Could Politicos Oversee Your Budgets?

A recent newswire story appears to be making its way among worried providers, stirring up considerable concern.

Last week the story, published by the Associated Press (AP), reported that lawmakers in Delaware approved legislation that would create the formation of panels to oversee the budgets of the state’s major hospitals in an effort to reduce costs.

Evidently, the recently passed legislation appears to be patterned after a similar bill instituted in Vermont. That legislation, according to the AP reporting, would require hospitals to submit “detailed annual budgets to the panel.” The story goes on to explain that the panel would be charged with “ensuring that hospitals align their price increases with annual healthcare cost growth benchmarks set by the state.”

Dennis Jones, a longtime contributor to both RACmonitor and Talk Ten Tuesdays, responded by email to RACmonitor when asked about this legislation and the potential similar versions could be adopted by other states.

“The concept of politicians having direct oversight of a hospital’s budget is chilling,” Jones said. “It is obvious that politicians do not understand the role of ‘charges’ in a hospital’s budget.”

Jones added that budget increases are often tied to “pass-through” costs of labor, drugs, equipment, supplies, etc. He noted that hospital budgets outline the institution’s forecasted spending for the next year. 

“Why and how would state governments have input in the strategic plans of a hospital?” Jones asked rhetorically. He also noted that in Massachusetts, hospitals face “a fine of up to $500,000 for noncompliance” with state-assigned budget constraints. He noted that in 2022, Massachusetts’ Health Policy Commission required Mass General to implement a performance improvement plan addressing its costs Jones also rated this type of legislation being adopted by other states as “likely.” 

“State oversight of hospital budgets would favor the ‘haves,’” Jones said, adding (that it) would hurt the “have-nots”, who will be limited in their ability to expand facilities and services to compete with other providers.

This recent legislative development comes on the heels of increased concern that the U.S. Supreme Court might overturn Chevron Deference. In this matter, under the landmark Chevron ruling, deference is given to the governmental agencies to interpret ambiguously written statutes.

References:

https://www.nbcboston.com/news/local/mass-house-applies-steward-lessons-in-new-expansive-health-bill/3357239

https://www.wbur.org/news/2022/01/25/health-policy-commission-mass-generalbrigham-health-costs