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Indiana lawmakers on Thursday night sent Gov. Braun a bill that threatens to strip the state’s largest hospital systems of their nonprofit status if their prices exceed state average prices.
The House passed House Bill 1004 by a 67-23 vote and, shortly later, the Senate passed the same legislation 37-13, touted by its backers as an effort to rein in high hospital prices in Indiana.
HB 1004, authored by Rep. Martin Carbaugh, R-Fort Wayne, took a continuous path through the General Assembly with its original focus on affecting hospital prices drastically altered and its scope widening to include other health care and insurance matters.
The bill’s core pricing scrutiny targets hospital systems with $2 billion or more in net patient service revenue in the state. In Indiana, that affects a group often called the “Big Five”—Indiana University Health, Ascension St. Vincent, Community Health Network, Franciscan Health and Parkview Health.
Backers of HB 1004 pointed to a recurring study updated in December by Los Angeles-based research group Rand Corp. that found Indiana had the ninth-highest hospital costs in the nation.
HB 1004 uses state averages to determine whether prices are excessive. The methodology does not allow for national comparison and, given the billions in revenue from the state’s largest hospitals systems, means the hospitals under the bill will be scrutinized on average prices that they themselves heavily influence.
As passed Thursday, the bill calls for the Indiana Office of Management and Budget, or OMB, to—before June 30, 2026—conduct a study of inpatient and outpatient hospital prices from 2023-2024 to determine statewide average prices, to be reported as a percentage of Medicare reimbursement.
Then, each year starting June 30, 2027, the office will adjust the average price based on the medical Consumer Price Index.
Starting in 2029, a hospital system will lose its state nonprofit status if its aggregate average prices were not equal to or less than the state average, although the system could re-establish nonprofit status by returning to compliance.
Carbaugh said hospitals in violation would lose state nonprofit status for one year. Hospitals regain nonprofit status by having prices in compliance with the OMB.
When the House passed HB 1004, the bill set hospital facility fees at 265% of Medicare, with violators facing financial penalties. Also, hospitals would have lost nonprofit status if the charges exceeded 300% of Medicare reimbursement.
“Those are out of the bill,” Carbaugh said of changes made to the Senate version.
Vocal critics of the bill were troubled by what they said was uncertainty about what would happen to nonprofit hospitals, and the care they provided, should they lose nonprofit status.
“I’m not in favor of this bill for many reasons, but it gets down to that we’re really going to create chaos in the system of health care over a small movement in price,” said Sen. Dr. Tyler Johnson, R-Leo.
Sen. Liz Brown, R-Fort Wayne, worried rural hospitals part of larger systems could be sold off or services shut down if systems were sold to investors.
In his closing remarks before the Senate vote, Sen. Chris Garten, R-Charlestown, responded to such criticism:
“This isn’t your Elks or your Moose Lodge that’s going to lose their nonprofit status,” Garten said. “So what is the case? (These are) multibillion-dollar nonprofit systems, in some cases, that are making more on Wall Street than they are providing health care for Hoosiers.”
Speaking Thursday prior to the House and Senate votes on HB 1004, Gov. Mike Braun commented on General Assembly: “You look at a lot of the legislation that made it across the finish line, I think they did a good job with it.”
When asked about disappointments, Braun said, “When you’re up against a lobby as strong as the health care lobby, from the hospital association to the insurance folks across the board … all I can tell you is when I was here (in the General Assembly) in ’15, we didn’t get anything in terms of a hearing.”
Braun said it is clear that health care costs are a drag on the economy.
“There’s a moment in time where the players in the health care industry, big hospitals and big insurance, are going to have to get with it, or else there’s going to be reform in a much larger way that will probably come from a place I just came from,” Braun said, referring to Congress.
“I think we got a good start on it,” he added.
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