Lansing — Michigan House Republicans introduced legislation Thursday to create a hospital cost review board with regulatory powers over nonprofit hospital pricing, acquisitions and mergers.
The four-bill package would require the board to approve any cost increases and limit those increases to no more than the rate of inflation. Hospitals seeking to acquire or merge with another facility also would face mandated cost reductions and limits on market share.
Republican House Speaker Matt Hall told reporters the legislation is meant to address increases in patient costs, even as hospitals complain of budget constraints while paying more and more to their CEOs.
“We’re watching them acquire other systems, we’re watching them build new buildings, we’re watching all of their executives’ pay go up, considerably,” the Richland Township Republican told reporters Thursday.
Under the legislation, Hall said, the review board would examine a variety of factors while evaluating a rate increase request — items such as patient costs, hospital expenditures and revenue, assets and liabilities, labor and Medicare costs, financial statements and the value of a nonprofit hospital’s tax exemption. The legislation appears to apply only to nonprofit hospitals, such as the Corewell and Henry Ford hospital systems, and would exclude for-profit hospital systems, such as the Detroit Medical Center.
The Michigan Health and Hospital Association on Thursday said it is examining the proposal, but warned that similar measures in other states have resulted in higher costs.
“Providing accessible, affordable health care remains the top priority for Michigan hospitals,” said MHA CEO Brian Peters. “However, proposals that introduce additional administrative burdens and arbitrary government price controls would exacerbate the affordability challenges they seek to address.”
The Michigan Health Purchasers Coalition, a group advocating for changes to hospital pricing and transparency, said it looked forward to reviewing the bills.
“The House package announced today by Speaker Hall is a bold solution taking aim at one of the biggest drivers of the affordability crisis — hospital prices,” said Bret Jackson, president of the coalition.
Hall likened the proposal to a similar approach taken by the state of Indiana and defended it as a necessary government intervention to rein in costs.
“There’s so much government intervention in health care that the free market doesn’t work,” Hall said. “What I’ve seen is the only way to solve this problem is to put in place some effort to incentivize the hospitals to lower the costs.”
The legislation was sponsored by Hall and Republican state Reps. Jay DeBoyer of Clay Township, Joe Aragona of Clinton Township and Mike Harris of Waterford Township.
Under the legislation, nonprofit hospitals must lower costs by 10% within two weeks of the act becoming law. It also subjects hospital acquisitions and mergers to board review and requires any consolidation to result in at least 2% decrease in costs.
The legislation prohibits mergers or acquisitions if they result in a consolidated bed count of more than 8% of all beds in the state or 15% of all beds in a prosperity region; or a consolidated market share of more than 3% of the state’s total market share or 15% of the prosperity region’s market share.
“There’s like three or four big systems now and they’re squeezing everybody else out and that was supposed to lower costs,” Hall said, while describing the market share limits. “But all of the expert studies are saying it’s leading to a dramatic increase in costs.”
The legislation also bars hospitals with more than $2 billion in annual revenue from requiring physicians to sign non-compete agreements.
The review board, which would be made up of five appointees, could also provide grants to certain hospitals experiencing consistent losses, with isolated or rural hospitals given priority, from a fund made up of assessments on regulated hospitals.
The board members, appointed by the governor, would need to have some health care background, would serve four-year terms and would be picked from recommendations from the Senate and House leaders, and the governor.
eleblanc@detroitnews.com
This article originally appeared on The Detroit News: House GOP hospital review plan to mandate lower costs, limit mergers
Reporting by Beth LeBlanc, The Detroit News / The Detroit News
USA TODAY Network via Reuters Connect
By Beth LeBlanc, The Detroit News | USA TODAY Network
