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Hoosiers across the spectrum — from employers to employees, and hospitals to insurers — recognize the burden of high health care costs on the state but, as Tuesday’s testimony demonstrated, there’s little consensus on how to tackle it.
House lawmakers heard two bills on Tuesday that are priority legislation for Republicans, one that would potentially redefine nonprofit hospitals in Indiana and another, six-pronged effort that would make several changes to the health care landscape.
Neither bill advanced, as committee chairs opted to hold the bills for further consideration. After hours of testimony on Monday, authors seemed open to considering amendments to House Bills 1003 and 1004.
Nonprofit hospital status under the microscope
Several of Indiana’s largest health care systems have a nonprofit status, meaning that they don’t pay taxes in exchange for the community benefit they provide. Though a health system’s nonprofit status is determined by the Internal Revenue Service, Indiana can decide whether or not that entity pays state taxes.
“With House Bill 1004, we are setting a standard for not-for-profit status. We say that if you charge more than 200% of Medicare, you lose your state not-for-profit benefits and will be considered a for-profit hospital in Indiana,” said author Rep. Martin Carbaugh. “The other provision in 1004 is seeking to narrow the definition of community benefit. We want to see that defined as charity care, uncompensated care and care reimbursed below Medicaid rates.
“Simply put, if you are a non-for-profit hospital, we are simply asking you to reflect that in your prices,” summarized Carbaugh, R-Fort Wayne. “If you aren’t willing to do that, then you’re a for-profit hospital and, as such, you should be paying the taxes that any for-profit entity pays today.”
But hospital officials argued that the 200% of Medicare benchmark was insufficient to cover the cost of services and lower than the 285% benchmark set by the General Assembly two years ago. A state-funded report released late last year concluded that the state’s five largest nonprofit systems charged between 238% and 267% of Medicare but ranged widely across service types.
“In a practical sense, 200% of Medicare would cause many hospitals and many systems substantial financial damage. When you’re talking about some of the larger systems, we’re talking about hundreds of millions of dollars a year,” warned Tim Kennedy, the general counsel for the Indiana Hospital Association. “You’re going to see substantial reduction in services …”
Kennedy said the proposal would be a “windfall” to insurers because the legislation didn’t dictate that any savings incurred from lower hospital prices would be passed onto patients.
Some hospital administrators noted they could potentially lose their nonprofit state by charging over 200% of Medicare’s prices on just one service and that the bill didn’t offer any method of disputing any state finding.
An industry-sponsored report concluded that Indiana’s hospitals provided $3.9 billion in community benefits, more than the $2.3 billion it received in tax exemptions. Nearly $1.8 billion of that benefit was free or discounted care for Hoosiers.
However, the bill has a powerful ally: Gov. Mike Braun. Cabinet Secretary Gloria Sachdev testified in favor of the proposal on behalf of the administration, saying that Medicare prices keep up with inflation. She also noted that many nonprofit health care systems have large reserves to cushion their bottom line.
“We would really want them to provide community benefit that equals at least their tax exemption that they’re getting from the state,” Sachdev said in her testimony. “… I think the hospitals are doing a lot in our communities. I just don’t think we have full insight or transparency into how they’re defining community benefit.”
Braun also directed Sachdev to investigate charitable care at nonprofit hospitals and create a report in an executive order earlier this month.
Multifaceted health bill heard in Insurance
Over in the House Insurance Committee, whose membership significantly overlaps with Public Health, Rep. Brad Barrett presented his priority bill before lawmakers. Like Carbaugh’s effort, House Bill 1003 attempts to tamp down on high health care costs, though Barrett’s proposal did so by pushing “site of service” reform that would prohibit health care systems from charging hospital-like prices for outpatient services.
According to Barrett, the bill has five other key points, including: fighting Medicaid fraud, enhancing transparency, expanding access, promoting wellness and increasing competition.
“What we’re trying to do here is really put a comprehensive plan together,” said Barrett, R-Richmond.
Rob McLin, the president and CEO of Good Samaritan in Vincennes, said the “site of service” provision would hurt hospitals like his by reducing payments for outpatient services.
“(This) does not take into account the regulatory requirements that outpatient settings are required to comply with and the additional staff and equipment it takes to operate an outpatient setting,” McLin said.
He said his facility, an independent county hospital with 1,800 employees, had 60 who work exclusively in compliance. Additional regulations under the proposal would mean hiring more people to meet compliance requirements, he said.
Testimony ran the gamut in terms of support and opposition. But there was a particular concern from hospital officials and entities receiving discounted drugs through the federal 340B drug pricing program.
Some hospitals and contractors have reportedly made millions off of the program, which is designed to help poor patients afford medication by giving participating health providers a steep discount. Vincennes’ Good Samaritan benefits from the program but so too do health resources and service administration grantees.
The latter category includes entities like the Indiana Hemophilia and Thrombosis Center, which provides medications for blood clotting disorders; the Damien Center and its HIV services; and the state’s federally qualified health centers, or community-based centers to offer services to impoverished Hoosiers. Representatives from each said they already complied with stricter reporting requirements than hospitals and would be negatively impacted by additional regulations imposed under the bill.
“The way it’s written now, it suggests that the benefit be passed on to the patient. The important thing to remember is that this benefit is already passed onto the patient in the clinic system,” said Damien Center President and CEO Alan Witchey.
Notably, Braun also has an executive order to review the 340B program.
Supportive testimony came from a handful of employer associations, who praised the bill for reducing costs. Other positive testimony highlighted the importance of provisional credentialing to alleviate the state’s health care workforce shortage. Sachdev also testified in support of the bill on behalf of the Braun administration.
Another aspect would grant law enforcement powers to the Medicaid Fraud Control Unit with the Attorney General’s Office, according to Matthew Whitmire, who directs the unit.
“We are not law enforcement, so we lack many tools that traditional law enforcement has to accomplish our goals. This bill does address those issues and gives us the powers and abilities to be able to accomplish our tasks that have been assigned to us,” Whitmire said.
Namely, it allows the office to access law enforcement databases and collaborate with other agencies. Whitmire said there were 53 Medicaid fraud units in the country and just ten, Indiana included, didn’t have law enforcement powers.
The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections.
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