Indiana enacted a law last year that caps the prices its five largest nonprofit hospital systems can charge patients with job-based health plans. Hospitals that do not comply with the price cap by 2029 risk losing their tax-exempt status and face a $10,000-a-day penalty.

The law requires the targeted hospital systems to offer direct-to-employer contracts that bypass insurers. This provision also applies to many other Indiana hospitals starting in September. The price cap will be based on the statewide average for inpatient and outpatient hospital prices, with Indiana using Medicare rates as a yardstick to measure commercial prices.

The state will exclude doctor services from the price cap calculation. A state report from November found that three of the five nonprofit hospital systems exceeded a voluntary price benchmark when practitioner services were excluded. However, all five systems were below the voluntary benchmark when doctor services were included in the overall score. Under the law, hospitals in Indiana must offer direct contracts to employers for procedures priced at or below 260% of what Medicare pays for hospital care.

"Government has to intervene, because healthcare is run like an unregulated utility," Indiana Governor Mike Braun said. The five hospital systems subject to the cap are Ascension St. Vincent, Community Health Network, Franciscan Health, Indiana University Health, and Parkview Health. The state is expected to release a report by June 30 detailing average hospital prices in Indiana.

Oregon's state employee plan implemented price caps where hospitals cannot charge more than two times the Medicare rate for services. This plan saved more than $100 million within its first two years. Legislation has been proposed in Colorado and New York to enact similar hospital price controls. Vermont also limits how much hospitals can charge for individuals covered by employer plans.

Scott Tittle, President of the Indiana Hospital Association, commented on the exclusion of doctor services from the price cap calculation. "We know it is absolutely part of the complete cost of care," Tittle said, adding, "Hospitals can and have done the hard work to reduce their pricing."