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After two hours of testimony and discussion, an Indiana Senate committee on Wednesday voted 10-1 to advance a bill that targets nonprofit hospital prices and send the legislation to the Senate Committee on Appropriations for more work.
Members of the Senate Committee on Health and Provider Services agreed with the need to address the high cost of health care. But they often disagreed with the approach of House Bill 1004, which threatens to strip hospitals of their nonprofit status, or impose an excise tax, if their prices exceed certain thresholds.
“The bill is not in its final form,” Rep. Martin Carbaugh, R-Fort Wayne, the bill’s author, said at the end of the meeting. “We’ve had a lot of good discussions about many points that were brought up.”
HB 1004 centers on the prices hospital systems charge patients covered by commercial health insurance, typically provided by their employers. A recurring study updated in December by the research group RAND Corp. found Indiana had the ninth highest hospital costs in the nation.
As passed by the Indiana House, the threshold for hospitals to lose their state nonprofit status was increased to 300% of Medicare reimbursement. The bill also institutes a limit for facility-fee charges to a patient—265% of Medicare reimbursement—and creates an excise tax to penalize hospitals found to be charging patients over that threshold.
Under the bill, starting in 2026, hospitals would face the penalty each time a qualifying patient faces a facility fee over that threshold. For 2026, the excise tax would be 33% of the charged fee. In 2027, the tax penalty jumps to 66% of the amount of the hospital facility fee charged.
HB 1004 also would establish a state-directed payment program for Indiana’s Hospital Assessment Fee, or HAF, to enhance reimbursement for care provided to patients covered by Medicaid, which typically reimburse at rates below cost.
Testimony, though, mostly focused on hospital prices.
“Too many Hoosiers pay hospital prices that are high and out of kilter nationally,” said Matt Bell of the advocacy group Hoosiers for Affordable Health Care. “House Bill 1004 creates an option … bring prices to a reasonable place or pay a penalty associated with that. It doesn’t force behavior. It presents a choice.”
Sophia Tripoli, senior director of health policy for advocacy group Families USA, called the bill a major step to curb the effects of hospital consolidation across Indiana.
“What were once local charitable institutions built to serve the community have now become large corporate entities focused on maximizing revenue rather than improving health, and the evidence of that is prices,” Tripoli told the committee.
Much of the testimony on House Bill 1004 focused on the struggles of small rural hospitals that see more reimbursement from Medicaid, which typically reimburses at rates lower than the cost of care.
Leaders of two Indiana hospitals said an excise tax for charges above 265% of Medicare reimbursement would be devastating to their operations.
“We are struggling,” said Michael Schroyer, president of Baptist Health Floyd in New Albany. “In February, we lost $4 million on record number of volume, record number of surgeries, a lot of this is due to our cost.”
Randy Christophel, CEO of Goshen Health in Gosten, said that the 265% limit on charged facility fees for commercial covered patients would cost about $10.6 million a year.
The two executives said they also were representing the Indiana Hospital Association in their testimony.
Many backers of the bill contend that Indiana’s high hospital prices are the result of consolidation among hospitals and tactics by the state’s largest nonprofit hospital systems including IU Health, Ascension St. Vincent, Community Health Network and Parkview Health.
No representatives from those hospital systems testified Wednesday.
The bill, which was amended in the House, faces more potential change in the Senate. Some senators said the legislation was too narrow in focusing on hospital costs.
“It seems like our focus on health care cost is focused at providers and hospitals, but perhaps we haven’t looked at the insurance companies or the third-party benefit managers,” State Sen. Jean Leising, R-Oldenburg, said.
Sen. Shelli Yoder, D-Bloomington, voted in favor of the bill during Wednesday’s meeting, but said she had concerns and reserved the right to not support it on the Senate floor.
“Communities are very different. They need different things,” she said. “My concern about some of 1004 is arbitrarily taking this cookie cutter approach to how we’re going to do health care in Indiana.”
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