Bill targeting high hospital prices passed by Indiana Senate

After a final reading, the Indiana Senate on Tuesday passed legislation that threatens to strip hospitals of their state nonprofit status if they charge prices exceeding certain averages in the coming years.

The bill, which passed 29-19, heads back to the House, where lawmakers will decide if they disagree with changes the Senate made to the legislation on Monday.

House Bill 1004—while addressing multiple complex issues related to health care costs—centers on the prices hospital systems charge patients covered by commercial health insurance, typically provided by their employers.

Through the amendment process on Monday, lawmakers removed a proposed new excise tax that would have been charged to large nonprofit hospitals if they had passed certain national price thresholds compared with Medicare reimbursement.

The hospitals still face a loss of state nonprofit status, although not until 2029. But now the price threshold the bill uses to scrutinize hospital prices is a state average, not a national comparison.

A recurring study updated in December by research group RAND Corp. found Indiana had the ninth highest hospital costs in the nation.

HB 1004 also orders a new study of prices overseen by the Indiana Office of Management and Budget.

The bill targets hospital systems with $2 billion or more in net patient service revenue, in Indiana often called the “Big Five”—Indiana University Health, Ascension St. Vincent, Community Health Network, Franciscan Health and Parkview Health.

If the House decides whether it agrees with the Senate’s changes to the bill, the legislation will be sent Gov. Mike Braun, who can sign it into law, veto it, or let it pass into law without his signature.

The bill will be referred to a conference committee if the House wants further changes.

“The moral question of this bill is simple,” Senate Majority Floor Leader Chris Garten, R-Charlestown, a bill sponsor, said just before Tuesday’s vote. “Are we going to continue to allow nonprofits to act like for-profits, but reap the benefits of being a nonprofit?”

Some senators expressed frustration about the complexity of addressing health care costs and worry about the impact of giant hospital systems potentially losing nonprofit status.

“You always want to be careful for what you ask for if you don’t know the consequence,” said Sen. Jim Buck, R-Kokomo, who voted against the bill. “I’ve tried to figure out what happens to a nonprofit that loses that status. I have no idea, and that scares the bejeezus out of me because I know how big some of those facilities are.”

State Sen. Ed Charbonneau, R-Valparaiso, conceded the complexity and confusion but said high hospital prices need to be dealt with.

“I want to keep focus on the fact that we’re addressing high hospital costs. That’s the starting point,” said Charbonneau, who voted for the bill. “The fact that we can’t solve this problem is creating problems for 7 million Hoosiers in every business that is conducting business in the state of Indiana. It’s very, very frustrating.”

Under HB 1004, the Indiana Office of Management and Budget before June 30, 2026, will 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 would lose its state nonprofit status if its aggregate average prices were not equal to or less than the state average, although it could re-establish nonprofit status by returning to compliance.

The Indiana House will receive a very different bill than originally authored by Rep. Martin Carbaugh, R-Fort Wayne,

For example, the original bill threatened significant financial penalties and used a national benchmark with percentages of Medicare reimbursement. Now, the bill uses state averages—which does not allow for national comparison and, given the billions in revenue from the “Big Five” hospitals, means the hospitals under the bill will be scrutinized on average prices that they themselves heavily influence.

Charbonneau specifically cited hospitals for criticism in working on the bill: “We have not had any collaboration from the hospitals. They have not come to the table as part of a group to discuss this issue.”