After weeks of industry speculation, President Bush last week nominated Thomas Scully, president and chief executive officer of the Federation of American Hospitals, as his HCFA administrator.
The announcement was somewhat anticlimactic given the long-running expectation that Scully, who was associate director of health and personnel in the White House Office of Management and Budget when Bush's father was president, would be nominated. It seemed more of a matter of when rather than whom.
Following normal practice with administration nominees, Scully had no public statement in the wake of Bush's decision to nominate him. He also declined comment after an appearance last week in Atlanta at a meeting of the Association of Health Care Journalists.
If confirmed, Scully, 43, would direct federal healthcare programs that are projected to spend a combined $370 billion this year alone. Now the most public voice of for-profit hospitals, Scully also would be expected to take a significant political role as chief salesman of Bush's healthcare agenda.
Scully's involvement likely would produce informed proposals for healthcare initiatives, said healthcare industry observers.
"Tom knows Capitol Hill. Tom knows the budget process," said Herb Kuhn, vice president of advocacy at the Premier hospital alliance. "Given the administration's agenda for the year-Medicare reform, a Medicare prescription-drug benefit-you can't just throw a proposal out there. With his time with the federation, he knows the hospital issues very, very well."
Scully won positive reviews from a senator who will be key in his confirmation. "I look forward to having Tom Scully on the job as administrator of HCFA," said Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, the panel through which Scully's nomination will move. "He will bring a wealth of knowledge to an agency that provides healthcare for over 74 million Americans through Medicare, Medicaid and the State Children's Health Insurance Program."
Scully would be the third HCFA administrator to come from the hospital industry in recent years. Bruce Vladeck, HCFA administrator from 1993 to 1997, had been president of the United Hospital Fund in New York, and Michael Hash, recently HCFA's acting administrator after the resignation of Nancy-Ann Min DeParle, once lobbied for the American Hospital Association.
In his previous position at the Office of Management and Budget, Scully was a key decisionmaker on healthcare policy and a White House liaison to HHS and HCFA. After the elder Bush's defeat, Scully joined the Washington lobbying firm Patton, Boggs & Blow, where he worked under contract for the federation.
Strong GOP ties
Scully's arrival at the federation in 1995 coincided with the advent of a Republican majority in Congress, a development hailed by federation leadership at the time. Since then, Scully has been the hospital industry's most effective voice with Republicans, sometimes having unparalleled access to legislators.
For example, in the heat of last-minute negotiations over the Balanced Budget Act of 1997, Scully was allowed to enter the suite of offices where congressional leaders and White House representatives were working out final details of the bill, although other lobbyists and the public were barred from the area. Scully wasn't in the meetings, but was able to stand outside the rooms where congressional leaders were negotiating the legislation's language.
The budget act, however, also brought a notable loss. While the bill was before the House Ways and Means health subcommittee, Scully persuaded subcommittee members to add a provision that would partially compensate for-profit hospitals for tax payments; the provision suffered defeat in the full committee, with four Republicans blocking it.
That result was a lobbying victory for the Catholic Health Association, which asserted that the property-tax adjustment constituted a special subsidy for for-profit hospitals. The AHA, usually the referee in such intra-industry battles, broke with practice and sided with the federation in that battle.
That battle, and Scully's role as the nation's chief spokesman for for-profit medicine, have caused some Washington insiders to express fears privately about how he will view not-for-profit hospitals once he holds the nation's healthcare financing levers.
But in a written statement last week, the Rev. Michael Place, the CHA's president and CEO, said his members are "pleased" at Scully's nomination.
"We believe Mr. Scully brings to HCFA a unique perspective and expertise," Place said. "We encourage Mr. Scully and the Bush administration he will now serve to put forward initiatives that expand health coverage for the uninsured, reform and strengthen Medicare, ensure adequate payment rates for hospitals and long-term-care providers, assure that HCFA regulations are reasonable and promote high-quality care."
The property-tax battle wasn't the first time Scully was at odds with his hospital-lobbying colleagues. In 1996, during Congress' first attempt at enacting a balanced-budget law with Medicare spending caps, AHA officials expressed concern over Scully's dual role as top hospital lobbyist and a board member of Oxford Health Plans, an HMO.
That board seat became an issue in the debate over regulation of provider-sponsored organizations in the GOP's balanced-budget plan. The plan called for state regulation of those PSOs, as insurers had asked, rather than the federal regulation that hospitals sought.
Despite that PSO measure, Scully chose not to join with the AHA and his other hospital colleagues in a joint letter of opposition to the entire balanced-budget package, although the federation opposed it. Some hospital lobbyists alleged that decision was related to his Oxford board seat, a charge Scully denied.
In January 1997, as the balanced-budget battle heated up again, Scully and the AHA, along with several other hospital groups, attempted to mend fences by forming a unity coalition in favor of federally regulated PSOs.
Last week, the AHA lauded his nomination, although AHA President Richard Davidson declined comment. Instead, the AHA issued a written statement by AHA Executive Vice President Richard Pollack that said, "Tom Scully has a unique combination of both real-world perspective and public service experience.... With his vast experience, Tom will be a valuable addition to the administration."
The usually voluble Scully, along with the organization he headed, have gone uncharacteristically silent in the weeks since the White House began considering the nomination.
In the past two years, the federation has worked hand in hand with the AHA and other hospital groups in lobbying to increase Medicare spending by $50 billion from 2000 to 2006 by reversing some of the payment restraints enacted under the Balanced Budget Act.