By most measures, this would appear to be the golden age for the American Hospital Association's Washington office.
The AHA's lobbying shop was recently named the 21st most powerful in Washington in a Fortune magazine poll of 2,200 Beltway insiders. Under current President Richard Davidson, the heart and soul, if not the flesh and bones, of the AHA have moved to Washington. The AHA lobbying staff is larger than ever. And donations to the political action committee continue to grow (See chart).
But when you ask veteran AHA lobbyists and alumni of the Washington lobbying staff if these are the best of times, they generally answer no.
Why? Three letters. P-P-S.
That's short for the Medicare pro-spective payment system. Congress implemented PPS in 1984, and for the Washington office of the AHA, life has never been the same.
The AHA opened its Washington office during World War II as the Wartime Service Bureau, which was later renamed the Washington Service Bureau. That was around the time Congress was considering the Hospital Survey and Construction Act, known popularly as the Hill-Burton Act.
For the most part during the first several decades, there were few real knock-down-drag-out fights. Healthcare was a rapidly expanding industry, and everybody was relatively happy. In 1950 total healthcare industry spending was $12.7 billion compared with $1 trillion today. By 1960 it was $26.9 billion. By 1970 healthcare spending had skyrocketed to $75 billion. With the exception of the passage of Medicare and Medicaid during the Johnson administration, there were few high-profile issues.
What's more, there was togetherness in the industry. The rancor between investor-owned and not-for-profit hospitals had not developed because the for-profit sector didn't have the power it has today. There were fewer hospital lobbying organizations, which meant there was little infighting. And most important, hospitals were paid based on their costs.
PPS changed all that. The switch from a cost-based Medicare reimbursement system to a prospective payment system based on diagnosis-related groups was the biggest change in hospital payment policy the federal government had ever implemented.
The world of hospital lobbying changed for good, although the effects weren't apparent for the first few years. That's because Medicare had set its payments so high that hospital profit margins reached record levels during the first few years of PPS.
But as the government began to ratchet down the payment rates, the rifts in the industry began to widen. Other changes, designed to promote "fairness" and "equity," increased the splits.
According to Richard Pollack, who started at the AHA in 1983 and worked his way through the lobbying ranks to become executive vice president of federal relations, the first serious battle came over a payment change designed to incorporate local costs into the national reimbursement rate.
Other fights followed, the most spectacular of which may have been over rural hospitals' attempt to be paid at the higher rates urban hospitals received.
"Once we moved to a fixed payment, it changed all the dynamics," Pollack says.
Larry Goldberg, director of Washington healthcare national affairs for Deloitte & Touche and a former AHA staffer, agrees.
"The reality is that (healthcare) lobbying is much more difficult now than it was 15 to 20 years ago," Goldberg says. "PPS changed the incentives. It makes the industry come apart and makes finding a unified approach to solving issues more difficult."
Through all the changes in politics and payment, the AHA has continued to update its lobbying methods.
According to Pol-lack, the AHA made a conscious decision to become a more aggressive lobbying operation in the early 1980s under Jack Owen, who headed the Washington office. For example, the AHA began using some of the grass-roots lobbying techniques it still employs, such as hosting hospital visits and seminars for legislators. The AHA also started its political action committee.
Under Davidson, the AHA has escalated its efforts. It now uses techniques such as public polling and focus groups. It also has improved its grass-roots organization and increased the use of contract lobbyists.
According to the AHA's annual filing with the Internal Revenue Service, or Form 990, the association's total spending in 1996 was $78.4 million. An AHA official estimates 22.8% of that went toward advocacy and representation.
According to federal disclosure forms, during the first half of 1997 the AHA spent more than $275,000 on outside lobbying compared with only about $110,000 in the same period in 1996. Pollack says the AHA also has set a goal of $70,000 in annual PAC contribution increases.
Davidson also has changed the AHA from a group that largely argued for the status quo to one that seeks change. For example, in last year's budget battle, the AHA successfully argued for the creation of provider-sponsored organizations, which are integrated provider networks that can contract directly with Medicare without becoming HMOs. PSOs will be allowed to contract with Medicare beginning in 1999.
At the same time, the AHA has tried to steer a politically neutral course. Pollack admits, however, that the strategy has had mixed results.
"An organization like ours that takes pride in being bipartisan and tries to take positions based on principles, it gets pretty tough," Pollack says. "When you're a moderate, you get beaten up from both sides. Maybe we will have to reassess (our neutrality) at some point down the road."
At times both parties have been mad at the AHA. For example, during the 1994 debate over the Clinton administration healthcare reform plan, House Ways and Means Committee Chairman Sam Gibbons (D-Fla.) accused the AHA of running ads to "scare the American people and protect hospitals' bottom line."
Republican leaders took umbrage at a series of ads run by the AHA opposing the GOP balanced-budget plan in 1995. The House Republican Conference, which coordinates House GOP communications and strategy, sent packets to all GOP members of Congress with a sample letter titled "Washington lobbyists lie to (Anytown), special interest group buys ad to scare seniors, line their own pockets."
Sometimes, the AHA's neutrality has angered its state members. In 1995, after the scuffle with Republican leaders, the AHA was criticized by the Healthcare Association of New York State for not taking a strong enough stand against Medicare and Medicaid cuts.
Last year's balanced-budget fight was a microcosm of AHA lobbying today. The group faced a tough situation. Both the White House and GOP leaders had agreed to balance the budget with little sacrifice from beneficiaries. That meant reimbursements to providers would have to be trimmed. Furthermore, there were dozens of proposals, usually put forth by other hospital lobbying groups, that pitted one hospital against another.
In the end, the AHA tried to stress things that united the field like the push to get Medicare-only PSOs approved and to avoid issues such as Medicare tax reimbursements that divided the industry. There were a few victories, a lot of damage control and a number of losses, although the AHA made full use of its assets.
Even with outside lobbyists, public polling and some advertising in play, a veteran healthcare lobbyist says it just wasn't like the team-spirited old days.
The lobbyist, who asked not to be identified, recalls when President Carter tried to impose a series of cost-containment measures, and the hospital industry united in opposition.
"It was (the industry's) finest hour," the lobbyist says. "Everyone was focused and together. It was really the last time everyone was on the same team."