Lawmakers hear mixed reviews on bill to lower health care costs

Indiana Statehouse

A wide-ranging bill aimed at lowering health care costs for Hoosiers received mixed reviews in committee on Tuesday, from provisions penalizing hospitals for high prices to curtailing the use of non-compete agreements.

Rep. Donna Schaibley, R-Carmel, introduced the measure’s components before the House Public Health Committee, though the panel agreed to hear testimony this week and amend the bill next week before a vote.

She said the bill, along with a companion piece of legislation that will be heard on Wednesday, are the result of a lack of action on the part of health care entities and insurers to lower prices.

“Indiana has a highly concentrated market with a high number of physician groups being employed by hospital systems,” Schaibley said. “This is something that is much needed in Indiana.”

Fining expensive hospitals

Hospitals whose cost of service is more than 260% of the federal Medicaid reimbursement rate would be fined in an attempt to lower health care costs across the board.

“It does focus on the large not-for-profit hospitals,” Schaibley said. “I would say most of them have extremely large reserves and I think they’re capable of absorbing them.”

Brian Tabor, president of the Indiana Hospital Association, warned of the unintended consequences that could come from the “punitive elements” of the bill, urging legislators to work with hospitals when it came to setting a fair price.

“We believe that there is a path forward to achieving the national average in price as long as it is measured fairly and not distorted through some of the other measures that we see out there,” Tabor said.

Tabor, in his testimony, argued that painting hospital prices as above average is misleading and that Indiana actually sits closer to the middle and could get there without government intervention.

“These are very complex institutions, very complex negotiations. If legislation constrains that, I think it would make it very difficult to meet that goal,” he said. “But if we move away from this (in the General Assembly) toward more of a commission–more of longer-term oversight with accountability type of model–I think we can get there.”

Hospitals attribute costs to outside forces

Executives with some of the state’s leading health care providers told the committee that prices weren’t a result of their policies–but rather a combination of the pre-existing poor health of Hoosiers, high staffing costs, drug prices and medical devices.

“We end up providing bills to people on things that we buy elsewhere and just pass them along–pharmaceuticals, devices, various therapies – we don’t set those prices,” said Bryan Mills, the president and CEO of Community Health Network. “We have limited leverage as well so I’m not here for sympathy. I’m just saying it’s not quite that simple.”

Mike Schroyer, president of Baptist Health Floyd in New Albany, said his hospital operated in the red, providing $14 million in charity or unreimbursed health care annually. This bill, he said, would cost his health care system an estimated $30 million it doesn’t have.

“I need not remind you that our friends in the insurance market have enjoyed extraordinary profit margins for years and I would guess would be happy to absorb the increased costs under this bill,” he said during his testimony.

In particular, delays waiting for prior authorization burdens the system, Schroyer said, as patients sit in beds that could be used for someone else.

Prior authorizations were initially billed as a way for providers and health payers–insurers or individuals–to collaborate and guarantee payment. Over time, the use of prior authorizations has created more administrative burdens for both sides.

CEOs down to primary care physicians noted the poor return for doctors treating Medicaid patients—something both Chairman Brad Barrett and committee member Rep. Rita Fleming, both retired physicians, can understand.

“We used to get 18 cents for each dollar of Medicaid service we rendered,” Barrett, R-Richmond, said. “It’s been several years … and it’s probably gotten worse.”

Barrett noted that much of the General Assembly’s suggested insurance regulations would be discussed Wednesday morning when discussing HB 1003 in the House Insurance Committee.

Other items in the bill

The bill also includes a provision to incentivize independent practices by giving doctors unaffiliated with a large health system a $1,000 tax credit for a handful of years, which Schaibley said would increase competition. Additionally, only critical access hospitals would be allowed to include non-compete clauses into physician contracts–a concept also under consideration in the Senate.

Both chambers have filed bills surrounding site-of-service language, a practice under which a large health system bills insurance as if the procedure was performed in a hospital or large facility–a far more expensive setting–rather than an off-campus building such as a clinic.

“It is financially more lucrative to, if you’re a hospital, for an outpatient department to have to provide a service than an independent clinic,” Gloria Sachdev, the president and CEO of the Employers’ Forum of Indiana.

Tabor, in his testimony, called this language “restrictive” but didn’t elaborate in his testimony on Tuesday.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.