Plan to stopper healthcare costs sparks early debate

BOSTON – Supporters of a plan to bottle the cost of medical services say it offers a salve to ailing community hospitals, and it will mean millions of dollars in savings for hospitals on the North Shore and Merrimack Valley.

But a group that represents those hospitals disputes just how much help it could mean and calls the plan “unworkable.”

The debate, pitting labor leaders against hospital executives, could be left to voters to settle.

Supporters of the union-backed proposal have collected nearly 70,000 signatures to put the question on the November 2016 ballot. Lawmakers have until May to take up the issue before it’s cleared for the ballot, but previous legislation hasn’t gained much traction.

The plan seeks to cap prices that insurance companies pay hospitals for a variety of services at no more than 20 percent more than the average of what other providers receive.

Importantly for community hospitals, the proposal sets a floor for payments to “safety net” hospitals, which must get at least 90 percent of the average payment to other providers.

Many community hospitals are considered “safety net hospitals,” because they serve large numbers of low-income patients. And many struggle to collect from low-paying government insurance programs, or get below-average reimbursements from commercial insurers.

The measure could reduce overall payments to hospitals by an estimated $450 million a year. But supporters say it will mean a savings of $250 million per year for community and safety-net hospitals.

That would mean more than $23 million for hospitals in the North Shore and Merrimack Valley – savings that could lower patients’ healthcare premiums.

“We need to create fairness in the healthcare market,” said Tim Foley, executive vice president of 1199 Service Employees International Union United Healthcare Workers East. “Too many good community hospitals are facing financial challenges that can be fixed by simply spending our healthcare dollars fairly.”

The union, which represents more than 52,000 hospital workers in Massachusetts, estimates that Lawrence General Hospital alone would save $5.7 million a year if the Legislature or the state’s voters approve the plan.

Holy Family Hospital in Methuen would save $4.7 million; Merrimack Valley Hospital in Haverhill would save $2.6 million; Anna Jaques Hospital in Newburyport would see $6.8 million; and Beverly and Addison Gilbert hospitals $3.5 million.

But the Massachusetts Hospital Association – which represents large medical centers as well as community hospitals – opposes the proposal.

Tim Gens, the association’s executive vice president, calls it “flawed and unworkable.” The state had a system of regulating reimbursements years ago, he said, “but it failed.”

“More government regulation is not what we need to address this problem,” he said.

Union estimates of what community hospitals will save, he added, are “inaccurate.”

“They make no sense, and the union hasn’t shared their methodology,” he said.

State lawmakers have wrestled with rising medical costs since approving a landmark healthcare law in 2006 that required coverage for all Massachusetts residents and expanded the state-run healthcare program to include more people.

In 2012, the Legislature passed a package of reforms that included cost-curbing provisions estimated to save the state government more than $200 billion over 15 years.

The law, signed by former Gov. Deval Patrick, caps annual healthcare cost increases at 3.6 percent.

Foley said limiting how much insurers pay for services will also allow community hospitals to “receive fair pay for good quality healthcare, protect healthcare jobs, and lower the cost of healthcare overall across the state.”

Gens disagrees. He said the biggest financial problem for community hospitals is underpayment of services by the state and federal governments, and that can only be fixed by legislation addressing the government reimbursement rate.

“Community hospitals are under financial pressure and certainly need assistance,” he said. “But they won’t be rescued by this plan.”

Christian Wade covers the Massachusetts Statehouse for CNHI’s newspapers and websites. Reach him at cwade@cnhi.com.