Bill would limit hospital fees in Nevada’s public employee health system

A bill in the Nevada Legislature aims to reduce the cost of hospital stays for patients in the Public Employees’ Benefits Program by capping hospital fees, which proponents argue could save the state millions of dollars.

Assembly Bill 349 would establish maximum rates that hospitals and other medical centers can charge for patients covered by the benefits program, also called PEBP. It would cap hospital charges for 175 percent of Medicare rates for in-network hospitals and 160 percent for out-of-network hospitals. The bill would apply automatically to the state employee health plan and provides an opt-in for local government employee health plans.

In an interview, bill sponsor David Orentlicher, D-Las Vegas, said he viewed the bill as an antitrust measure; he said hospitals have been able to boost their profit margins as mergers over the years have consolidated their market power.

For instance, Nevada hospitals on average are charging 287 percent of Medicare rates. The break-even rate is 138 percent on average, according to the National Academy for State Health Policy.

“I know Medicare underpays, but they don’t need to triple Medicare rates,” he said.

If that 175-percent cap is approved, the health plan could save the state $36 million annually, Orentlicher said in his testimony. Hospital profit margins on private plans could go down less than 1 percent because PEBP covers roughly 3 percent of patients in the commercially insured market.

Still, PEBP officials said the exact savings are unknown. The program contracts with networks, who then negotiate the rates with providers for the program’s 70,000 covered individuals. Celestena Glover, executive officer of PEBP, said the parties “are reluctant to share” the hospital fees with the program.

“I can’t guarantee that it’s a savings to us, but it may help us stabilize some of our costs,” Glover said during the hearing in the Assembly Committee on Health and Human Services on March 12.

The bill carves out exemptions for critical access hospitals and other small or rural hospitals.

Hospital system representatives told lawmakers they oppose the bill. Brian Kleven, the Nevada market chief financial officer for Dignity Health St. Rose Dominican Hospitals, said the bill could jeopardize financial stability of hospitals and limit patient access to care.

“Rather than imposing damaging reimbursement caps to us, revenue caps, we urge and recommend lawmakers to engage with providers for sustainable solutions that will control costs and maintain high access to quality care and encourage future investment in the great state of Nevada,” he said.

AB 349 is based on similar legislation passed in Oregon in 2017, which set caps on hospital facility prices for their public benefits system at 200 percent of Medicare for in-network services and 185 percent for out-of-network services at the state’s 24 large, urban hospitals.

Roslyn Murray, an assistant professor at Brown University who studied Oregon’s policy, said her research found no evidence of cost-shifting to private insurance during the first two years of the policy. It also found members saved almost $2 million in outpatient out-of-pocket expenses during that time.

Oregon saw $160 million in savings in the first two years, said Margaret Smith-Isa, a program development specialist with the Oregon Health Authority. She said for patients, the policy may not have been noticeable because many plans’ benefits include a hospital stay co-payment, which did not change. What is notable to her is that much has remained the status quo for patients’ provider options.

“We have not had situations where a hospital has left the network or is no longer available to employees,” Smith-Isa said.

Contact McKenna Ross at mross@reviewjournal.com. Follow @mckenna_ross_ on X.