An aura of optimism surrounded the announcement of an accord between hospital groups and the White House to limit Medicare rate cuts in reform legislation to $155 billion over 10 years. But in many quarters, news of the deal landed with a thud.
Not everyone's onboard
Reform deal gets heat from some Dems
Critics said the hospitals had not made any concessions in striking the handshake agreement because they stand to earn more revenue than they’re giving away. Some Democrats in the U.S. House said they were not a party to the deal and would not have to honor it. And outside observers suggested final legislation could include rates cuts that go beyond $155 billion (See related story, p. 10).
William Leaver, president and CEO of 10-hospital Iowa Health System, Des Moines, said the agreement would be a good thing for the hospital industry as long as it is accompanied by reforms in insurance coverage and value-based payments. “If you don’t get universal access and all we get are cuts, then this is not a good thing. We might as well go back to the 1990s and look at provider cuts. We clearly are not supporting that,” Leaver said. “I think we have a long ways to go, but I generally would applaud the effort.”
In interviews, American Hospital Association President and CEO Richard Umbdenstock and Federation of American Hospitals President Chip Kahn said preliminary estimates show that many hospitals will ultimately see a slight increase in overall revenue if insurance coverage reaches the 95% threshold needed to trigger some of the funding cuts. Some opponents of the agreement criticized deal-backers for characterizing it as a sacrifice on the part of hospitals, but Kahn said that criticism was off-base. “We never denied that. Part of this is that patients and hospitals will benefit from having greater coverage.”
Vice President Joe Biden on July 8 announced that the AHA, FAH and the Catholic Health Association had agreed to support $155 billion in cuts to federal payments between 2009 and 2019. In exchange, the legislative package includes tougher restrictions on self-referral to physician-owned hospitals, a simplification of “administrative red tape,” and no cuts to training funding at academic medical centers.
Two hospital industry officials on the podium with Biden—Richard Bracken, president and CEO of HCA, and Sister Carol Keehan, president and CEO of the Catholic Health Association—declined to comment. Wayne Smith, president and CEO of Community Health Systems, could not be reached for comment.
Officials from the AHA said the agreement also included a guarantee that the reform bill would not set a specific threshold for how much charity care hospitals would have to provide in order to maintain their tax-exempt status, although that guarantee was not included in the official joint statement from the three groups. The issue has been a lightning rod since an options paper from the Senate Finance Committee said cracking down on underperforming not-for-profits could be a “revenue raiser” to help pay for reform.
The $155 billion would come from three sources: about $103 billion in decreases to the annual inflation adjustments on Medicare payments known as annual “marketbasket” updates; about $50 billion from decreases in Medicare disproportionate-share payments that help hospitals cover the cost of unreimbursed care; and $2 billion in penalties to hospitals that fail to prevent certain types of costly readmissions.
The cuts in disproportionate-care funding would not go into effect until 2015, and the hospital groups said the cuts would be linked to hitting the goal of 95% of Americans having health insurance in some form by that time.
Following reports that members of the House were not going to honor the agreement, Kahn, of the FAH, said fears that the White House and Senate Finance Committee Chairman Max Baucus (D-Mont.) could go back on their agreements were unfounded. “This is solid. The president is going to stand by his commitment to us that this is our contribution,” Kahn said.
Eneida Roldan, president and CEO of the 1,833-bed public hospital system Jackson Health System, Miami, said there was a good chance that the legislation could be revisited before the agreed-upon funding cuts take hold if the cuts are unreasonable. “We will see healthcare reform, one way or another. The issue is going to be how (hospitals) are going to fund this universal care,” Roldan said.
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