Charlie Baker’s Plan to Help Community Hospitals: Is it Enough?

On January 28, 2020, the Joint Committee on Health Care Financing held a hearing on Massachusetts Governor Charlie Baker’s health care Bill H.4134, An Act To Improve Health Care By Investing In Value. Governor Baker and Secretary Sudders presented the highlights of the 179-page bill that proposes wide-ranging changes to the Massachusetts health care system, including the elimination of surprise billing, further oversight on pharmaceutical pricing, increased investment in primary care and behavioral health, and additional funding for community hospitals and health centers.  

Community hospitals play a vital role in treating some of the Commonwealth’s most vulnerable populations. They offer convenient locations within communities and competitive prices compared to Massachusetts’ major teaching and research hospitals. However, a 2016 report from the Health Policy Commission found that community hospitals across the state face considerable challenges, including low occupancy rates and poor financial margins compared to larger hospitals. The report also noted that since 1980, nine community hospitals in Massachusetts have closed, 22 have converted into non-hospital facilities, and many more have been purchased or merged with a larger health care system. Such changes have endangered the sustainability of these important health care institutions and prompted Governor Baker to look for ways to support them financially.

As for the former CEO of Harvard Pilgrim Health Care, Governor Baker is a known entity in the health policy sphere. In the build up to filing this legislation, he made it clear that addressing the struggles of community hospitals would be a key feature. 

A Proposal for Increased Investment in Community Hospitals

True to his word, Baker’s proposed legislation amends an existing fund to create the Community Hospital and Health Center Investment Trust Fund, which, if created, would distribute money to community hospitals and health centers most in need of financial assistance. Along with $15 million worth of state funding, the trust would be funded by penalties levied on pharmaceutical manufacturers who increase their prices more than 2 percent per year. Furthermore, fines paid by health care entities who exceed the Health Policy Commission’s annual cost-growth benchmark would also fund community hospitals and health centers. 

However, some believe that Baker’s proposed legislation does not do enough. Diane Anderson, CEO of Lawrence General Hospital, argued that the Governor’s bill “does not address the real core issues of appropriately reimbursing hospitals and providers….it’s probably not enough to be a sustainable fix.” Democratic State Senator Barry Finegold, whose district includes Lawrence, testified before the Joint Committee that “a pot of money [for community hospitals] is not acceptable. To address this problem, we need a steady stream of funding…if this bill stays as is, I cannot and will not support it.”

Provider Price Variation: Lots of Attention, Marginal Progress

At the core of this issue is the continued debate around provider price variation. In 2017, the state convened a special commission to investigate and report on provider price variation, finding that community hospitals were the victims of “apparent underpayment” when compared to other institutions. Still, relatively little progress has been made on rectifying these disparities in hospital prices.

Furthermore, Governor Baker has seemed unmoved by comments like Anderson’s, stating at the 2019 Health Policy Commission Cost Trends Hearing that “while many would argue that the fundamental problems with our health care system are rooted in some provider organizations being paid too much, and some being paid too little, we would argue the problem is more fundamental than that.” He continued to say that such discrepancies between providers was more due to “our health care system [that rewards] those providers that invest in technology…at the expense of those who chose to invest in primary care, geriatrics, addiction services, and behavioral health care.”

Testifying before the Joint Committee on Health Care Financing, Baker and Sudders reiterated that their proposed legislation purposefully did not include provider price variation language and was more focused on stabilizing community hospitals in the short run. Sudders explained, “the very services we wanted to see invested in, [primary and behavioral health care] would be the very services that would not be invested in,” should a floor or cap be placed on provider pricing. Yet, Section 17 of Baker’s bill calls for continued reporting and monitoring of the differences in provider pricing and reimbursement, and it therefore seems likely that conversation surrounding the issue will persist, especially as legislation addressing provider price variation has bounced around Beacon Hill in recent legislative sessions. 

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