McGonagle, Mass. House pass major health care legislation

Largest update to health care laws since 2012

Special to The Advocate

On May 16, 2024, Rep. Joe McGonagle, along with his colleagues in the Massachusetts House of Representatives, passed comprehensive legislation – An Act enhancing the market review process – that aims to restore stability to the health care system, bolster accountability within the industry and control health care spending to ensure that everyone in Massachusetts has access to quality, affordable health care. The bill also includes important updates to how the Commonwealth regulates and monitors the health care market – informed by the Steward Health Care crisis. The bill passed the House with a 152-1 vote. On May 20, 2024, the Senate referred the bill to its Committee on Ways and Means.

“I think today shows Massachusetts’ commitment to taking action to protect its’ citizens against predatory and harmful practices in the healthcare field,” said McGonagle. “What we saw with Steward Health Care was unacceptable and cannot happen again. Massachusetts has always been a leader in healthcare and this is no different. I’m grateful to Speaker Mariano, Chair Lawn and all my other colleagues for getting this legislation passed.”

The legislation continues the House’s commitment to bettering the Commonwealth’s health care system, as was demonstrated during the passage of Massachusetts’ landmark health care reform laws of 2006 and 2012. Strengthening oversight to prevent hospitals and other providers from exploiting the same gaps in the state’s regulatory structure that Steward Health Care exposed, the bill makes important updates to the Commonwealth’s laws that govern the oversight of hospital systems and other provider organizations.

The House legislation:

• Increases transparency related to the corporate structure of hospitals and other provider organizations by requiring disclosure of significant for-profit investment, including any private equity investments, and empowers the state’s Center for Health Information and Analysis to gather more financial data on hospitals and other provider organizations
• Enhances penalties for failure to comply with data-reporting requirements, including increased financial penalties, adverse consequences for licensure, and withholding approvals of future projects
• Empowers the Health Policy Commission (HPC) to scrutinize certain transactions more closely for anticompetitive impacts, such as significant equity investments that result in a change of ownership or control of a hospital, conversion of a hospital from a nonprofit to a for-profit entity and a significant transfer of a hospital’s assets
• Expands the Attorney General’s authority to seek information from significant equity investors, real estate investment trusts (REITs) and management service organizations as part of that office’s statutory authority to monitor and investigate health care trends, and exposes entities with an ownership or controlling interest in a provider organization to potential liability under the state’s False Claims Act if the entity knew, but did not report, that a provider organization was defrauding MassHealth, for example

The bill also makes important reforms to prevent acute care hospitals from selling their most valuable asset, their land, to REITs. When Steward sold their hospital properties to Medical Properties Trust (MPT) in 2016 for $1.25 billion, Steward agreed to lease back their former properties from MPT for exorbitant rents, syphoning away important resources and depriving the hospital operations and patients of needed investments. The House bill prohibits the future leasing of land from REITs for the operation of a hospital’s in-patient facilities and requires increased disclosure of other lease arrangements as part of the licensure process with the Department of Public Health (DPH).

In response to the tragic death of a patient at one of Steward’s hospitals, the bill also improves patient safety by ensuring that DPH is notified if a hospital’s medical or surgical supplies are at risk of repossession because of a hospital’s financial condition. The bill requires a secured creditor or vendor of medical equipment to notify the hospital and DPH of a possible repossession of equipment 60 days before the intended repossession.

Addressing the rising cost of health care

To address the rising cost of health care in Massachusetts, the bill reforms the HPC and the health care cost growth benchmark by establishing a benchmark-setting process that is more responsive to market pressures while also raising expectations on providers to meet the Commonwealth’s cost containment goals:

• Reconstitutes the HPC board from 11 to nine members who have more current, relevant experience and insight into the trajectory of the health care market
• Establishes a Technical Advisory Committee within the HPC to adjust the benchmark based on market conditions, such as inflation, labor and workforce development costs, and the introduction of new pharmaceuticals, medical devices and other health technologies
• Changes the current annual benchmark to a three-year benchmark beginning 2026-2029, which will allow health care entities greater flexibility to address unexpected expenses, and give the HPC greater insight into longer-term trends
• Gives the HPC increased enforcement authority when a health care entity exceeds the benchmark, and when a first performance improvement plan (PIP) is not successful, by allowing the HPC to suggest elements of a new PIP and to conduct Cost and Market Impact Review (CMIR), which might result in a referral to the Attorney General

The bill also establishes a dedicated Division of Health Insurance to review health insurance rates for affordability for consumers and purchasers of health insurance products. Currently, the same state agency that reviews auto insurance policies reviews health insurance, an insurance product that is essential to the well-being of residents and an important aspect of one of the Commonwealth’s largest economic sectors. This bill raises the assessments on insurance companies to pay for increased staff to give health insurance products the scrutiny they deserve.

Protecting independent community hospitals and slowing further market consolidation

This legislation includes several policies to advance the House’s long-standing policy goal of protecting low-cost, high-value health care providers and of avoiding further market consolidation by larger hospital systems.

The bill establishes and integrates a Rate Equity Target within the benchmark enforcement process for insurance companies, with the goal of raising the reimbursement rate for historically poorly reimbursed acute care hospitals. The bill incentivizes insurance companies to pay these hospitals no less than 15 percent below the average reimbursement rate for hospitals in the insurance company’s network during the first three-year benchmark cycle from 2026 to 2029. Thereafter, the bill guarantees a minimum percentage increase in a hospital’s reimbursement rate as a percentage of the health care cost growth benchmark.

This up-front investment by commercial insurers will provide needed resources for low-cost providers for the long-term benefit to the health care market given that, if such hospitals were to close or merge with a larger hospital system, total health care costs in the Commonwealth would inevitably increase.

The bill also provides a Medicaid rate enhancement for a similar group of hospitals, based on a hospital’s percentage of patients that are public.

The House bill also revisits House legislation passed last session that requires applicants for new ambulatory surgery centers to partner with independent community hospitals if the facility’s primary service area would overlap with that of the independent community hospital. This measure would protect these crucial hospitals from having their most important services syphoned off by surgery facilities that do not provide the same level of community benefit as 24-hour hospitals that offer a more complete range of health care services.

Stability and planning

The bill establishes a Health Resource Planning Council to produce a five-year plan on how to address regional and state capacity issues, which will be housed within a reformed HPC. The bill recommits to comprehensive state and regional health resource planning, and it requires consideration of the state plan in the Determination of Need process.

It also creates new license categories for urgent care centers and office-based surgery centers, as well as a new registration requirement for physician practices with more than 10 physicians. The bill also requires physicians to notify patients 90 days prior to terminating a patient-physician relationship, which was partly informed by Compass Medical’s abrupt closure of its physician group practice locations in May 2023.