It’s time to mend community hospitals’ insurer payment deficit

While a struggling for-profit health-care system might not elicit the kind of sympathy reserved for its not-for-profit counterparts, its take on the uneven field of the state’s medical insurance reimbursement landscape deserves everyone’s attention.

Steward Health Care’s dire finances and suspected slew of unpaid bills have spilled into the public domain recently. However, hospital system officials had been warning since at least last year about inadequate funding support that puts community hospitals in jeopardy.

When Steward submitted testimony to thehealth Policy Commission for its autumn cost trends hearing, it urged policymakers “tomake bold actions to correct a hospital marketplace that has been functionally broken since the 1990s.”

The four pages ofmaterial it submitted made no specific reference to the scope of the problems Steward faces, which now include reports that it’s $50 million behind on rent and faces lawsuits over unpaid bills to vendors. They did, however, raise some of the same points the company’s leadership have made in the past two weeks.

“Consolidation and predatory business practices has resulted in a two-tiered system of health care where brand andmarket power allow a select few provider systems to leech the vast majority of health care resources in the Commonwealth,” Steward wrote in its cost trends hearing testimony. “The remaining community hospitals are forced to increasingly do more with less. In order to break this paradigm, the Commonwealth needs to make major disruptive actions that solve market failure in the present as well as structurally for the future.”

Of course, Steward’s referring to sprawling health- care systems like Mass General Brigham, Umass Memorial Health Care, Beth Israel Lahey Health, BMC Health System and Tufts Medicine, which have all improved their reimbursement power by merging with other hospitals to command a larger share of the health- care dollar, at the expense of community hospitals.

Those community hospitals, like the nine Massachusetts hospitals in Steward’s system, including Nashoba Valleymedical Center in Ayer and Holy Name Hospital in Methuen-haverhill, typically serve a higher share ofmedicare and Medicaid patients, which typically offer lower reimbursement rates than private insurers whose patients often seek out care at academic medical centers.

This reimbursement imbalance has been known for several years — decades by our reckoning — with no definitive action taken to correct it.

According to previous reporting by the State House News Service, 27 medical centers in recent years had received less than 90% of the statewide average commercial rate. Like many in the Steward system, they serve diverse “Gateway Cities” like Lawrence, Brockton and Holyoke, communities with large minority populations that were paid 85% of the state average or less in 2016.

The main roadblock to health- care reform in previous legislative sessions remains the same — finding common ground on a funding-mechanism for community hospitals. A previous House version, which included $247.5 million in assessments on insurers and $90 million in assessments on the largest hospitals, was vehemently opposed by the hospital lobby.

Reimbursement disparities aren’t the only inequities facing community hospitals, though they all stem from inadequate finances.

Steward said in the fall that many of its pressures come from ongoing labor shortages.

“We continue to train nurses and staff at our hospitals, only for themto leave after 6 to 12months for higher pay at a large academic medical center or a hospital backed by such an entity. Good Samaritan Medical Center (Brockton) today has nearly its entire Emergency Department staffed by traveling nurses and temporary staff, and despite significant investment we still struggle to meet staffing demands,” Steward wrote.

Steward’s unsigned testimony called for the Legislature to “recreate a community hospital reinvestment fund,” which would redistribute resources to better support community hospitals.

House Speaker Ron Mariano has long favored changes in state oversight of major hospital expansions that marginalize smaller facilities, but there’s been no evidence of a similar sentiment in the Senate.

But the sudden revelation of Steward’s deteriorating financial position might put renewed pressure on Beacon

Hill to act.

Medical Properties Trust, which in 2016 purchased Steward’s hospitals and began leasing them back, announced on Jan. 4 that it was working to collect about $50 million in unpaid rent; that’s in addition to about $50 million more in deferred rent related to the reconstruction of Norwood Hospital, currently closed due to flood damage.

Court records indicate that Steward faces additional financial challenges. The State House News Service reported in December that salary.com sued Steward in Suffolk Superior Court, alleging the hospital system owed it nearly $95,000 for its subscription services. And more recently, Canopy Partners filed suit in Suffolk Superior Court against Steward, claiming that it owes almost $140,000 for radiology assistant services.

Steward might be the most extreme case of deteriorating community hospital finances, but it’s still symptomatic of the haves and have-nots of this state’s insurance reimbursement reality.

If Mass General Brigham is too big to fail, so are the string of community, last-resort hospitals that care for the commonwealth’s most vulnerable.

It’s about time the Legislature and health- care regulators came to grips with this untenable situation and take steps to mend this broken system.