When about 1,800 hospital executives came to Washington in April for the American Hospital Association’s annual conference, they were handed three pages of talking points and encouraged to buttonhole lawmakers on Capitol Hill. Potential cuts to Medicaid and Medicare were among the top items that hospital officials were told to discuss with their members of Congress.
The House and Senate “must look beyond traditional provider cuts to find other options for budget savings that can be achieved without harming hospitals’ ability to provide care for their communities,” the memo said.
Hospital officials say that financial pressure from government policies is mounting and that additional cuts beyond those included in the 2010 health care overhaul could end up undermining care for patients. Medicare and Medicaid payments represent about 55 percent of hospitals’ revenue and have a significant impact on their overall financial health. Hospitals are already facing reimbursements that will be reduced by $155 billion across a decade under last year’s law.
Cuts in payments to hospitals could find their way into measures that would increase the debt limit, delay a scheduled Medicare payment cut for physicians or extend Medicare payment policies that are expiring at the end of the year.
“We’re really focused on blocking and tackling,” said Rick Pollack, the AHA executive vice president of advocacy and public policy.
A coalition of nine national trade organizations representing hospitals is spelling out its concerns in a series of advertisements being placed in inside-the-Beltway publications. “Enough is Enough,” the ad reads. It features six pictures of patients in hospital gowns, centered by a photo in the middle of an African-American boy in a hospital bed. “Hospitals are already doing more with less. There are other ways to reduce the deficit — don’t hurt patient care.” The tagline reads, “No More Cuts to Hospital Care.” Hospital officials also sent out an alert to their members last month urging them to contact lawmakers over the next few months. The trade association is planning to fly hospital executives to Washington again for meetings on July 13.
The current approach by hospitals stands in contrast to the dealmaking they engaged in during the 15 months of debate on the health care law. Then, hospitals agreed to the $155 billion in reduced government spending for the sector over a decade. The thinking was that the industry could make up the difference as more patients gained insurance and used it for hospital care.
But some state hospital association officials were surprised that the national advocates agreed to the cuts, and some local hospitals say the reductions could create serious financial problems for them. In many places, the federally mandated reductions in growth come on top of cuts in state Medicaid payments — reimbursements that hospital officials have long argued were already too low.
Provider payments are one of the first line items state officials consider when making Medicaid cuts because they produce less public outrage than directly cutting benefits. Hospital rates have been a favorite target since 2009 because that year’s stimulus law and the health care overhaul enacted a year later barred officials from making other types of changes, such as restricting eligibility levels, increasing beneficiaries’ premiums or enrollment fees, and making it harder for people to enroll.
Hospitals also are concerned about several regulatory changes that could reduce government reimbursements in the next few years.
With all of those issues already creating uncertainty, hospitals say that further reductions pose a threat to their financial viability. The national hospital trade groups are winning support from state associations as they stand against additional changes.
More Room to Move?
Some health policy experts have a different view of whether hospitals can withstand further cuts in the growth of their payments.
The Medicare Payment Advisory Commission (MedPAC), which issues recommendations to Congress on Medicare rates, initially considered proposing a 2.5 percent increase in hospital payments in 2012 as part of its report this spring. The panel ended up pushing for a 1 percent hike for several reasons, including concerns that hospitals have been overpaid for certain medical services. Another factor was that although Medicare payments were expected to be less than costs in 2011 for about 64 percent of hospitals, the panel said in its March report to Congress that “negative Medicare margins do not necessarily mean that payments are too low.” Sometimes hospitals are inefficient, and low Medicare margins can push them to become more efficient, commissioners said.
The commission also cited measures showing that patients hadn’t been adversely affected by the cuts. For the past eight years, the number of hospitals grew. Even as the country staggered through the economic downturn of the past three years, the number of hospital workers grew by 4 percent. Measures that aim to assess the quality of patient care, including mortality rates, have improved.
But hospital lobbyists say that with all of the changes already made and more pending, it would be unwise to tap hospitals again to reduce the deficit or pay for an increase for physicians, who are scheduled for a nearly 30 percent reduction in Medicare payments on Jan. 1. A number of lawmakers in both parties want to prevent that cut from taking effect, but even a short-term fix would cost tens of billions of dollars.
The three-page AHA talking points memo told hospital officials to say that “while we support a permanent fix to Medicare physician payments, it cannot be achieved at the expense of our nation’s hospitals.”
Different Facilities, Similar Message
Lobbyists for hospitals are not alone in their concerns about additional cuts.
The MedPAC report recommended no payment increases for home health agencies and skilled nursing facilities. MedPAC commissioners also proposed saving money by accelerating policy changes for home health agencies that were enacted in last year’s health care law. Hospice providers, who would get a 1 percent payment increase under MedPAC’s recommendations, are also concerned.
The National Association for Home Care and Hospice is encouraging its members to take members of Congress on visits to local facilities to showcase their services for vulnerable patients.
“We’ve given more than our fair share already,” said Bill Dombi, vice president of the National Association for Home Care and Hospice. He estimated that in 2013, half of all home health agencies would be paid less than the cost of delivering care. Unlike hospitals and some other providers, home health agencies get the vast majority of their funding from Medicare and Medicaid, so they can’t compensate for lower government payments by charging privately insured patients more.
Hospitals, home health care agencies and other providers point to statements by Rick Foster, longtime actuary of Medicare, suggesting that the health care industry is not well-positioned to absorb more cuts. Foster has said he doesn’t think the approximately $500 billion in Medicare cuts in the health care law are sustainable, and that lawmakers will eventually step in to prevent some of them from taking effect, a point opponents of the measure made frequently before it became law.
The president’s fiscal commission last year proposed some specific ideas that hospitals are afraid could gain traction, including reducing the payments that Medicare gives to teaching hospitals to support resident training and eliminating the elaborate mechanisms that states use to draw higher federal matching rates in Medicaid. As alternatives, hospital executives suggest limiting medical malpractice awards, requiring seniors and people with disabilities who get Medicare to pay more of their own costs, pushing back the eligibility age for Medicare, encouraging the use of generic drugs, boosting tax incentives for long-term care, capping tax benefits for employer-provided health insurance and increasing taxes on junk food.
Lobbyists are particularly nervous this year because of the added glare of the debt ceiling debate and the focus on deficit reduction.
“In past years, when there were challenges, there was a budget, a reconciliation process and some pattern to the year,” said Chip Kahn, president and CEO of the Federation of American Hospitals, which represents investor-owned hospitals. “There was some level of expectation that was set by policy makers. Here, because of a unique political situation, there’s no clear process and it’s more ad hoc. So we don’t know what’s on the table, don’t actually know who to deal with, and one has to worry the deal will be cut and you won’t have a chance to get your two cents in. . . . So you have to be vigilant now.”
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.