Winning another reprieve from budgeted Medicare payment reductions could be a breeze for teaching hospitals this year, as the political winds appear to be blowing in their favor.
That's despite the fact that major teaching hospitals have and will continue to enjoy double-digit Medicare inpatient profits (See chart).
However, rural hospitals, which were worried about their Medicare profits before the budgeted reductions, say that they are most in need of relief--not teaching hospitals.
"We've been very vocal about the needs of hospitals in the nation's heartland, the safety-net hospitals, and Congress is certainly listening," said William Sexton, administrator of 59-bed Franciscan Skemp Healthcare in Sparta, Wis., and a member of the National Rural Health Association's policy board. "Realistically, all hospital groups are competing for (congressional) attention, and you can't give everything to everyone."
Last year, teaching hospitals won a freeze in Medicare's indirect medical education payments, and for fiscal 2000 the rate stayed at the 1999 level instead of dropping as was required by the Balanced Budget Act of 1997. Medicare paid teaching hospitals roughly $3.7 billion in 1999 for their indirect costs, such as overseeing physician training programs. That payment would have dropped to a little less than $3.6 billion without the freeze.
This year, teaching hospitals want more of the same, and they have some new data and support from other healthcare groups to help them make their case.
New York Democrats have introduced identical bills in the House and the Senate extending the freeze on Medicare's indirect medical education payments to teaching hospitals.
The bills' announcement came days before Congress' two-week spring recess, when lawmakers return to their home states to speak with their constituents about issues. A congressional recess is an ideal time for providers to mount a grass-roots lobbying campaign (Aug. 30, 1999, p. 2).
The Senate bill, which was introduced by Sen. Daniel Patrick Moynihan (D-N.Y.), boasts 24 co-sponsors, including five Republicans.
Moynihan, who is the ranking Democrat on the Senate Finance Committee, is a powerful ally of teaching hospitals. He is also retiring from the Senate this year after 24 years, and some lobbyists say that lends his proposals a certain "sentimental favorite" quality.
"They may just give this (bill) to Moynihan and say, `Oh, it's his swan song,"' said one healthcare lobbyist, who asked not to be named. "I think that really helps the (teaching) hospitals."
The House bill, which was introduced by Rep. Charles Rangel (D-N.Y.), has only six co-sponsors--all Democrats.
"We've got a lot of (lobbying) work to do in the House," said Richard Knapp, M.D., executive vice president of the Association of American Medical Colleges, which represents 125 medical schools and their academic medical centers.
The Medicare Payment Advisory Commission also is helping teaching hospitals--albeit inadvertently--to win further Medicare payment relief.
Last month, MedPAC formally recommended to Congress that hospital Medicare inpatient payments rise 3.5% to 4% for fiscal 2001--a bigger increase than even the hospitals requested (April 17, p. 6).
In addition, MedPAC released figures showing that total Medicare profits for major teaching hospitals fell in 1998 to 2.3% from 5.1% in 1997. Those figures include all Medicare services, such as inpatient, outpatient and rehabilitation.
On inpatient care alone, those margins were 25.5% and 28.5% in 1998 and 1997, respectively.
"MedPAC's (inpatient) recommendation and the total margin numbers have certainly served to help us," the AAMC's Knapp said. "1997 was a good year, and that hurt (our lobbying efforts) to some degree last year. The data finally seems to be catching up (with reality)."
The AAMC is working closely with the American Hospital Association to win more relief from the Balanced Budget Act. The budget law called for significant reductions in Medicare payments to providers.
Knapp said that next week the two healthcare groups will bring industry executives to Washington to plead their cases to members of Congress.
"We meet with the AHA every Friday morning," Knapp said. "They come to our briefings, and we go to theirs."
"Just like last year, we're working with them to ensure specific, targeted relief for teaching hospitals," said Thomas Nickels, senior vice president of federal relations at the AHA. "If (Medicare) relief happens, there will certainly be a teaching hospital component to that."
While MedPAC has given the teaching hospitals valuable bargaining tools, the commission is also seeking to combine Medicare's indirect and direct graduate medical education payments--a move teaching hospitals see as a threat to their livelihood.
On that issue, the teaching hospitals have a friend in the American Medical Association, which also opposes such a move.
The AMA has written a letter to MedPAC asking the commission to hold off on any changes in the way Medicare pays for medical education until more studies can be done.
The AMA is also sponsoring a conference this week in Chicago on the plight of academic medical centers. The conference will be held May 4 in conjunction with the annual meeting of the Association of Health Care Journalists.