Push For Equitable Hospital Pricing Hits Beacon Hill

Mar 7, 2016

There is a push for what advocates are calling equitable pricing at Massachusetts hospitals.

The Legislature’s Joint Committee on Health Care Financing is holding a hearing Tuesday on a ballot initiative titled the Massachusetts Fair Health Care Pricing Act. It would prohibit healthcare providers and private health insurance companies from entering into contracts that pay hospitals more than 20 percent above the average amount paid to similar providers for the same services.

“We believe the legislation and the ballot initiative will save $267 million for consumers and add $200 million to the community hospital network,” said Tyrek Lee, Executive Vice President of 1199SEIU United Healthcare Workers East.

The union represents 52,000 healthcare workers in Massachusetts and is promoting the initiative through its “Campaign for Fair Care.” The measure would also prohibit contracts that pay hospitals less than 90 percent of the average amount paid to similar providers. State Senator Ben Downing of Pittsfield is the lead sponsor of similar legislation.

“To me it makes no sense that if we’re getting the same quality outcome in a community hospital setting and at an academic medical center setting that we would be paying widely divergent price for that care,” said Downing.

Downing says he started to dig further into the issue after the March 2014 closure of North Adams Regional Hospital, which was driven by financial straits. The Democrat says he doesn’t necessarily think having a law like this in place would’ve prevented that closure.

“If you look at the system that we have today, no one would draw it up and say this is the best way to pay for healthcare and ensure access across the commonwealth,” Downing said. “I’m not wedded to this specific proposal. What I am wedded to is trying to come up with a solution to this problem because if you logically follow it, it doesn’t allow community hospitals to continue to operate and provide the scope of services that they need to provide.”

If the current system doesn’t change, Lee predicts there will be more closures, consolidations and loss of services. According to SEIU, the measure would reduce what they call excessive insurance payments to wealthy hospitals by more than $460 million. Thanks to their bargaining power with insurance companies, Lee says some of the richest hospitals are paid up to 400 percent more than community hospitals.

Data on the union’s website shows Berkshire Medical Center in Pittsfield would see no financial gain under the measure, but Fairview Hospital in Great Barrington would gain about $63,000 in payments a year. Both are operated by Berkshire Health Systems. Lee says BMC already receives a high reimbursement rate.

“Currently they are at over 90 percent of the reimbursement in terms of the insurance rates so one of the things that we want to make sure during this campaign is that they’re viable and they don’t lose and end up at a lower threshold like some of our other community hospitals,” said Lee.

The Massachusetts Hospital Association is opposing both measures, calling the ballot initiative flawed, overly simplistic and potentially destabilizing to the commonwealth’s healthcare system. The Association says neither measure addresses low government reimbursements, which the group calls one of the greatest contributors to hospitals’ financial challenges.

When asked for an opinion on the efforts, Governor Charlie Baker’s office says the Republican administration is exploring ways to increase healthcare price transparency including building upon 2012 cost containment legislation and stronger enforcement of that law. Baker, the former Secretary of Health and Human Services and CEO of Harvard Pilgrim Health Care, has expressed skepticism at price regulation in the past.

Both Downing and SEIU1199 say they would rather have the legislature act on the effort, but the union says it is prepared to put the measure on the 2016 ballot.

“It may well be that the proposal that I have put forward in legislation and that is currently before the legislature in the form of a ballot initiative is too heavy-handed for some folks,” Downing said. “Then my response is ‘What’s another alternative?’ And I’m open to one.”