Health law benefits some Massachusetts hospitals, penalizes others

Steward Health Care System, which includes struggling Carney Hospital, will not qualify for millions of dollars in special payments under the new Massachusetts health care law, because legislators said they did not want to subsidize a for-profit company. The provision is one of several buried in the 350-page bill that penalize or benefit certain hospitals.

The cost-control law also targets three Harvard-affiliated hospital systems — Partners HealthCare, Boston Children’s Hospital, and Beth Israel Deaconess Medical Center — to pay a one-time $60 million tax to fund health programs.

Legislators rewarded three small hospitals considered too isolated or too specialized to fail: Athol Memorial, Fairview in Great Barrington, and Franciscan Hospital for Children in Boston will get boosts in Medicaid payments.


In order to receive a share of $155 million set aside mostly to help community hospitals invest in technology, control costs, and better coordinate patient care, providers will have to make their case to a commission being set up to oversee the law’s implementation.

“It’s a jump ball,’’ said Donald Thieme, executive director of the Massachusetts Council of Community Hospitals. “They’ve created a very broad definition of things to look at. It gives [the commission] wide authority to select one versus another.’’

Hospitals doggedly lobbied key legislators to treat them well under the new law, which Governor Deval Patrick signed earlier this month. The law seeks to keep health spending from growing faster than the state’s economy through 2017 and to further slow spending for five years after that.

The governor and legislative leaders say it could save $200 billion in health costs over the next 15 years by encouraging providers to use fewer expensive procedures, to better coordinate patients’ care to keep them healthier, and to steer patients to lower-cost hospitals and doctors.

A major point of debate among lawmakers who crafted the law was whether to dock powerful caregivers who demand high prices for their services, one of the most-cited reasons for rising medical spending, with House leaders pushing for financial penalties.


Discussions also focused on whether to help shaky community hospitals, a pet issue of state Representative Ronald Mariano, a Quincy Democrat and a member of the team negotiating a compromise between House and Senate proposals.

As a result, the law sets up a Distressed Hospital Trust Fund that will distribute $135 million over four years, with about 35 community hospitals competing for money, Thieme said.

Teaching hospitals and hospitals with very high prices do not qualify. And the law for the first time prohibits a specific pool of money, the distressed hospital fund, from going to for-profit hospitals.

The state has 13 for-profit, acute-care hospitals, including three owned by Vanguard Health Systems. Cerberus Capital Management, a New York private equity firm, owns the 10 Steward hospitals, including Carney, which has been financially unstable but has taken care of some of the city’s poorest residents for years.

Even though Carney lost $20 million in 2011, Mariano said, the Dorchester hospital’s for-profit status makes it “difficult to make the argument that they should get a large chunk’’ of the money. Steward bought nearby Quincy Medical Center last year, adding to his concern.

“We don’t know what is going to happen with these places,’’ he said. “We don’t know how long they are going to exist.’’


Spokesman Christopher Murphy said that Steward is committed to Carney and that the distressed hospital fund is “a Band-aid’’ anyway, not a permanent solution.

“We’re looking at building Carney for the long-term, so the availability of these Band-aid funds isn’t material for the future’’ of the hospital, he said.

Carney has been a major recipient of similar special funds for years, including about $5 million this year from state and federal programs for hospitals that serve large numbers of poor patients. It will continue to receive that money.

The distressed hospital fund, along with money for public health programs and information technology systems in the new law, will come from an assessment on hospitals and insurers.

But the law is written to apply only to Partners, Children’s, and Beth Israel Deaconess, legislative leaders said.

Massachusetts General and Brigham and Women’s hospitals, which are part of the Partners network, and Children’s have been targeted as three of the highest-paid hospitals in the state, in reports from the Patrick administration and Attorney General Martha Coakley.

Representative Steven Walsh, a Democrat from Lynn who led the House effort, said legislators “created a formula we felt would only hit those hospitals that are healthy enough to withstand’’ it.

Walsh said Partners’ share is about $42 million. Beth Israel Deaconess and Children’s will roughly split the remaining $18 million, although they can apply for a hardship waiver for most of their share under the law.

Partners Spokesman Rich Copp criticized the approach.


“Imposing a tax on a very small number of hospitals is not a fair way to approach this issue, particularly when the money is being used to solve a problem the state created by underfunding the Medicaid program,’’ he said. “Burdening hospitals with more costs in a bill to reduce costs is a paradox, as well as bad public policy.’’

Meanwhile, Athol Memorial and Fairview — tiny, isolated hospitals — will get increases to their Medicaid payments to bring them up to slightly more than Medicare pays.

Medicare, the health insurance program for the elderly, has traditionally paid better than the state and federal Medicare program for the poor.

Medicaid rates for Franciscan Hospital — a pediatric rehabilitation hospital for children with disabilities and long-term significant medical needs — will increase by 50 percent.

The hospital received $6.5 million from Medicaid last year. Senator Richard Moore, Democrat of Uxbridge, said children there would have few alternatives if the hospital failed.

The state’s hospitals also will be able to compete for up to $20 million in additional Medicaid payments.

Mariano said community hospitals will be at a disadvantage because hospitals must show they have made strides in switching to budget-minded payment systems that help providers coordinate care and hold down costs, which requires information technology.

“They don’t have the infrastructure,’’ he said.


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