New Indiana Healthcare Laws From the 2023 Legislative Session

The Indiana Legislature addressed a number of healthcare issues during its long legislative session and passed several new healthcare-focused bills that have since been signed into law. Two of these laws – regarding physician noncompete agreements and healthcare oversight – will be especially significant for healthcare providers.

Physician Noncompete Agreements (SEA 7)

The most noteworthy new law refines physician noncompete language. For context, roughly 70% of physicians are employed, most of which are employed by a hospital or health system. The healthcare industry, like most other industries, makes use of noncompete agreements that restrict where physicians may work should they leave their current employer. Last year’s legislative session brought refinements to how these contracts could be exited. This year’s session prohibits noncompete language for primary care physicians and eliminates any post-employment restrictions for any physician, assuming their contract was fulfilled.

Practical takeaways:

• For physicians: Generally, currently employed physicians now have more options (or fewer restrictions) at the end of their contract and can effectively practice wherever they want as long as they satisfy their current obligations. Going forward, primary care physicians will have no restrictions at all.
• For hospital employers: Knowing that primary care physicians can move to a competitor easily, it will be key for hospitals to focus on retention. Without the stick of a noncompete, the emphasis will be on the carrot, which may require hospitals to rethink their compensation philosophy. Employed specialists will not have a noncompete “tail” and may also move to a competitor at the end of their contract.
• For consumers: With some physicians able to switch to a more lucrative employment agreement quickly, their compensation would increase as a result of a switch. This may further increase the budget pressure on their hospital employers, which in turn may lead to higher prices for their services. On the plus side, if a physician changes employers, patients’ medical records have to follow.

Health Care Cost Oversight (HEA 1004)

A hodgepodge of healthcare items from other bills were ultimately consolidated into House Enrolled Act 1004, which creates a healthcare cost oversight task force. Originally conceived as a cap on hospital rates (i.e., price control), this bill is now the legislative equivalent of “double-secret-probation” for hospitals – but only selected hospitals. The law carefully excludes facilities owned by government divisions (such as cities and counties), critical access hospitals, those specializing in behavioral or oncology care, or those that have net revenue under $2 billion. Of the 192 hospitals in Indiana, the law actually applies to only 10: essentially the four big health systems of Community Health Network, IU Health, Parkview Health, and Ascension (St. Vincent). The law has four main points of impact:

• The bureaucracy of a healthcare cost oversight task force
• The collection and analysis of healthcare data and ultimately recommendations on improving affordability
• The narrow application of site-of-service billing requirements, which prevents clinics from being classified as hospital departments and thus billed at higher rates (not effective until 2025)
• The establishment of a price cap of 285% of Medicare rates but without any penalties being assessed for exceeding this threshold

These are only the highlights. Each of these points has a myriad of details to assess.

Practical takeaways:

• For physicians: This law creates the potential for streamlining prior authorizations by using value-based payment arrangements with insurers.
• For hospitals: For the targeted few hospitals to which it applies, they will have to navigate the oversight of the task force and the elimination of any new hospital-based outpatient departments. Hospitals will also benefit from the future streamlining of prior authorizations, and hospitals will also have more data reporting requirements.
• For insurers: Insurers may experience a potential reduction in payments for clinics billed as hospital departments, and they will likely encounter more data reporting requirements and oversight by the task force. There is a slight encouragement for insurers to pursue value-based care arrangements.
• For consumers: There is no immediate impact for consumers, but the aim of this law is to increase healthcare affordability for Hoosiers.

Other Healthcare Legislation

The legislature passed three other bills impacting healthcare that are worth mentioning:

• The long-term care law (HEA 1461) limits the ability of temporary staffing agencies to recruit new employees from the current staff of contracted facilities (i.e., no poaching).
• The biennial budget (HEA 1001) sets physician Medicaid reimbursement at 100% of the prior year’s Medicare rates.
• The requirements to function as an athletic trainer have been strengthened to require completion of an accredited program and completion of a certification exam (HEA 1647).

If you need help determining how these new laws will impact your healthcare organization, please contact KSM’s healthcare consulting team or complete this form. For more on the latest tax legislation resulting from Indiana’s 2023 legislative session, check out our 2023 Indiana Legislative Update.