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The Indiana Senate Appropriations Committee voted 9-4 Thursday to amend a bill targeting the cost of health care at nonprofit hospitals, with the new version freezing prices but not imposing penalties for two years.
With the amendment, lawmakers also narrowed the focus and potential penalties of House Bill 1004 from applying to all Indiana nonprofit hospitals to instead focusing on nonprofit systems with $2 billion or more in net patient service revenue. Committee members referred to those systems as the “Big Five” in the state: Indiana University Health, Ascension St. Vincent, Community Health Network, Franciscan Health and Parkview Health.
The bill also requires additional disclosures from health insurance companies of certain commissions and payments for greater transparency.
The bill, which faces additional revisions, would enact a two-year price freeze—from July 1, 2025, to June 30, 2027—before any potential penalties would be given to hospitals that overcharge patients. The bill also requires the Indiana Office of Management and Budget to conduct a study on hospital prices in Indiana.
This change came to assuage concerns raised by small rural hospitals, which earlier testified that the legislation could threaten their viability or force them to cut services.
“We’re just asking hospitals, look, we’re not doing anything to you for two years,” said Senate Majority Floor Leader Chris Garten, R-Charlestown, a bill sponsor who outlined the amendment during Tuesday’s hearing. “Just stabilize the market and stop raising health care prices on Hoosiers for two years.”
The amended bill evaluates aggregate average hospital prices using 270% of Medicare reimbursement as a benchmark, which could be adjusted, and does not take effect until July 1, 2027.
After the two-year freeze, large nonprofit hospitals would face rising penalties for prices above the baseline threshold: 100%, in the year, 150% in the second year and 200% in the third year.
“Those monies would be deposited into a fund that would go toward Medicaid, health care workforce in rural areas or other state health programs,” Gartner said.
Hospitals can avoid penalties by lowering their costs by 6% annually based on audited financial statements, he said.
Sen. Liz Brown, R-Fort Wayne, who voted against the amendment, was critical of the price freeze.
“On only one industry in the state of Indiana are we saying you can’t raise your prices for the next two years,” she said. “(It) doesn’t matter if we have another pandemic, doesn’t matter if the tariffs increase all the costs of services and goods that come into your hospital system. You can’t raise your prices for the next two years, period.”
Of hospitals negotiating with health insurers, she added: “I don’t know what you negotiate. You just negotiate down.”
The amendment also mandates a physician reimbursement floor of 168% of the Medicare rate, which is the national average, according to Garten.
The previous bill would have imposed penalties on hospitals starting in 2026.
Previously, the bill set a limit for facility-fee charges to a patient—265% of Medicare reimbursement—and created an excise tax to penalize hospitals found to be charging patients over that threshold. Rep. Martin Carbaugh, R-Fort Wayne, is the bill’s author.
The amendment passed despite criticism from members of the Senate Appropriations Committee.
Sen. Michael Crider, R-Greenfield, expressed questions about the two-year price freeze but voted yes, adding that he hoped the bill “ends up in a conference committee or something because there are so many questions that just I don’t understand.”
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