Hospitals get wins on price cap bills

Hospitals scored victories recently in the ongoing push across multiple states for price caps for their organizations.

The 2026 legislation followed three states that enacted hospital price caps in 2025. A total of 13 states considered reference-based hospital pricing legislation last year, according to tracking by the National Academy for State Health Policy.

Delaware delay

Delaware has steadily advanced a bill this year that would limit prices for hospital services to 250% of Medicare rates unless the hospital or health system is in a state global budget. Such global budgets use a predetermined, fixed annual budget to care for their patient population.

Supporters of the bill cited a RAND Health report that found 2020-2022 Delaware hospitals’ average commercial prices were more than 300% of Medicare prices.

The Delaware Healthcare Association (DHA) said the bill — as originally written — would cut $413 million annually in healthcare services for Delaware hospitals and risk 4,000 jobs.

But in May, the DHA dropped its opposition after working with legislators to tweak the legislation to address their concerns.

“This amended legislation moves the needle on healthcare costs while also recognizing the headwinds facing hospitals and Delaware’s unique care needs as a growing and aging state,” Brian Frazee, president and CEO of DHA, said in a written statement. “Healthcare reform has rightly been a major focus of policymakers. The status quo is unacceptable, and Delaware hospitals are once again leading the way with collaborative solutions.”

The bill has continued to advance, and on June 23 it won approval from the Delaware House Appropriations Committee.

The key changes included a longer (seven-year) runway for reference-based pricing implementation, as well as exemptions for specific hospitals based on populations served, said a hospital official.

Hospitals pushed for the changes while underscoring that they expected to see more uninsured patients visit emergency departments due to coming federal policy changes, and they have faced worsening regulatory burdens.

The final bill also directed the Department of Insurance and the State Employee Benefits Office to consult with Delaware hospitals when determining each hospital’s true underlying Medicare rate, which may not otherwise be captured in a hospital’s annual Medicare updates.

Exemptions also were added for freestanding children’s hospitals, Medicare-dependent rural hospitals and urban Medicaid disproportionate share hospitals.

Vermont veto

On June 16, Vermont Gov. Phil Scott (R) vetoed legislation, S190, that would have sped up the state’s ability to begin mandating reference-based pricing for hospitals in plans for public school employees and ACA marketplace plans.

The governor said he would instead push his own healthcare reforms administratively, after the legislature previously rejected legislation containing those policies. His preferred approaches include bringing association health plans back to Vermont, allowing insurance premiums to be based partially on age and a site-neutral payment approach.

The state is still on track to implement a bill, Act 68 of 2025, which directs the independent Green Mountain Care Board (GMCB) to begin implementing reference-based pricing in commercial plans beginning in hospital financial year 2028. It will implement global hospital budgets for noncritical access hospitals by 2028 and for all Vermont hospitals by 2030.

Rate-setting guidance is set to be issued by GMCB in March 2027, according to an update it issued earlier this year.

Michigan moves

On June 18, Michigan House Speaker Matt Hall (R) introduced legislation that would cap all hospital reimbursements at 200% of Medicare rates. It also would create a hospital cost review board and impose new restrictions on hospital consolidation.

The four-bill package (HB6116, HB6117, HB6118 and HB6119) also would create a five-member Hospital Cost Review Board, establish a fund to support struggling rural hospitals and prohibit certain physician noncompete agreements within large hospital systems.

The price control provisions drew the ire of the Michigan Health & Hospital Association (MHA).

“Proposals that introduce additional administrative burdens and arbitrary government price controls would exacerbate the affordability challenges they seek to address,” Brian Peters, CEO of MHA, said in a June 22 statement. “Neighboring states that have adopted similar policies face significantly higher costs than Michigan, which ranks third lowest in the country for hospital prices relative to Medicare.”

Specific provisions of the bills include:

• Requiring hospitals to immediately reduce certain healthcare costs by 10% or lose their nonprofit status
• Subjecting annual hospital price increases to board approval and limiting them to the rate of inflation or lower
• Barring any hospital from controlling more than 8% of the statewide bed share, or 3% of statewide market share
• Barring hospitals from controlling more than 15% of a state prosperity region bed share, or 15% of a state prosperity region market share
• Subjecting mergers and acquisitions (M&As) to board approval and only allowing them to proceed if rates are reduced by at least 2%
• Subjecting M&As to a 12% tax on the purchase price
• Capping charges for cash-pay patients at 150% of Medicare rates
• Allowing the hospital cost review board to review any data related to budget, cost reports, executive compensation and utilization

“One of the problems we’re having is that we’re giving these hospitals and the care system billions and billions of dollars,” Hall said. “And then they’re always coming back and asking for more money, and always saying they don’t have any money.”

Peters countered that the legislative package would impose additional administrative burdens and “arbitrary government price controls” at a time when hospitals are already facing financial pressures.

MHA underscored those existing challenges by highlighting the recent closure of Sturgis hospital, a 101-year-old rural nonprofit hospital.

“Our members are committed to ongoing dialogue with lawmakers to ensure policy proposals are evaluated with a clear understanding of their real-world impact on patients, providers and local healthcare systems,” Peters said.