Opponents say bill would punish, financially harm Indiana’s nonprofit hospitals
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Officials representing Indiana hospitals spoke out Tuesday against an Indiana House bill that would strip hospitals of their nonprofit status if they exceed certain price thresholds.
House Bill 1004 would require nonprofit hospitals—though not county hospitals—to file a report each year by Nov. 1 with the Indiana Department of Health showing aggregated data on billed services compared with the Medicare reimbursement rate for those same services.
If charges at a nonprofit hospital exceed 200% of that rate at the time of the charge, the hospital would face forfeiture of its state nonprofit status, meaning it would have to pay applicable taxes. The bill would not take away a hospital’s federal nonprofit status with the Internal Revenue Service.
The IRS defines charity care as financial aid or “free or discounted health services provided to persons who meet the organization’s criteria for financial assistance and are unable to pay for all or a portion of the services.”
HB 1004 centers on the prices hospital systems charge patients covered by commercial health insurance, typically provided by their employers. A recurring study updated in December by research group RAND Corp. found Indiana had the ninth highest hospital costs in the nation.
Opponents of the bill said such a measure would punish nonprofit hospitals for even a single case of prices exceeding the requirement and that it would financially harm hospitals. At stake, critics said, is the ability of these Hoosier hospitals to stay financially viable and to provide the community benefit and charity care to those in need.
“For this bill, you can have 1,000 charges under 200% of Medicare, but if you had only one charge above 200% of Medicare, you lose your tax exemption,” Tim Kennedy, general counsel for the Indiana Hospital Association, told the House Public Health Committee. “Apparently you lose it forever, because there’s nothing in the document here that suggests that there’s a way to appeal it or to renew it.”
The measure is authored by Rep. Martin Carbaugh, R-Fort Wayne, and co-authored by Reps. Ben Smaltz, R-Auburn, and Julie McGuire, R-Indianapolis.
Carbaugh said the legislation seeks to set standard parameters for nonprofit hospitals: “As you dive deeper into the numbers, it becomes clear that our large nonprofit hospitals have the highest prices in our high-priced state.”
Gloria Sachdev, Indiana’s new Secretary of Health and Family Services, spoke in favor of the bill. She specifically cited average prices charged by the state’s largest hospital systems.
During her remarks, she cited the RAND study, which shows aggregate pricing for large systems Ascension St. Vincent, Indiana University Health, Community Health Network, Franciscan Health and Parkview Heath as being above 300% of Medicare for average inpatient facility charges. Aggregate outpatient prices were even higher, she said.
“They’re making huge profit margins off of the commercial sector,” Sachdev said
She said Medicare—which typically reimburses higher than Medicaid—was a good benchmark for the bill because the federal program considers inflation when setting reimbursement rates.
Before being appointed to her new role by Braun, Sachdev served as CEO of the Employers’ Forum of Indiana, which also spoke in favor of the bill Tuesday. Sachdev also was a board member of Hoosiers for Affordable Healthcare, which backs the bill. She has resigned from that position.
Representatives from two Indiana hospitals—Baptist Health Floyd in New Albany and Goshen Health in Goshen—spoke in opposition to the bill.
“My hospital (at) the beginning of last year was 236 beds. I just added 32 more beds, and it still is not enough,” said Mike Schroyer, president of Baptist Health Floyd. “I’m overflowing, because we have more and more people seeking our care that I’m running a negative operating margin right now, and by studies and data that I count we’re one of the lowest cost hospitals in the state.”
Randy Christophel, CEO of Goshen Health, said 200% of Medicare reimbursement is not enough to cover hospital costs.
No representatives from Indiana’s largest nonprofit hospital systems spoke at Tuesday’s hearing.
The bill also would subject nonprofit hospitals to an annual audit by the Indiana Secretary of State and would require nonprofit hospitals to provide the entirety of the Schedule H (which includes community benefit) of its federal 990 form, making it available on the General Assembly’s website with redactions only for personal or private information.
Tuesday’s hearing was for testimony only. No committee votes were taken.