Rent Seeking in Mass Price Capping Law

After Moody’s issued a credit negative analysis for hospitals in the Commonwealth under the new health care law signed this week, I started to wonder how hospitals will react to the incentives in this new proposal.

One line from the Moody’s report is of particular interest:

Another negative credit effect of the bill is that the state will use an excise tax on insurers to support smaller and less profitable hospitals, potentially allowing them to remain in business longer than would otherwise be possible…

I contacted the author from Moody’s (Dan Steingart) to ask if they had additional information on the $135 million Distress Hospital Fund and the hospitals that would receive this money. Part of his response is below.

The bill is vague about who will receive money from the fund… The bill is equally vague about the criteria that will be used to decide who gets the funds.  …. but in general, our take is that it will be a highly political process subject to intense lobbying by hospitals that are eligible to receive funds. (bold added)

Criteria for grants from the Distressed Hospital Fund include:

All expenditures shall have 1 or more of the following purposes:

(1) to improve and enhance the ability of community hospitals to serve populations efficiently and effectively;

(2) to advance the adoption of health information technology, including interoperable electronic health records systems;

(3) to accelerate the ability to electronically exchange information with other providers in the community to ensure continuity of care;

(4) to support infrastructure investments necessary for the transition to alternative payment methodologies, including technology investments in data analysis functions and performance management programs, including systems to promote provider price transparency, necessary to aggregate and analyze clinical data on a population level;

(5) to aid in the development of care practices and other operational standards necessary for certification as an ACO under section 15 and 6D; and

(6) to improve the affordability and quality of care.

Now we have a community hospital rent-seeking opportunity, let the institution with the best lobbyists win. Of course this will be at the expense of all patients that will pay for higher health care costs because of the $225 million dollar surcharge on hospitals and providers that will help fund the Distressed Hospital Fund.

This is what health care cost containment looks like?

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