In a case of political role reversal, Thomas Scully, the Centers for Medicare and Medicaid Services' new administrator, personally rejected a plea from a New York hospital to increase its Medicare payment rates despite the fact that the hospital's lobbyist was Scully's mentor and former co-worker Michael Bromberg, Modern Healthcare has learned.
The incident offers an unusual example of the Washington influence revolving door, in which people move in and out of government and lobbying. At a time when national organizations are seeking more Medicare funding, the case also shows that individual hospitals will go to unusual lengths to boost their government payments.
"There's never a hospital that's satisfied with what they're getting," said Charles Inlander, president of the People's Medical Society, an Allentown, Pa., consumer group. "The (wage index) formula is a good formula."
The lobbying drama centers on Vassar Brothers Hospital, a 249-bed not-for-profit in Poughkeepsie, N.Y. Through its membership in the Greater New York Hospital Association, the hospital sought to receive the same payment rates as hospitals in the New York metropolitan area, which would increase its annual total Medicare revenue by 12%. The rates in metropolitan New York are higher because they are adjusted for the market's higher labor costs.
Bromberg, who is the GNYHA's lobbyist in Washington, took up the cause with CMS. Bromberg also is vice chairman of the Federation of American Hospitals, the for-profit hospital trade group. Until 1995, when Scully replaced him, Bromberg was the executive director.
Scully considered the hospital's request but rejected it, CMS officials said. Scully told Bromberg that Medicare law bars CMS from paying Vassar Brothers the same as rate as its urban brethren 80 miles south. Current law extends the New York metropolitan rates as far north as Newburgh, N.Y., a few miles down the Hudson River from Poughkeepsie.
If Vassar Brothers had been successful in its adjustment bid, the same inpatient case would have netted it one-third more than Poughkeepsie's other hospital, 314-bed Saint Francis Hospital and Health Centers, just two miles north of Vassar Brothers.
"It would clearly tie both our hands behind our backs," said Frank Hemrick, Saint Francis' vice president for corporate development. "You're competing for scarce resources. I wouldn't be surprised if that's one of the reasons there hasn't been as much cooperation to date as we would have hoped for on this issue."
If Scully had sided with Vassar, Hemrick said, "We would have sued."
That potential acrimony contrasts sharply with the cozy relationship the two hospitals enjoyed when they formed a joint operating company called Mid-Hudson Health in 1992 and ran it for eight years. Last year, a federal judge ruled that Mid-Hudson was a sham organization that the competing hospitals used to illegally fix prices for their services and ordered Mid-Hudson dissolved.
With Scully's rejection of Vassar Brothers' appeal, both hospitals have pledged to lobby for legislation giving New York City rates to all the hospitals in Duchess County, home to Poughkeepsie.
But Richard Henley, executive vice president for Vassar Brothers' parent, Health Quest Systems, said the company would be willing to settle for legislation that gives the metropolitan New York rates to Vassar Brothers and three other nearby hospitals that have been classified as part of the Newburgh metropolitan area. Saint Francis isn't one of those hospitals.
Henley said the higher payment is justified because the hospitals must compete with New York-area hospitals for the same healthcare workers. "The decision was made more from a fear of what this would lead to than necessarily the steadfast opinion that this is the right decision," he said.
Neither Bromberg nor Saint Francis' representative, Stephen Cooper, a veteran lobbyist for New York healthcare interests who now works for the public affairs firm FH-GPC, would comment on the CMS decision. Scully was on vacation and could not be reached for comment.