Michigan hospitals are pushing back on a state bill that would impose new requirements on their pricing, market position and potential dealmaking.
The potential restrictions, split across three separate bills, were introduced last week by Michigan House Speaker Matt Hall and cosponsored by Mike Harris and Jay DeBoyer, all Republican state representatives, and has been referred to committee.
Chiefly, it would create a five-member hospital cost review board that would impose and enforce various restrictions that include price caps on reimbursement (200% of Medicare) and cash pay (150% of Medicare) and a near-immediate 10% reduction in rates for nonprofits wishing to maintain their tax-exempt status.
Under the legislation, nonprofit hospitals would also be required to submit various information about operations and financials to the board each year, and “a clear and concise explanation” of any rate increases. Those increases would be limited to the rate of inflation or lower.
The board, if formed, would also review any pending mergers and would only approve those that “demonstrate a commitment” to decrease rates by at least 2% following the deal’s close. The board would also reject deals that lead to substantial control of statewide or regional bed and market share.
The bills do include provisions intended to support struggling hospitals, Hall noted. A new tax collected from merging hospitals (12% of the total purchase price) or fees imposed on those not complying with the pricing restrictions would be pooled in a fund overseen by the state treasurer, according to the bills. A grant program would then award those funds to facilities deemed by the board to be “experiencing unsustainable losses,” which at minimum would entail a -3% operating margin for three consecutive years, and most likely to benefit from extra funding.
“One of the problems we have is that we’re giving these hospitals and the healthcare system billions and billions of dollars—and then they’re always coming back and saying they don’t have any money,” Hall said at a press conference announcing the bill. “…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 Michigan Health & Hospital Association, the leading trade and advocacy group for hospitals in the state, flatly denounced the proposed legislation.
Immediately following its unveiling, association CEO Brian Peters said in a statement that “proposals that introduce additional administrative burdens and arbitrary government price controls would exacerbate the affordability challenges they seek to address."
On Monday the group went further, writing in a member news post that it “believes these proposals would severely harm hospitals, jeopardize their financial viability and threaten access to care throughout Michigan.”
That post went on to highlight Michigan hospitals’ low prices compared to the majority of the U.S., and pointed to the June 19 shutdown of Sturgis Hospital, a designated Rural Emergency Hospital, as evidence of the financial pressures facing providers across the state.
The association encouraged its members and other community stakeholders to message their state legislators and the governor in opposition to the bills. A message template it provided reads that the legislation would “decimate access to care across the state” and “upend[] the institutions that care for our communities 24/7, year-round.” The template instead calls for officials to “support policies that improve affordability without jeopardizing access to care or the sustainability of Michigan’s healthcare system.”
Hospital spending represents a substantial portion of overall healthcare spending, with their rising prices being targeted more and more often by critics as a driving force in healthcare unaffordability.
Price caps of various designs have been brought by multiple states, including Indiana, Vermont, Washington and Oregon, or proposed in others like Colorado and New York. Several states also have laws on the books requiring additional administrative review of healthcare mergers, or permit state offices to block a deal outright if it is found not to be in the public interest.