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After PhRMA, Hospitals Could Strike the Next Health Care Deal

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Now that the pharmaceutical industry has a deal with Senate Finance Chairman Max Baucus (D-Mont.) and the White House to help pay for health care reform, K Street insiders say they expect the next sector in line for an agreement is the hospital industry.

Over the weekend, the Pharmaceutical Research and Manufacturers of America announced a deal with Baucus and the Obama administration in which the drug companies will help save the government $80 billion by expanding the Medicare prescription drug program.

The move, which PhRMA member companies are legally beholden to only if health care reform is passed, also received the backing from the massive seniors’ group, AARP.

Lobbyists and health care industry sources say hospitals also are involved in high-level negotiations over potential cuts that could be worth as much as $200 billion. Key players involved are the American Hospital Association, the Federation of American Hospitals and the Catholic Health Association.

“We are looking at responsible solutions,” said Sister Carol Keehan, president and CEO of the Catholic Health Association. “I don’t want to speak for other people or violate any kind of confidential things, but we are at the table.

“Our clear priority is to get everybody covered,” she added. “Too many people are suffering.”

One area targeted by some lawmakers for savings would come from the Medicare and Medicaid disproportionate-share payment programs that reimburse hospitals for providing services to patients who are uninsured or whose treatments are not fully covered.

Hospitals say the program would naturally see significant cost savings if all Americans have health coverage, but they caution that making the cuts before health reforms have been implemented could do more harm.

“The amount of money that you will need will be less, but until we get them covered and until we demonstrate the program is working, it would be the worst possible thing to do,” Keehan said. “Most people of goodwill in the White House and Senate understand we won’t need that large amount of money in [disproportionate-share payments] when there aren’t 47 million uninsured.”

Chip Kahn, president of the Federation of American Hospitals, said he could not comment on any ongoing negotiations with Members or with the White House, but he said hospitals expect their part of “shared sacrifice” to achieve reform.

“Our first priority in health care reform is to achieve as close to universal coverage as possible,” he said.

Kahn added that it’s “premature” to comment on the disproportionate-share program but said that hospitals will still need that program’s support because it will take a number of years to get to universal coverage. Even then, he said, there will always be some patients, such as undocumented immigrants, who may slip through the coverage cracks.

“We’re ready to enter into dialogue,” he said, noting that whatever the industry might agree to must be “fair and equitable” to hospitals. “We’ll know it when we see it.”

Jim Kaufman, vice president of public policy at the National Association of Children’s Hospitals, said the disproportionate-share hospital program “cannot be cut until health care reform’s actually working and reimbursement rates are actually covering the cost of care. Those dollars are critical.”

Alicia Mitchell, a spokeswoman for the largest hospital group, the umbrella organization AHA, would say only that her group is “talking to everyone. We won’t go into any specifics at this point.”

Lobbyists familiar with the AHA say that the group — whose president is Richard Umbdenstock and whose top lobbyist is Thomas Nickles — runs a tight-lipped ship regarding any ongoing health care reform negotiations.

“Clients aren’t telling you what’s going on,” said one health care lobbyist. “But politically, [hospitals] are the next to fall. The Baucus staff wants more deals.”

But other health care lobbyists say hospitals and other groups that represent the insurance industry, medical device-makers and doctors would be remiss to cut deals until more legislative proposals have been unveiled.

“I’m not sure the PhRMA deal is necessarily a trend,” said one health care lobbyist. This lobbyist added that certain factions within the hospital sector could decide to support cuts, while their other hospital colleagues may not be on board, at least publicly.

“You may see some splintering,” this lobbyist said. “People are waiting to see what are the final decisions that the Finance and [Health, Education, Labor and Pensions] committees make.”

A source with the American Medical Association said the group is engaged in an “ongoing dialogue with Members of Congress and the administration on health reform,” but at “this time, we are not engaged in specific negotiations akin to those of PhRMA.”

Karen Ignagni, president of America’s Health Insurance Plans, said her group has been involved in many discussions with Members on both sides of the Capitol.

AHIP, she said, has said it is willing to accept some cuts to the Medicare Advantage program and has pledged to support standardizing health care treatment codes and to cover patients regardless of pre-existing issues or health status ratings.

“Everyone has to be part of the effort,” she said. “This is an opportunity for the country to take a major step forward.” She added, “I see the makings of a bipartisan agreement.”

As for the hospital industry, the sector has maintained a bevy of lobbyists.

For the first quarter of this year, the AHA has reported spending $3.6 million on lobbying and has on retainer such firms as the Nickles Group, the firm of former Sen. Don Nickles (R-Okla.); the Bockorny Group; the all-Democratic shop of Ricchetti Inc.; Hogan & Hartson; and diGenova & Toensing.

The federation, meanwhile, reports spending $830,000. Its outside firms include the all-GOP firm Fierce, Isakowitz & Blalock, Capitol Tax Partners, Jennings Policy Strategies, Howard Cohen of HC Associates, Law Offices of Frederick H. Graefe and Capitol Solutions.

The Catholic Health Association has reported spending $165,000 for the first quarter and retains one outside lobby firm, Cornerstone Government Affairs.

The National Association of Children’s Hospitals has spent $530,000 on outside firms that include Health Policy Strategies and Mehlman Vogel Castagnetti, whose lobbyists include Democrat David Castagnetti, a former top aide to Baucus, and Colette Desmarais, a one-time aide to Senate Finance ranking member Chuck Grassley (R-Iowa).

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