Massachusetts Health & Hospital Association 
INSIDE THE ISSUE
> Positive Financial Bump in FY25
> Gov. Proposes New Health Fund
> Prior Authorization Guidance
> Transition
MONDAY REPORT
FY25 Data: Hospitals Rebound. (But Do They Really?)
The statewide hospital system median operating margin finally snuck into positive territory in fiscal year 2025, registering a 0.2% margin, up from negative -2.6% the year before, according to the most recent report from the Center for Health Information and Analysis (CHIA).
While such positive news usually would be met with optimism, those intimately familiar with Massachusetts healthcare quickly saw the reasons behind the turnaround as well as the inescapable threats to the improved numbers. Such observers say hospitals have not “turned the corner” towards profitability; instead, they fear to see what lurks around that corner as up to 300,000 in Massachusetts will lose coverage in the coming year, combined with other federal funding cuts.
Throughout hospital fiscal year 2025, the Healey-Driscoll Administration and the state legislature appropriated hundreds of millions of dollars to shore up safety net hospitals, the Health Safety Net, hospital-licensed health centers, as well as the hospitals that stepped in to prop up the former Steward Health Care facilities left in the lurch when that system went bankrupt. Just as recent decisions to stop reimbursements for expensive GLP-1 weight loss drugs have likely helped reverse declining finances of health insurance companies, the state’s temporary influx of cash to stabilize providers was a welcome, but temporary, fix to the system, responsible for part of the positive bump.
“CHIA’s FY25 results reflect critical state investments and the rigorous work hospitals have undertaken to prepare – but billions still hang in the balance in the immediate years ahead,” said Dan McHale, MHA’s senior vice president, Healthcare Finance & Policy. “While CHIA’s latest annual report shows most hospital systems were operating on thin or negative margins in FY25, providers are now bracing for a historically challenging road ahead. Major increases in uncompensated care, restrictions on fundamental financing supports, and growing administrative demands will collectively present the most disruptive wave of financial pressures hospitals have experienced. They come with alarming implications for not just provider organizations, but for patient access and affordability.”
Hospitals’ own belt tightening is also viewed as a contributing factor to the FY25 results. CHIA’s recent report shows hospitals decreased their use of expensive temporary labor. They have also instituted new supply chain efficiencies, innovative technology, and painful decisions around non-clinical workforce, among other actions to address cost pressures and keep services open. But as policymakers and MHA have noted, hospitals are fundamentally “cost takers” as they struggle to absorb the rising expense of pharmaceutical drugs; labor (accounting for the largest share of hospitals’ operating costs); administrative red-tape practices; as well as the increased costs for utilities, technology, and other essential resources that every segment of the economy is experiencing.
“Massachusetts has the power to soften at least some of these impacts through bold and collaborative policy action,” McHale said. “Those are the solutions at the forefront of our hospitals’ advocacy today, with the wellbeing of their patients and caregivers at the center.”
Governor’s Stabilization Fund Would Help Ailing System
Last week, Governor Maura Healey filed a $2.24 billion supplemental appropriations bill that, among other things, would create a Health Care Stabilization Fund “to support emerging healthcare needs, including new costs born from recent federal policy changes,” according to the filing letter the governor submitted with the bill.
“This fund will allow us to house surplus resources to support MassHealth, the Connector, and the Health Safety Net,” Healey wrote.
If passed, the “supp” also would suspend the state’s 24-cent-per-gallon tax on gasoline for two months; cap the resale price of concert tickets at 110% of face value; direct $41.5 million to support SNAP recipients, including $26.6 million for caseworkers at the Department of Transitional Assistance; and fund the postpartum and maternal mental health programs the governor had announced the previous week.
“The Health Safety Net has faced persistent annual deficits of hundreds of millions of dollars and, due in part to federal policies in the coming year, that deficit will reach an unsustainable level that threatens patient care and the very viability of some hospitals,” said MHA’s incoming Interim President & CEO Mike Sroczynski. “Governor Healey’s stabilization fund proposal is one of the creative and innovative actions we will have to take in the coming months to stabilize the Massachusetts healthcare system. MHA and the hospital community commend her for this action and urge the legislature to include it when the supplemental budget is passed.”
DOI Lays Out Guidance for Sweeping Prior Auth Changes
The Massachusetts Division of Insurance (DOI) has issued three guidance notices clarifying how it will implement its new regulation released in June that significantly limits some prior authorization requirements from fully insured commercial health insurance companies under DOI jurisdiction.
The guidance collectively represent one of the most significant prior authorization reforms in Massachusetts in recent years. They move the regulatory framework toward greater transparency, fewer utilization management barriers, stronger continuity-of-care protections, and substantial reductions in prior authorization requirements for many of the most frequently used healthcare services.
One guidance document (Guidance J) requires health plans to make prior authorization requirements fully transparent and easily accessible to providers and consumers by maintaining on their websites a searchable public list of all services, supplies, and pharmaceuticals requiring prior auth. They also must provide at least 60 days’ advance notice before implementing any new or more restrictive prior authorization requirements and, to cut down on administrative burdens, the insurers can demand of providers only the information necessary to make a determination.
Another guidance document (Guidance K) establishes prior auth procedures for urgent situations where delay could seriously jeopardize a patient’s health or safety; in these circumstances, carriers must issue prior authorization determinations within 24 hours after receiving necessary information. Approved authorizations also must remain valid for at least 90 days or the remainder of the benefit year, whichever is shorter. The guidance also protects patients changing health plans; new carriers must honor prior authorizations approved by a patient’s previous health plan for at least 90 days, provided the service remains a covered benefit.
The most significant operational change is contained in a third document (Guidance L) that outlines the creation of broad categories of services for which prior authorization may no longer be required. These include emergency services, most in-network acute inpatient hospital admissions, weekend and holiday post-acute care admissions, routine maternity care, and abortion and abortion-related services, among others.
All affected insurance carriers must submit implementation plans to DOI within 45 days, detailing operational changes, provider/member communications, and compliance strategies.
The three guidance notices are located here under “Health.”
Transition
Dr. Thea James, Boston Medical Center’s vice president of mission, associate chief medical officer, and executive founder of the Health Equity Accelerator, last week announced her retirement, effective at year’s end. Dr. James has been a member of the MHA Board of Trustees since 2019.
Widely regarded as a leader and innovator in the healthcare equity space, in addition to being a skilled clinician, Dr. James’s efforts have expanded access, created pathways to economic mobility, and helped build the conditions in which individuals, families, and communities can flourish. Her many admirers at MHA who have learned from her compassionate, pioneering work wish her the very best in the next chapter of her journey.