Senators pass ‘site of service’ bill with reservations

By: - February 9, 2023 7:00 am

Brian Tabor, with the Indiana Hospital Association, asks senators to reconsider a ‘site of service’ bill. (Whitney Downard/Indiana Capital Chronicle)

A bill dictating payments for certain health services based on location — or site of service — cleared a Senate health committee Wednesday, though nearly every senator voiced concerns with the bill. 

Senate Bill 6 passed 8-4 with bipartisan votes on both sides, but at least five of the ‘yes’ votes expressed reservations about the measure. 

“I think this is a flawed bill unintentionally,” Sen. Liz Brown, R-Fort Wayne, said, before voting yes on the Senate priority bill

Supporters say that they, through their insurance coverage, shouldn’t have to pay hospital-level prices for care delivered at outpatient clinics owned by hospitals. But hospitals argue that these clinics – whether or not they’re physically part of the hospital – operate under the same regulations and standards set for hospitals.

Hospital prices are typically higher due to the intensive, 24/7 services offered and specialized equipment. Opponents said the bill would cost hospitals billions.

Valparaiso Republican Sen. Ed Charbonneau, the proposal’s author, acknowledged the work ahead for the bill and assured critics that he wouldn’t rush the bill through the chamber. He said he planned to hold the bill on second reading – which allows for amendments from the Senate – until the bill deadline at the end of the month. 

Employers seek relief from high health care costs

Employers’ organizations spearheaded the support for the bill, which wouldn’t directly decrease hospital prices but rather decrease costs to those paying for insurance coverage. Under the bill, the site of service – which could include nearly all outpatient treatment depending on the definition – would determine the payment.

Andrew Berger, the senior vice president of the Indiana Manufacturer’s Association, criticized the large reserves held by hospitals –  enough to cover operations at some hospitals for up to 260 days – when the state itself only held enough in its reserves to fund 85 days.

A report from the Petris Center found that Indiana’s monopolized health care systems and monopolized insurance providers contributed to higher costs for the state’s employers. (Petris Center analysis of Health Care Cost Institute Healthy Marketplace Index)

“And I don’t think anybody would say that Indiana’s finances aren’t in good shape,” he said.

Berger shared health care costs for several national employers with employees in Indiana, saying companies routinely paid more for health care costs for their Hoosier employees.

One company averaged $12,000 nationally per employee, compared to $16,000 for Hoosiers. Another reported health care costs were 15-20% higher in Indiana, even if their Hoosier employees were healthier than their out-of-state counterparts.

“The fact that employers have a premium they have to pay to employ someone in Indiana… is a problem that can’t go unaddressed,” Berger said. 

Gloria Sachdev, the president and CEO of the Employers’ Forum of Indiana, said hospitals purchased independent clinics and then charged patients more, which adds to costs for employers.

“(We should) pay for offices at the same rate no matter who owns the office because the service is the same,” Sachdev said. 

Hospitals decry intervention in private negotiations

Hospital representatives said their rate negotiations with insurers already tried to consider the different costs at clinics versus hospital campuses but this bill overrode all of that work on site of service issues. 

Gregg Ferlin, a CFO for the parent company of Community Healthcare System in Northwest Indiana, said that his system alone could lose up to $40 million. 

Gregg Ferlin, chief financial officer of Community Foundation of Northwest Indiana (Photo from Community Healthcare System website)

“I’m not exaggerating; this bill will lead to closures and more consolidations,” Ferlin said. “We operate facilities across the Region; this is for ease of patient care and local services. We’re going to be looking at patients driving further for services or, in some cases, not getting service at all.”

Hospitals say that reimbursement rates for government programs haven’t kept pace with costs, meaning health care providers must recoup the loss elsewhere – typically with private insurance holders. 

Testimony decried the state’s low insurance reimbursements for physicians, which are some of the lowest in the country. According to the oft-cited RAND study putting Indiana’s hospital costs at 7th in the nation, Indiana ranks fourth-lowest for physician reimbursements as a percentage of Medicare.

Joining a hospital, which receives a higher reimbursement rate, can help those independent physicians who have less bargaining power with insurers, hospitals said.

Republican Sen. Vaneta Becker, whose Evansville district butts up against the Kentucky state border and sits close to Illinois, said her local hospital, Deaconess, had met the national average for care. 

But under this bill, certain off-campus treatments like cancer services, would have to close because the system could lose money.

“How is that good for care?” asked Becker, who was one of the four senators to vote against the bill.

Insurers sit out this debate

Senators and testimony alike openly questioned why no insurance representatives had appeared to testify on site of service language. Charbonneau asked committee members to limit testimony related to insurers, who have their own bills.

Marty Wood, the president of the Insurance Institute of Indiana, said while many insurance stakeholders watched the meeting, the site of service bill didn’t have a direct impact on their industry.

Marty Wood, the president of the Indiana Institute of Insurance (Photo from Insurance Institute of Indiana website)

“This is a payment issue and the ultimate payers of these hospital fees, these provider fees, are the business groups,” Wood said. “… the truth of the matter is, this is really more of an issue that impacts the employers.”

Wood noted that their lobbyist, Maddie Howe Augustus, has testified on insurance-specific issues, including prior authorization, and she was scheduled to speak on a separate bill Wednesday morning in the House insurance committee that ultimately wasn’t called. 

But Wood noted that health care testimony, particularly on thorny issues, frequently pits insurers against hospitals and is unproductive.

“It kind of devolves into, ‘Who’s the bigger evil?’,” he said. 

But Wood said his association, which represents industry interests, supported the bill overall so that “facility billing is reflective of where the services were actually presented.”

He said that physician reimbursement is an issue that insurers wanted to participate in but that high hospital reimbursement rates overwhelmed the discussion.

“We want to be involved in discussions on that but those discussions are never going to take place as long as we’ve got hospital reimbursements in the top 10 in the country and so much higher than the average,” Wood said. “And, obviously, so much higher than what the costs really are.”

SB 6 is one of several bills under consideration in the General Assembly as an attempt to reduce above-average health care costs for Hoosiers, which several researchers have attributed to the monopolization and vertical integration of health care under the state’s hospital systems. 

Non-profit hospitals, especially, have been a target for legislators, as their reported revenues and investment income increased even during the pandemic. 

Though lawmakers in both chambers have heard testimony on several bills, only one other priority bill has advanced – Senate Bill 7, which limits noncompete agreements for physicians.


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Whitney Downard
Whitney Downard

A native of upstate New York, Whitney previously covered statehouse politics for CNHI’s nine Indiana papers, focusing on long-term healthcare facilities and local government. Prior to her foray into Indiana politics, she worked as a general assignment reporter for The Meridian Star in Meridian, Mississippi. Whitney is a graduate of St. Bonaventure University (#GoBonnies!), a community theater enthusiast and cat mom.