Division of Insurance and the Health Policy Commission would assume some oversight of hospital-insurer contracts, and could insist on performance improvement plans to lower costs if it is determined that the higher rates being commanded by a hospital or system are due to unwarranted factors.
So far, many of the stakeholders that would be asked to pay the assessments have been silent publicly, but House leaders have been getting plenty of feedback privately from systems like Partners HealthCare, which would bear the brunt of the $120 million in hospital assessments.
Mariano did not have a complete list of the hospitals that would get hit with the new assessments, but he said it would be fair to assume Partners HealthCare and its hospitals, including Massachusetts General Hospital and Brigham and Women’s Hospital would be in that group.
“It’s hospitals that are successful in this market and we are confident can weather the transition into global payment without too much trouble,” he said.
The state’s larger teaching hospitals often argue that the higher rates they receive are necessary to support their teaching and medical research functions.
Massachusetts Health and Hospital Association Vice President for Government Advocacy Michael Sroczynski said the trade group supports the goals of the House bill.
“The broad intent of the House healthcare bill – increasing access, improving quality, reducing costs and enhancing transparency – reflects goals shared by hospitals and the broader healthcare community. We applaud the ongoing legislative attention to these issues and we look forward to working with the House on a comprehensive package that best advances these ideals for every resident of the Commonwealth,” Sroczynski said in a statement to the News Service.
Meanwhile, the Massachusetts Association of Health Plans said Wednesday it was still “reviewing the legislation.”
Once the funding from the assessments and professional license fees gets spent, the Community Hospital Reinvestment Trust Fund would continue to have a revenue stream beyond 2021, albeit a much small one.
The House estimates that additional professional license fee increases and smaller assessments on ambulatory surgery centers and urgent care centers will net $20 million a year to fund the CHRTF.
“We felt that the market is kind of unstable and as we go into the (accountable care organization) global payments we have to have some time for the market to transition and some time for the ACO to figure out how they’re going to operate in this new lineup so what we’ve done in this bill is do some things that will help stabilize the industry over the next three years so that-low cost providers like community hospitals can maintain and prosper in the changing marketplace,” Mariano said.
Dr. Paul Hattis, an associate professor of public health at Tufts University School of Medicine and a former member of the Health Policy Commission, compared the House to “Robin Hood” in an op/ed published in Commonwealth magazine.
“While the House bill feels much more uncertain in establishing the amount that a lower paid hospital might receive, perhaps its wisdom is that in many instances (though not all) these lower-paid hospitals have continuing financial challenges because they care for large numbers of Medicaid and even some number of uninsured patients,” Hattis wrote. “This is an important point, because boosting only commercial hospital rates may not generate enough additional revenue to get them to a more stable financial operating position.”
Community hospitals and proponents of the price-floor approach, such as Rep. Frank Moran of Lawrence, have so far embraced the House’s different approach.
“It’s a small step for the insurers and the large hospitals but a giant leap for the small community hospitals who have suffered from unfair pricing for years,” said Spiros Hatiras, the CEO of Holyoke Medical Center.
Massachusetts League of Community Health Centers President James Hunt said the $15 million in annual funding proposed in the bill for community health centers will also be a boon for those centers that provide care for diverse populations.
“This support will offer health centers greater financial stability as they continue to work in close partnership with state leaders to transform care in communities across the Commonwealth,” Hunt said.