A powerful labor union dropped its push for a controversial ballot question that would have cost the state's largest health care provider $440 million a year, after reaching a deal Wednesday with hospital industry executives and Beacon Hill leaders.
The compromise averts what otherwise promised to be an expensive and contentious political fight leading up to the November election. The deal will establish a special commission to study variations in health care prices and calls for hundreds of millions of dollars in new funding for ailing hospitals over the next five years.
It may also lead to more jobs for members of the Service Employees International Union at giant Partners HealthCare.
Tyrek D. Lee Sr., executive vice president of SEIU's Local 1199, which had pushed the ballot question, said the compromise "begins to address the unfair way that Massachusetts hospitals are reimbursed for care."
A Partners spokesman said the approach "offers an effective way to provide needed assistance, especially to those community hospitals that serve disproportionately high numbers of low-income patients."
Partners and the SEIU also said they have formed a "strategic alliance" that could lead to more workers at Partners hospitals unionizing under the SEIU. Only about 1,200 of the union's 52,000 members now work at Partners facilities.
The SEIU's ballot proposal would have dramatically changed the way hospitals are paid.
Some of the hundreds of millions of dollars taken from Partners hospitals, which are among the priciest in the state, would have been redistributed to lower-paid hospitals, and some would have been returned to health insurers.
Several state reports have found that big Boston teaching hospitals, such as those owned by Partners, are paid more than smaller community hospitals for providing similar care, at least partly because of their greater market power. SEIU leaders had argued that their ballot question would have helped level the playing field.
Executives at Partners, a nonprofit health system that owns Massachusetts General, Brigham and Women's, and eight other hospitals, said the measure would have forced them to cut thousands of jobs.
But Partners and the SEIU made peace Wednesday, releasing a joint statement that said they support Partners' employees rights to unionize.
"We have always respected the rights of our workers to choose whether to be represented by a union, or not," the statement said. "Future organizing efforts will be designed to ensure the right of workers to make free and fully informed decisions on this question through the process of a secret ballot election."
The broader legislative agreement to avoid the ballot question will establish a special commission to review variation in health care prices, which would include lawmakers, state officials, employers, and representatives from the health care industry.
The commission would be charged with recommending steps to reduce price variation among different providers and issuing a report by March 15, 2017.
"The speaker, the Senate president, and the governor have given us the opportunity to work with stakeholders to explore provider price variation in the commonwealth," said state Representative Jeffrey Sánchez, a Jamaica Plain Democrat and House chairman of the Legislature's Joint Committee on Health Care Financing. "We're looking forward to looking at this issue in detail."
The governor and lawmakers have already proposed a new $250 million annual assessment on the hospital industry to be returned to hospitals through Medicaid payments, and the compromise announced Wednesday would add $15 million a year to that total.
The money would be redistributed so hospitals with higher shares of patients on Medicaid, the government program for poor and low-income residents, would benefit the most. The tax would be phased out after five years.
The agreement also adds a new $45 million assessment on the hospital industry, which would be paid back over five years to hospitals with prices below 120 percent of the statewide median.
"This framework establishes a path to a long-term solution on the issue of price variation that will protect consumers, provide stability in the healthcare marketplace, and help put all of our hospitals on solid financial footing," Senate President Stan Rosenberg said in a statement.
Without a compromise, the SEIU had vowed to collect enough signatures to put its initiative on the statewide ballot. Partners and the broader hospital industry had vowed to fight the measure.
Both sides were gearing up to spend millions of dollars on their campaigns.
But at the same time, they were talking behind closed doors to try to avert the ballot question.
Talks to hammer out a compromise picked in recent weeks, and included top aides on Beacon Hill.
Lynn Nicholas, president of the Massachusetts Hospital Association, called the compromise a "constructive step forward."
"It is certainly a superior approach to the misguided rate setting process contained in the union's proposed ballot question, which just about all health care experts viewed as a 'blunt instrument' that was both unwise and unworkable," she said in a statement.
Steve Walsh, executive director of another industry group, the Massachusetts Council of Community Hospitals, also called the agreement an important step, but said more work must be done to support and sustain community hospitals.