Lansing — A group that lobbies on behalf of Michigan hospitals told lawmakers Thursday that a proposed legislative package intended to rein in health care costs would more than double the number of hospitals operating in the red and result in nearly 22,000 job losses.
The Michigan Health and Hospital Association said the number of hospitals operating with negative profit margins in Michigan currently stood at 27, or about 25%, but that total is likely to increase to 54, or roughly 52%, if or when mandatory price cuts contained in House legislation take effect.
In all, the proposed immediate 10% cost cut included in the bill package, along with other cost caps that limit increases to the rate of inflation, would likely result in a $2.3 billion loss for hospitals across the state, said Adam Carlson, senior vice president of advocacy for the Michigan Health and Hospital Association.
The cuts, Carlson added while testifying Thursday before the House Government Operations Committee, could result in 21,600 full-time job losses at hospitals.
“These job loss numbers represent service line reductions; it represents the closure of birthing units; the closure of behavioral health units, and, potentially, the closure of hospitals,” Carlson said.
House Speaker Matt Hall, R-Richland Township, when asked to respond to the hospitals’ concerns, noted that the hospitals — somehow — were still finding money to acquire other hospitals, construct new buildings and pay millions of dollars to executives despite claims that they were struggling.
“Any time that you try to lower health care costs, hospitals make these arguments,” said Hall, who is one of four Republican sponsors involved with the bill package. “One of the challenges you have in this — I’ve been doing this for a while now — everyone involved in health care points fingers at each other and then they’re trying to protect the status quo.”
Hall’s relationship with the Michigan Health and Hospital Association has been rocky; in September, he called for the ouster of MHA CEO Brian Peters after Peters criticized Medicaid cuts in a proposed spending plan.
State Rep. John Fitzgerald and other Democratic lawmakers voiced concerns about the speed at which the legislation is moving. It was introduced last week, had a committee hearing Thursday and may be part of ongoing budget negotiations, according to Hall.
Fitzgerald, D-Wyoming, also voiced concerns about whether the proposed cost cuts would actually trickle down to individuals or be absorbed by insurers and other middlemen involved in health care costs. There needs to be a broader, more measured discussion about all of the factors driving up patient costs, he said.
“We were starting to have that discussion a little bit,” Fitzgerald said. “It is insurance premiums. It is pharmaceutical costs. It is workforce and recruitment and retention. …It’s a full mixture and I don’t disagree, health care costs are going to be still probably one of the top three cost drivers for most families in the state of Michigan.
“We have to come forward with a comprehensive solution,” he said.
Carlson said a vast majority of hospital cost increases are attributable to pharmaceutical cost increases, with drug costs among Michigan hospitals increasing by 52% since 2017, while state inflation over that period has increased by 29%.
Carlson and former state Rep. Ben Frederick, who represents Memorial Healthcare in Owosso, also noted that the grant program included in the legislation and meant to benefit struggling rural hospitals requires that recipients operate in the red for three consecutive years to qualify for the grant. For most hospitals, closure, merger or sale would occur before reaching three years of losses, they said.
“The price to pay for any rural hospital in order to receive grant funds at the front end would likely mean closure or selling out to private interest well before accessing those funds,” said Frederick, a Republican who represented Shiawassee County in the House from 2017 to 2022. He is now associate vice president of advocacy, government relations, and business development at Memorial Healthcare.
Bret Jackson, president of the Michigan Health Purchasers Coalition, maintained that 77% of Michigan’s nonprofit hospitals operate at a profit margin above 10%. In 2024, the average hospital operating profit margin in Michigan reached 16% and that profit margin increased to 20% among large urban systems in the state.
The legislation introduced last week is a necessary start to “a very important and very difficult conversation” to address those profits amid rising consumer costs, Jackson said.
“The current trend of increased hospital prices has broken the backs of many Michiganders,” Jackson said. “It’s unsustainable for patients, employers, and the hard-working families of Michigan.”
State Rep. Mike Harris, a Waterford Republican who helped sponsor the hospital reforms, acknowledged that some tweaks may be needed to the legislation. But he maintained the discussion and changes to the status quo are sorely needed.
“I recognize this legislation asks significant questions of our healthcare system,” Harris said. “It should. Health care is one of the largest expenses facing Michigan families, employers and taxpayers alike.”
Under the legislation introduced last week, 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 designated “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.
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 funded by 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.
The board’s oversight powers would not apply to for-profit hospital systems, such as the Detroit Medical Center, which is owned by the publicly traded Dallas-based Tenet Healthcare Corp.
eleblanc@detroitnews.com
This article originally appeared on The Detroit News: Michigan hospital group warns of nearly 22,000 lost jobs from GOP bills
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
