Bill by state Sen. Benjamin Downing, ballot initiatives target health insurance payments


PITTSFIELD >> Proposed legislation and a ballot initiative both seek to reduce high insurance payments to larger hospital groups while boosting revenue to struggling community hospitals in Massachusetts.

State Sen. Benjamin B. Downing, D-Pittsfield, has filed legislation that would regulate the maximum and minimum level of insurance payments from private insurers to hospitals. He said Senate bill S-574, "An Act Relative to Equitable Health Care Pricing," aims to reduce the often much higher reimbursement rates larger institutions have negotiated from insurance carriers, while simultaneously setting minimum reimbursements for all institutions.

And the United Healthcare Workers East, Local 1199 of the Service Employees International Union, which represents 52,000 mostly non-medical hospital workers in Massachusetts, has developed two related versions of a state ballot question. Based on Downing's bill, the initiatives would set similar insurance payment caps and minimum payments. The goal is to place a question before voters on the November 2016 state election ballot.

Downing said he's been interested in the issues of reducing high health care costs and supporting community hospitals since the former North Adams Regional Hospital filed for bankruptcy protection to reorganize in 2011. The hospital emerged from that crisis, but it abruptly closed in March 2014 as its debts again mounted.

Since the insurance industry was deregulated in the early 1990s, Downing said, discrepancies have developed between the payments larger institutions can negotiate with insurance carriers and those of community hospitals with much less negotiating power. Some smaller institutions are struggling to survive, he said, and could face the same fate as the former North Adams hospital.

"It is tough to justify these discrepancies," he said of the payment differences.

According to figures released in a statement by 1199-SEIU, the largest care networks, like Partners HealthCare and South Shore Medical Center, have been able to negotiate payments from private insurance companies that sometimes are more than twice as high as for the same procedure at a smaller hospital.

The effect of the legislation and the ballot initiative would be in setting a ceiling on payments for Partners HealthCare and other large networks at no more than 20 percent above the statewide average for the procedure or treatment, and a floor payment level for all hospitals — at 90 percent of the average for all institutions.

According to cost figures cited by the union, the insurance payment for a similar treatment, such as for a heart attack, can be more than twice as high at a Partners HealthCare affiliated hospital than at a smaller hospital.

In addition to saving consumers millions statewide on insurance premium payments and health care costs, supporters contend revenue to the financially stressed community hospitals would increase, and groups like Partners HealthCare would have an adequate but more reasonable revenue stream when compared to other institutions.

"Community hospitals are the economic engines for many of our cities and towns, but they are being shortchanged as the crisis caused by these payment inequities worsens," said Veronica Turner, executive vice president of 1199-SEIU United Healthcare Workers East, in a release. "When it comes to hospitals in Massachusetts, the rich are getting richer and the poor are getting poorer. It's a pattern that is jeopardizing the future of the hospitals that most Massachusetts patients depend on for both emergency and preventative care. The time for reform is now."

According to a union spokesman, there are 47 hospitals in the state that could be considered community hospitals, and together they support tens of thousands of employees.

When NARH abruptly closed, more than 500 jobs were lost, although some of those positions have returned as Berkshire Health Systems in Pittsfield expanded its health care services to Northern Berkshire by creating a campus at the former North Adams hospital site.

Downing said his bill would be revenue neutral for Berkshire Medical Center, in part because it is a rural hospital and is in some cases the only facility in the region capable of providing some services.

According to a press release from 1199-SEIU, "specialty, disproportionate share and geographically isolated hospitals would be exempted from the initiative's price cap, although some will benefit from the bill's price floor."

Officials with Berkshire Health Systems, which operates Berkshire Medical Center, could not be reached in time for comment on the legislation and initiatives.

Jeff Hall, communications director for 1199-SEIU, said the regulatory proposals would result in at least a slight revenue increase for nearly every hospital except for Partners Health Care, the largest, and South Shore Medical Center.

What would "be their spare change" at Partners HealthCare, he said, could help a community hospital to survive.

The legislation "is not a criticism of the quality of work they do," Hall said, but an attempt to address an imbalance in the current system.

Large groups like Partners HealthCare "haven't done anything wrong," Downing said, "but the framework we have is out of whack."

He added that, while he understands some hospitals have concerns about the legislation, "I think that, generally speaking, [officials understand] we have to rein in health care costs. I hope that if they don't like this proposal, that is not the end of the discussion."

Hall said of the legislation, "Senator Downing deserves a lot of credit for stepping up on this."

A hearing on the bill is expected to be held in September before the Legislature's Joint Committee on Health Care Financing, Hall said.

A spokesman for Partners HealthCare referred all comment on the issue to the Massachusetts Hospital Association.

MHA Executive Vice President and General Counsel Tim Gens said Friday in a written statement: "The MHA board of trustees examined the bill filed by SEIU on this issue and voted to oppose it. The board represents every category of hospital throughout the commonwealth. The board's position was based on several reasons, including opposition to government regulation of hospital reimbursement rates either generally or at a time when Chapter 224 [which was enacted in 2012 and seeks to reduce health care costs through "increased transparency, efficiency and innovation"] has not had an opportunity to be fully implemented; and opposition to the specific proposal put forward by SEIU because its design is seriously flawed and would create more problems than it could attempt to solve."

Gens added that the differences in wording among the two initiatives and the legislation illustrate the complex nature of the issue. "Even those proposing the bill and petitions can't agree on the correct course," he said. "Placing such a complex issue before the voters won't make the proposals any less complex or choices wiser."

Hall said the union has prepared two versions of the proposed ballot initiative, and stakeholders on the issue are expected to work toward agreement on a single version. Principal differences, he said, are that a second version would include under the regulation large physician groups that negotiate contracts with insurance carriers and would have a more gradual phase-in period.

Under the first version and the legislation, the regulation would take effect in 2017.

The change would not affect Medicare, Medicaid, Veterans Administration or other government insurance systems, only private health insurance contracts with health care providers.

Such legislation would be the first of its kind in the nation, Hall said, although other states are considering similar regulation.

Under Downing's legislation, the state Health Policy Commission would review contracts for compliance to the regulation.

Contact Jim Therrien at 413-496-6247.


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