Members of the Alabama Hospital Association are threatening to bolt from the American Hospital Association, saying the national lobby group isn't fighting hard enough for their interests in Washington.
Last week, Alabama was the only one of 50 state hospital associations that did not sign letters of support for Medicare payment relief legislation sent to Senate leaders by the AHA.
While the legislation is stalled in the Senate, Alabama hospital officials told Modern Healthcare that a single provision of the far-reaching bill involving the Medicare wage index has become the source of a potentially poisonous rift between them and the AHA.
The state association is troubled by what it sees as the AHA's cave-in on the issue of relief from the wage index, which often reduces payments in low-wage areas such as Alabama and raises them in areas where wages are high.
Wage-index relief is part of the 10-year, $43 billion Medicare package that faces an uncertain future in Congress and beyond. The Bush administration views the bill as excessive. The Senate-consumed last week with a resolution authorizing President Bush to attack Iraq-has little time to reach consensus on a broad range of matters. Several observers said last week that the bill is unlikely to pass.
Hospital lobbyists nevertheless continued their fight for the legislation, saying members of Congress are listening to hospital officials and that an all-but-certain lame duck session will give them more time to act.
Last week's letters were sent to Senate Majority Leader Tom Daschle (D-S.D.) and Minority Leader Trent Lott (R-Miss.).
The AHA, which has called the Medicare bill a "flagship piece of legislation," said it would provide a great deal of help to the hospital industry overall, and that no single provision should be considered in a vacuum.
"The Senate bill takes an important step in the right direction, and the effort to address wage-index concerns must be viewed in the larger context of addressing payment improvements," said Richard Pollack, the AHA's executive vice president for policy and advocacy.
The 111-member Alabama Hospital Association objects to a provision in the Senate bill that would address payment disparities among urban and rural facilities by reducing the labor share of the wage index to 68% from 71% for hospitals currently below the standard index. Wage indexes are used to adjust Medicare payments based on local labor costs.
Shrinking the labor share would increase payments in low-wage areas by applying a 100% reimbursement rate to a larger portion of inpatient costs. The adjustment would most benefit rural facilities that rarely pay the same high wages as their urban counterparts. Under the Senate proposal, hospitals with a wage index above the standard would see no change in their reimbursement.
Alabama hospitals said the Senate isn't doing enough to equalize payments because their labor share is lower than 68%. "I'm saying my labor component is 57% ... and I'm right," said Carl Bailey, president and chief executive officer of the two-hospital Coffee Health Group in Florence, Ala.
The wage index formula is "literally stealing the assets of the hospitals in Alabama and delivering them to states and areas of the country that have the least need," said Dennis Hall, president and CEO of 10-hospital Baptist Health System in Birmingham, Ala., the state's largest hospital provider. "It has continued to push Alabama hospitals into an economic abyss."
Hall, a board member of the Alabama Hospital Association, said the board took no formal vote on whether to endorse the Senate bill.
Since the Medicare payment bill was introduced earlier this month by Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican Charles Grassley (R-Iowa), hospital lobbyists have said it would provide substantial help by addressing issues from an inpatient update to renewed safety-net payments.
The bill also would stave off cuts that took effect Oct. 1 for home health, indirect medical education and disproportionate-share payments, as well as offer some help to Medicare HMOs.
Alabama hospitals as a group would boost their payments by some $35 million annually if the wage index were based on a 57% labor share, Bailey said. The Alabama Hospital Association did not return numerous calls seeking comment for this story.
It is clear, however, that the wage-index issue prompted the Alabama Hospital Association's rebellious stance on the provider bill. Some hospital officials in the state believe the AHA's advocacy on the wage index has been so lackluster that they have considered canceling their membership in the 5,000-strong association.
"The people in the AHA recognize and appreciate the injustices," Hall said. "But it's apparent to me having met with all these people that they feel politically impotent to address it." As a result, Hall said, "if there is a movement in this state to move away from the AHA because they no longer represent our interests, then we will certainly band with our colleagues across the state. There's a tremendous amount of unrest here."
Bailey too said he would "absolutely" consider leaving the AHA over its handling of the wage index. "It's difficult when (the AHA) has a lot of constituents out there who don't want wage-index relief because they're winning." Meanwhile, he said, "we're running with lead shoes."
Alabama hospital administrators acknowledged the Senate bill would provide other useful relief. Still, some see the wage-index problem as so severe that anything short of a full-court press from their advocate in Washington is insufficient.
The AHA has recognized that the system is unfair but hasn't worked hard enough to get Congress to change it, Bailey said.
At least one veteran healthcare lobbyist took the AHA's side, arguing that it may be unwise to ask for too much.
"In lobbying you've got to go with the hand you're dealt, and the AHA has really done a terrific job this legislative season in pushing the hospital agenda," said Chip Kahn, president of the Federation of American Hospitals. "It's sort of sour grapes for anyone to complain because they can't get everything."
Alabama is not alone in facing reimbursement shortfalls because of the wage-index formula. But hospital officials in other rural states hurt by the existing formula said the legislation is too important to condemn. In Oklahoma, for instance, the bill would boost Medicare payments to the state's hospitals by $180 million to $190 million during the next 8 to 10 years, said Craig Jones, president of the Oklahoma Hospital Association.
Recalibrating the wage-index formula to reflect Oklahoma's true labor costs, Jones said, would amount to a "several-million-dollar" upshot annually for each hospital in the state.
Like Kahn and the AHA, Jones would like to see the bill approved before Congress leaves to campaign for the fall election. But at deadline the prospects for its immediate passage were dimming by the minute. Last Thursday Lott told reporters that the bill would cost too much and is flawed because it lacks Medicare prescription-drug coverage.
Lott did not list Medicare payments among a handful of priority items he said the Senate must consider before recess, including terrorism insurance, bankruptcy reform, election reform and defense appropriations.