Massachusetts Health & Hospital Association 
INSIDE THE ISSUE
> Out-of-Network Rates
> MTF on the HSN
> Spending Growth Study
> Federal Funding for Rural Healthcare
> Lawsuit Targets 340B Rebate Program
> Transitions at BILH
> MHA Closed Today
MONDAY REPORT
MHA to DOI: Define the Problem Before Taking Out-of-Network Actions
It makes sense that the state’s Division of Insurance (DOI) is taking a deep dive into the healthcare affordability question and it’s equally understandable that insurance regulators are specifically focusing on out-of-network (OON) healthcare costs, MHA wrote in a letter to DOI Commissioner Michael Caljouw last week. But before DOI considers such drastic measures such as having the government establish OON default rates, MHA cautioned it to more clearly define the problem and closely study the potential consequences of such actions.
Specifically, MHA reminded DOI that the federal No Surprises Act already provides consumers with strong billing protections for care delivered by out-of-network providers at in-network facilities. Before setting a default rate, MHA suggested that DOI first determine the rate at which OON services are still occurring in Massachusetts and whether such a sweeping action such as a default rate is needed.
Setting a fixed out-of-network payment benchmark or default reimbursement rate does not account for meaningful differences among providers, MHA cautioned, and could create groupings of lower-paid and higher-paid providers who will change their participation in networks based not on their contracts with insurers but on how they are faring under set rates.
“Any proposed out-of-network policy should be evaluated in the broader context confronting Massachusetts hospitals and health systems,” MHA’s Interim President & CEO Mike Sroczynski wrote. “Providers continue to face rising supply and labor costs, workforce shortages, increasing patient acuity, inflation, and persistent public-payer reimbursement challenges … Given these realities, policymakers should carefully consider whether proposed out-of-network payment policies could reduce commercial reimbursement, weaken provider networks, or add pressure on providers already struggling to sustain essential services. Particular attention should be paid to the effects on safety-net and community hospitals, rural providers, trauma centers, teaching hospitals, and specialty care providers.”
MHA reinforced its support for a “collaborative, data-driven” solutions to OON issues – especially those that ensure patients are meaningfully protected from unexpected costs.
Taxpayers Group Provides More Evidence of Broken Safety Net
The Massachusetts Taxpayers Foundation (MTF) has produced a factual, well-reasoned analysis of the state’s Health Safety Net program, tracing its history, current financing, and the troubling future it faces.
Created in 2006 along with the state’s historic Chapter 58 universal coverage healthcare law, the Health Safety Net reimburses uninsured care that patients receive at hospitals and community health centers. The essential problem facing the safety net is that the cost of care has risen dramatically since its creation, but the dedicated funding level from hospitals, insurers, and the state – $330 million annually – has remained essentially unchanged. That has resulted in funding deficits that are averaging about $200 million per year, including factoring in one-time legislative funding relief; hospitals alone must absorb those shortfalls.
MTF’s report brings to light some salient points that may help to inform future discussions. For instance, in FY2018, the Health Safety Net had 256,000 users and experienced a funding shortfall of $14 million. In FY2024, the users increased only 1.5% to 260,000, but the shortfall was $197 million. “As utilization has rebounded above pre-pandemic levels, increased healthcare costs and other factors … illustrate a vastly different healthcare landscape,” MTF writes. “With an estimated 135,000 new users by 2028 as a result of [the One Big Beautiful Bill (OB3)] reforms, the total demand, and in turn the funding shortfall, on the Health Safety Net is expected to grow at a higher rate than previous years.”
MTF attributes the rising demands on the Health Safety Net to three things: 1) increased pharmacy costs at hospitals and community health centers; 2) increased community health center demand, noting that from 2008 to 2022 payments to CHCs were relatively flat, but since 2023 payments to the health centers have increased on average by 55% to $102 million annually; and 3) an increased number of hospitals qualifying for higher percentage payments from the safety net because they are considered “disproportionate share hospitals.”
The report revisits what MHA and others have also cautioned about – namely how OB3 will drive up to 300,000 off the insured rolls and significantly increase demand on the Health Safety Net, thereby increasing the funding shortfall by as much as an additional, and unsustainable, $600 million annually.
As for achieving solutions to the problem, MTF speaks generally about the need for policymakers to explore dedicated state funding, “reviewing how existing healthcare system participants contribute to the Health Safety Net, and whether the existing array of reimbursable services appropriately balances access, affordability, and fiscal sustainability.”
Another Report on Spending Growth
In yet another study showing how rising pharmaceutical costs are destabilizing Massachusetts healthcare, researchers from Blue Cross Blue Shield of Massachusetts and Harvard University published a study in Health Affairs last week showing that spending growth for the insurer from 2018 through the first half of 2025 was driven largely by increased utilization and prescription drug spending, and not by increasing prices for medical services.
Specifically, the researchers found that in FY 2025, inflation-adjusted growth in medical spending was 6.7% and, adjusted for inflation, prices for medical services were relatively flat, rising 1.3% in FY 2025. However, inflation-adjusted spending growth for retail prescription drugs in FY 2025 was 18.8%, according to the study, which found that much of that increase was driven by spending on GLP-1 weight loss drugs, which grew 83.7% compared with 9.6% growth rate for all other retail drugs.
The recent Massachusetts Taxpayers Foundation report on the Health Safety Net (see story above) identified the rise in pharmacy spending as a key contributor to the safety net’s shortfalls. The state’s Center for Health Information and Analysis has determined pharmacy spending makes up more than 23% of total healthcare expenditure growth.
Federal Funding for Rural Healthcare Now Available
Last week the state opened the application process for the first tranche of funding through the federal Rural Health Transformation Program (RHTP).
