How hospitals are paid: witnesses outline payment systems and warn of risks in reference‑based pricing bill

Devin Green, representing the Vermont Association of Hospitals and Health Systems, told a legislative committee that hospitals in Vermont receive payments from three main sources—commercial insurers, Medicaid and Medicare—and that each payer uses different methods.

Green said hospitals “start out with one chargemaster” and that commercial insurers “negotiate hospital payments through contracts” that can include fee‑for‑service discounts, capitated payments or bundled/episode payments. He added, “I want to put a disclaimer right up front that I am, just like Jessa, not a doctor, I am not a finance person.”

Why it matters: lawmakers are weighing a bill that would use reference‑based pricing (RBP) tied to Medicare as a benchmark for what commercial payers must pay hospitals. Witnesses warned that Vermont’s Medicare reimbursements differ from other states and that pegging commercial rates to a low Medicare baseline could materially change hospital revenue.

Green and others told the committee Medicaid in…