SECTION 1. Chapter 6D of the General Laws is hereby amended by inserting after section 21 the following new language: -

Section 22. Ensuring the Efficient Operation of Hospitals

(a) The commission shall develop an index to measure and ensure hospital efficiency. In developing the hospital efficiency index, the commission shall consider existing measures of hospital efficiency, which shall include but not be limited to the following:

i.Measures of low-value care and potentially avoidable utilization, including but not limited to avoidable hospital admissions, hospital readmissions, avoidable emergency department visits, preventable medical errors, hospital-acquired infections, unnecessarily extended length of stay, and use of low-value services and treatments, developed in consultation with the Betsy Lehman Center;

ii.Measures that examine inpatient and outpatient hospital payment levels compared with hospital performance on standard quality measure set, as established by the center for health information and analysis pursuant to section 14 of chapter 12C;

iii.Measures that examine the hospital’s cost of delivering care compared to other hospitals, including but not limited to measures of cost per case, ratios comparing costs to payments, average length of stay, efficient use of bed capacity, and measures of hospital operating expenses per case or service delivered, and compared to Medicare reimbursement rates and national trends; and

iv.Measures of administrative waste and other unnecessary administrative spending, including but not limited to, foregone opportunities due to lack of clinical and operational integration, redundant staffing, unnecessary duplication of procedures and diagnostic testing, lack of electronic medical records and interoperability of patient medical records.

(b) The commission shall develop each component of the efficiency measure for application at both the hospital and the system level, unless the commission deems that certain measures would be more appropriately applied at the system level.

(c) Prior to publishing the hospital efficiency index under subsection (a), the commission shall hold a public hearing. The commission shall provide public notice of such hearing at least 45 days prior to the date of the hearing, including notice to the joint committee on health care financing. The commission shall identify as witnesses for the public hearing a representative sample of hospitals, hospital systems, payers, including public and private payers, consumer organizations, employer representatives, and such other interested parties as the commission may determine. Any other interested parties may testify at the hearing.

(d) The commission shall evaluate the index every two years and may modify the index. Prior to publishing an updated index, the commission shall hold a public hearing as set forth in subsection (c). 

(e) The commission shall publish an annual report on its website and include as part of its annual hearings, pursuant to section 8, hospital performance, in the aggregate and by individual hospital, on each component of the index.

(f)The commission, in consultation with the center for health information and analysis shall promulgate regulations governing the collection of data sufficient to monitor hospital efficiency. 

(g) The commission shall develop recommendations governing the enforcement of the hospital efficiency index by the state and private and commercial payers. The commission’s recommendations shall include, but not be limited to the following:

i.Requiring commercial insurers, Medicaid, and group insurance commission to directly apply efficiency adjustments to hospital contracts based on performance on the efficiency index;

ii.Requiring the hospital to enter into an efficiency correction action plan if a hospital performs poorly on the index overall or on any component of the index; and

iii.Prohibiting commercial, Medicaid, and the group insurance commission payment for low value care or other hospital services related to potentially avoidable utilization, provided that consumers are protected from balance billing for such services.

The commission, in consultation with the center for health information and analysis, the office of Medicaid, the group insurance commission, and the division of insurance,  shall file a report containing its recommendations for enforcement of the hospital efficiency index with the house and senate committees on ways and means and the joint committee on health care financing and shall be published and made available to the public no later than July 1, 2026.