The first year of funding – $162 million – is available to the state’s six designated rural hospitals as well as a host of other rural-focused entities, such as rural health clinics, rural-located nursing facilities, and physician practices in rural communities. The six designated rural hospitals in Massachusetts are Athol Hospital, Martha’s Vineyard Hospital, Fairview Hospital, North Adams Regional Hospital, Nantucket Cottage Hospital, and Baystate Wing Hospital.
The federal RHTP program is funded through a $50 billion appropriation in the One Big Beautiful Bill Act. The Centers for Medicare and Medicaid Services will distribute $10 billion annually to states over the next five years. Massachusetts is eligible to receive upwards of $800 million by Fiscal Year of 2030.
Recipients must use the funding to fulfill priority needs among 34 activities relating to healthcare access, population health, workforce, technology, community health, and facility modernization.
While the current designated rural hospital funding is limited to only six facilities in the first year of the program, the state noted in the application that “based on funding and other considerations, eligibility for some activities may be expanded in future years to include different entity types or regions.” MHA has advocated with the state that all rural-serving hospitals should be eligible for the RHTP funds.
Full application details are available here through the state’s COMMBUYS system and are included under “File Attachments.”
AHA, Hospital Interests Sue HHS Over 340B Rebate Program
Last Friday, the American Hospital Association (AHA), the Maine Hospital Association, and four safety-net hospitals filed a lawsuit in the United States District Court for the District of Maine challenging changes by the U.S. Department of Health and Human Services (HHS) to the 340B Drug Pricing Program that would expand the use of a proposed rebate model previously halted by the courts. Estimates show the new program could impose more than $1 billion in annual administrative costs on already-strapped hospitals.
Hospitals use 340B savings to maintain healthcare services; expand access to medications; support behavioral health, oncology and preventative care; and provide other programs tailored to the needs of their communities. HHS’ proposed rebate mechanism would divert resources that 340B hospitals currently use for patient care toward higher upfront drug costs and new administrative burdens, AHA argues.
The 340B drug rebate model replaces immediate, upfront price discounts with a retrospective (back-end) reimbursement process. Under the flawed rebate plan, hospitals must pay full market price for outpatient drugs upfront and wait weeks or months for drug manufacturers to issue a rebate. This severely strains the operating budgets of safety-net and rural hospitals that already operate on thin or negative margins.
“When the government makes a change of this magnitude, it must fully consider what it will mean for the patients and communities that rely on 340B hospitals every day,” said Steve Walsh, president and CEO of the AHA. “The AHA and its member hospitals provided detailed evidence showing that the rebate program would impose massive new costs and divert resources that support care for millions of patients. We also proposed viable alternatives that would address concerns about transparency and program integrity without imposing the same financial price tag. For the sake of our shared goal of protecting patients and expanding access to care, those costs, consequences and alternatives cannot be treated as afterthoughts. It’s unfortunate that we are back in court challenging the same flawed program.”
Following HHS’ attempt to launch a similar rebate program in 2025, both the U.S. District Court for the District of Maine and the U.S. Court of Appeals for the First Circuit faulted HHS for moving forward with a rebate mechanism without adequately accounting for what it would cost the hospitals required to operate it. Shortly thereafter, HHS moved forward with a revised version of the same rebate program — only twice as large and even more expensive.
Before announcing that the revised program would take effect on Jan. 1, 2027, the Health Resources and Services Administration, which oversees the program, received more than 2,400 comments, including extensive evidence from 340B hospitals and other covered entities describing the financial and operational impact of a rebate mechanism. Hospital analyses estimate that administrative costs alone could exceed $1 billion annually – far above HHS’ $537 million estimate. HHS’ estimate does not fully account for costs associated with reconciliation of incoming rebate payments, startup costs, cash-flow burdens, loss of cost-of-goods-sold benefits, and other operational impacts.
The AHA and Maine Hospital Association are joined in the suit by Eastern Maine Medical Center in Maine, the Unity Medical Center in North Dakota, the Dallas County Medical Center in Arkansas, and the Nathan Littauer Hospital and Nursing Home in New York. In addition to the Complaint for Declaratory and Injunctive Relief linked to above, the plaintiffs also filed this Temporary Restraining Order with Incorporated Memorandum of Law.
Transitions at BILH
The Board of Trustees of Beth Israel Lahey Health (BILH) announced last Thursday that it had chosen Peter Shorett as the health system’s next president and CEO, effective January 2027. He succeeds Kevin Tabb, M.D., who announced earlier this year that he would be stepping down. Shorett has been with BILH since 2019, most recently serving as senior executive vice president and chief operating officer. Prior to joining Beth Israel Lahey Health, Shorett was a senior partner at Chartis. Shorett earned his Bachelor of Arts at the University of California, Berkeley. He completed his Master of Public Policy at Harvard Kennedy School, with a focus on healthcare policy.
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Megan Gray, DNP, R.N., has been named president and chief operating officer of Anna Jaques Hospital, part of Beth Israel Lahey Health. Gray has served as chief nursing officer and chief operating officer of Anna Jaques since May 2025. She previously held executive positions at Frisbie Memorial Hospital and Portsmouth Regional Hospital in New Hampshire. Gray earned her Bachelor of Science in Nursing from Quinnipiac University in Connecticut and later received both her Master of Science in Nursing, Family Nurse Practitioner, and Doctor of Nursing Practice from the University of New Hampshire.
MHA Offices Closed
MHA’s offices are closed today in recognition of the federal and state holiday known as Columbus Day. While many entities, including MHA, recognize the day as Indigenous People’s Day, that designation does not legally exist in the commonwealth, although there have been attempts in the State House to pass legislation to change the name. Approximately 28 cities and towns in the commonwealth have voted to independently recognize Indigenous People’s Day.