By Matt Murphy
STATE HOUSE NEWS SERVICE
STATE HOUSE -- Hospital profits and executive compensation came under fire Wednesday from nurses and union leaders who packed a hearing to urge the Legislature to pass a bill forcing hospitals to disclose their financial holdings and pay penalties on excessive profits and pay.
Fueled by the closures over the past year of full-service hospitals in North Adams and Quincy, health care workers associated with the Massachusetts Nurses Association lamented that critical services, including mental health and pediatric care units, are being shuttered while executives are taking home larger paychecks and hospitals are stashing funds in offshore accounts in the Caribbean.
"Hospital CEO's should not get rich while our families struggle to secure basic services for our children," said Susan Wright Thomas, from Cambridge Health Alliance.
Bills filed by Rep. Josh Cutler in the House and Sen. Michael Moore in the Senate (H 979/S 623) would require hospitals to report to the Center for Health Information Analysis all assets and financial holdings, including those held by offshore financial institutions and investments outside the United States.
"Transparency of health care costs is one of the key ingredients to our health care system," said Cutler, a Duxbury Democrat.
Hospitals with less than 60 percent of patients on Medicaid that report profits in excess of 8 percent or any hospital that receives state funding and compensates its CEO at a rate greater than 100 times the annual salary of the facility's lowest paid employee would also have to pay penalties. Those fines would be put into new Medicaid account to increase rates for hospitals with larger low-income patient populations.
The bills were the subject of a hearing before the Health Care Financing Committee on Wednesday, co-chaired by Rep. Jeffrey Sanchez, of Boston, and Sen. James Welch, of Springfield.
The Massachusetts Hospital Association declared its "strong" opposition to the bills, defending executive compensation as carefully considered pay packages structured to be competitive in the market and declaring the transparency provision a "red herring."
According to the hospitals, arbitrarily capping profits at 8 percent would fail to take into account the full financial health of a medical institution. North Adams Regional Hospital had an operating margin of 7.8 percent in 2012, according to the MHA, masking the financial trouble that eventually forced the hospital's closure.
"(The bill)'s undue focus on operating margins and its underlying assumption that a hospital with a higher margin is 'too' financially healthy and can afford to be penalized demonstrates not only an ignorance of finance, but a lack of concern for one of the state's biggest employment sectors," the trade group said in testimony submitted to the committee.
Hospitals also defended their use of offshore accounts in the Cayman Islands or Bermuda for the purpose of "cost effective management of hospital liability insurance costs" that produce savings that they say are used to better deliver care. All self-insured businesses, including hospitals, must report their offshore holdings to the Internal Revenue Service, the MHA said.
Similar legislation filed last session did not gain traction, and advocates came up short in their quest to put a question on the 2014 statewide ballot to force greater financial transparency on hospitals.
"These bills would ensure the public has a clear picture of the financial health of these hospitals that serves their communities," said Katie Murphy, a Framingham resident and critical care nurse as Brigham and Women's Hospital in Boston.
Massachusetts AFL-CIO President Steven Tolman compared the efforts of the nurses to those of U.S. Sen. Elizabeth Warren in her fight for greater oversight of Wall Street banking and financial institutions.
"It's been said sunshine is the best disinfectant, but when that was said I don't think they meant sunshine in the Cayman Islands," Tolman said. "Very much the way Elizabeth Warren is trying to hold Wall Street accountable, our nurses are trying to hold our hospitals and medical industry accountable."