Indiana bill seeks to end tax breaks for non-profit hospitals that overcharge patients

Indiana lawmakers are pushing to slash hospital prices after a Guardian investigation chronicled how one of the state’s largest non-profit hospital chains bought up its competition and used its market power to stick patients with some of the highest bills in the country.

A new bill introduced last week in the Indiana general assembly would strip non-profit hospitals of their tax-free status if they continue to charge commercially-insured patients more than 200% of what the federal government pays for the same services under Medicare.

If enacted, the legislation would mean millions annually in tax obligations for Parkview Health, the Fort Wayne-based non-profit hospital chain investigated by the Guardian, should it choose to maintain its high prices. Between 2011 and 2023, Parkview charged commercially-insured patients an estimated 233% of the Medicare’s reimbursement rate on average, one of the highest price levels in the country, despite its location in greater Fort Wayne, which currently ranks as the No 1 most affordable metro area to live in the United States.

The Guardian’s investigation into Parkview Health sparked a firestorm in Fort Wayne with hundreds of patients and small business owners complaining on social media, to the Guardian, and to local news outlets about their struggles with the charity hospital chain’s high prices.

In a statement, Republican representative Martin Carbaugh, the bill’s author, said he hoped his proposal would help address the public outcry by holding large non-profit hospitals like the Fort Wayne system accountable.

“Indiana has a high cost of healthcare problem and when you look closer at the numbers we see some of our highest costing hospitals that are driving this issue are our large non-profit hospitals,” said Carbaugh. “Any not-for-profit hospital that continues to charge more than 200% of the Medicare reimbursement rate for a service or item will lose their not-for-profit status which would mean they would need to start paying taxes like any other for-profit entity.”

Parkview Health did not respond to repeated requests for comment about the proposed legislation.

In an email, the Indiana Hospital Association, an industry group Parkview is affiliated with, criticised the bill, arguing it would put Indiana residents “at risk of losing access to comprehensive care”.

“While we can all agree that healthcare is expensive across the board, the Indiana General Assembly’s own report shows that prices are moving in the right direction,” said Steve Cooke, the Indiana Hospital Association’s senior director of public relations. “Legislators set a benchmark for commercial prices charged by hospitals, and according to the report, Indiana’s non-profit hospital systems averaged 31% lower than the state’s benchmark in 2023. In addition, systems reduced their prices on average over the course of the study.”

Carbaugh’s bill would also subject non-profit hospitals to audits, which would be carried out at the discretion of Indiana’s secretary of state.

Doug Allen, a Fort Wayne area small business owner who has struggled to balance employee payroll with Parkview’s hospital costs, said “it’s about time” lawmakers took action.

“The more you drive around, the more you see every single facility around here is Parkview,” said Allen, who runs a plastic molding firm outside of Fort Wayne. “It’s pretty easy to see where everybody’s money is going.”

In 2023, Parkview Health, which brought in more than $2bn in revenue, handed over more than $5m in compensation to its already retired CEO, Michael Packnett, the hospital chain’s latest available IRS disclosures show.

The hospital price bill has been designated as a priority by the state’s Republican house majority, and may attract bipartisan support.

“I’m open to any conversation surrounding lowering healthcare costs, because that’s something Hoosiers desperately need,” said Representative Kyle Miller, a Democrat from Fort Wayne, who said through a spokesperson that he is mulling whether or not to support the bill.

Last year, after the Guardian’s initial stories about Parkview, Allen, the small business owner, said he was skeptical that legislators would take on the non-profit, which is the largest employer in the greater Fort Wayne area.

But now he’s watching to see what happens.

“I thought it would all just flame out,” Allen said, referring to the public uproar. “But this one seems like it’s sticking around a little bit.”