Massachusetts Bill Seeks to Limit Private Hospital Payments

A proposal to set a floor and a ceiling on health insurance payments is an effort to eliminate disparities, but the Massachusetts Hospital Association's board of trustees calls the bill "overly simplistic."

In an effort to make the payment system more equitable between different hospitals for the same procedures, a bill in Massachusetts is aiming to set limits on what private insurers can pay hospitals.

"We have vast discrepancies, well beyond the cost of care that's provided and well beyond the outcome," says State Senator Benjamin B. Downing (D- Pittsfield), who filed the bill.

Bill S.574, "An Act relative to equitable healthcare pricing," would prohibit payments that are 20% higher or 10% lower than the average payment for similar settings. The ceiling wouldn't apply to certain specialty or geographically isolated hospitals.

"My thinking, generally, was related to some of the issues that I've seen in my district," Downing says, referring to the sudden and shocking closure last year of the financially beleaguered North Adams Regional Hospital.

"This bill by no means would have solved all of those problems," Downing acknowledges. But he says the way that healthcare is paid for now "drives costs up and drives people away from settings where they could get just as high-quality [care] and be closer to home."

He adds that making payments more evenly distributed would not only help ensure access to care, but also stabilize communities and "anchor institutions" that are major employers in some of the state's most economically challenged places. Moreover, he says, they're providing high-quality care, but being paid much less for it.

"We are blessed to have remarkable academic medical centers" in Massachusetts, he says. "The question is, do we need to rely on them for as much care as we do?"

Opposition

Timothy F. Gens, Massachusetts Hospital Association's executive vice president and general counsel, says the bill is flawed and could potentially "destabilize the healthcare system." the Massachusetts Hospital Association's board of trustees has voted to oppose it, he says.

Gens says current reforms—namely the healthcare cost containment law Chapter 224—haven't been fully implemented and need to be given a chance to work. "We do think they should give that approach an opportunity to succeed before they make major changes," he says.

But beyond that, Gens says there are a number of "practical problems that suggest that this bill won't work."

A few that he ticks off: That healthcare costs are about utilization as well as price; that severity of illness is different from one hospital to the next; that costs change from year-to-year as hospitals negotiate different contracts; and that there's a move away from fee-for-service payment models.

"The variables are numerous," Gens says. "When we see these overly simplistic ideas….it raises serious concerns."

Moreover, the bill doesn't address a major issue: Low government reimbursements.

"There are hospitals that are in financial stress, and if you look at those hospitals, I think a common denominator would be low government payment. And it's becoming a more significant issue," Gens says. "Those are areas where hospitals are really having financial trouble. If you were looking at taking an immediate step, that's where it should be.

Downing says he knows the bill isn't perfect, or the "be all, end all," and says that he's willing to work on alternative solutions. But, "If not this, then what? No one, I think, would say that the status quo is sustainable or ideal."

"We all have the same goals in mind," Downing says. "We've got to do something to make the payment system make more sense than it does right now."