Big Sky is Cloudy for Hospitals

As state hospital association leaders assemble in Big Sky, Montana this week, the environment for hospital-friendly legislation is threatening at best:

The public’s trust in hospitals has eroded. Hospital financial performance is a mixed bag: some are profitable and many aren’t. Congress thinks hospitals need more regulation to increase price transparency, require ownership disclosure, verify community benefits that justify tax exemptions and impose restrictions on hospital private equity investments. And programs through which state and federal health policies are authorized—HHS, CMS, FTC, FDA, CMMI et al—are in limbo as a result of the June 28, 2024 Chevron ruling by the Supreme Court.

At a federal level, the American Hospital Association has successfully fended-off a significant portion of proposed cuts to key programs (DSH, rural), delayed Congressional action against facility fees and site neutral payments, influenced improvement from April’s proposed 2025 Medicare rate from 2.6% to 2.9%, advanced legislation to protect healthcare workers and streamline prior authorization business practices by insurers. In most cases, it has pursued a unified agenda alongside its Coalition (America’s Essential Hospitals, the Federation of American Hospitals, the Catholic Health Association and the Association of American Medical Colleges , Children’s Hospital Association et al) and it has invested heavily in its lobbying:  $6.46 million in the second quarter 2024 (plus $4.1 million by HCA, AAMC, Tenet and others).

At the state level, the attention hospitals get is equally intense but more complicated: It starts with money and demand: Examples:

• State resources: 9 states don’t tax any income, regardless of the source (AL, FL, NV, NH, TN, SD, TX, WA, WY); 4 states don’t tax any retirement income: (IL, IA, MS, PA); 8 states tax social security benefits (CO, MN, MT, NM, RI, UT, VT, WV)
• Population health status: WalletHub used 44 measures to assess each state and the District of Columbia on healthcare cost, access, and outcomes. WalletHub weighted the three categories equally. The Top 5: MN, RI, SD, IA, NH; the bottom 5: MS, AL, WV, GA, OK

There are Blue and Red states. Some are growing and some declining. All are integrating more diverse populations and divergence between low- and high-income household financial security and spending. The health system, and its hospitals, impact all.

Healthcare spending for state employees, Medicaid and dual eligible enrollees and public health programs consume a third or more of total state spending. And actions taken in states vis a vis ballot referenda, executive orders, administrative agency rulings and legislative actions result in wide variance in the regulatory environments for hospitals. Consider:

• 32 states have passed legislation to lower health system costs
• 31 states have CON requirements (24 of these have been revised since 2021).
• 15 states have passed laws to reduce or eliminate facility fees including hospitals
• 17 have passed legislative to increase competition in healthcare
• 23 passed legislation to reduce surprise medical bills
• 9 have passed legislation to address community benefit declarations by NFP hospital and health systems.
• 9 have passed legislation to reduce insurer prior authorization obstacles.
• 13 passed legislation involving reference pricing requirements for hospitals
• 8 states passed legislation requiring minimal levels of primary care services
• 24 modified their Certificate of Need programs
• 3 states have all-payer payment policies.
• 8 states have drug price control commissions/mechanisms to limit price increases.
• And all are grappling with determinations about abortion services, drug formulary design for Medicaid, state health employee health costs, Medicaid eligibility and funding, staffing requirements in hospitals and nursing homes, rural health solvency, telehealth efficacy, insurer plan design restrictions, and scope of practice expansion for nurse practitioners, pharmacists and much more.

The advocacy environment for hospitals at the state and federal levels will be dicier going forward: the near-term macro-environment is unwelcoming for hospitals presumed to have returned to profitability after the pandemic.

It’s root in four convergent issues:

• Economic Uncertainty: Last week’s BLS jobs report signaled softening of the economy and alarmed some thinking it a harbinger of a possible recession.
• Middle East Tension: the Israeli-Palestinian conflict appears headed toward a broader regional conflict involving Lebanon, Iran and others.
• Campaign 2024: hyper-partisanship coupled with disinformation on both sides lends to voter unrest: healthcare affordability, price transparency, consolidation, executive compensation and inequity are ripe targets.
• Healthcare Workforce Disenchantment (including Physicians): Hospitals directly employ half of the physician workforce and 30% of total health industry employment. Labor-management tension in hospitals is mounting.

For hospitals, effective advocacy is imperative: the reservoir of good will enjoyed for decades is evaporating. Advertising “we’re there for you” is timely as rural providers need a lifeline, and public castigation of “corporate insurers and billionaire critics” necessary to rally supporters.

But beyond these, two things are clear:

• The marketplace for “hospitals” is fundamentally different than the past requiring a clearer value proposition and fresh messaging.
• And in states, hospitals will encounter unique opportunities and challenges in plotting strategies for their future. No two are alike.

Big Sky is a symbolic locale for this week’s meeting of state health executives: the Big Sky over hospitals is cloudy.