Hospital Groups Assess Health Care Law

The year-old federal health care law offers a tempting promise for the country’s hospitals: a potential pool of 32 million newly insured customers. That could produce a huge reduction in the tens of billions of dollars worth of services for patients who cannot be refused, but who often cannot pay.

The American Hospital Association and other mainline national hospital groups have publicly supported the law and oppose efforts in the courts and Congress to gut it. But some small rural hospitals across the country favor repealing the law altogether.

Half the newly covered people are expected to be Medicaid patients, who have been big losers for hospitals in cash-strapped states where Medicaid payments do not cover costs.

And budget cuts affecting Medicaid, like the 35 percent reduction being discussed in Kentucky, would be a big hit for hospitals. That deep a cut would more than triple the $25 million annual shortfall in payments for Medicaid patients for the state’s largest hospital group, Norton Healthcare, a five-hospital nonprofit in Louisville, said Stephen A. Williams, Norton’s president. “It would be unsustainable.”

Cedars-Sinai Health System, one of the largest Medicaid providers in California, booked a loss of $96 million in 2010 on Medi-Cal, the state’s version of Medicaid, said Thomas M. Priselac, president of Cedars.

The battle to hollow out Medicaid is a proxy for the battle to repeal the Obama administration’s Affordable Care Act enacted one year ago, said Dr. Bruce Siegel, chief executive of the National Association of Public Hospitals and Health Systems. “Medicaid is the largest payer for our 140 hospitals,” he Siegel noted.

In addition to the American Hospital Association and the public hospitals that tend to favor the law, the Catholic Health Association, the for-profit Federation of American Hospitals, the National Association of Children’s Hospitals and the Association of American Medical Colleges.

The six associations filed amicus briefs in federal courts supporting the law and its mandate requiring individuals to have coverage. They also wrote to Kathleen Sebelius, secretary of Health and Human Services, urging the administration to hold firm on maintaining federal Medicaid requirements until 2014 as the law requires.

The hospital associations are lobbying for some important changes, but not the outright repeal that was approved by the Republican-controlled House in January.

“We supported it, imperfect as it is,” said Richard J. Umbdenstock, president of the American Hospital Association. “Now it is much more important to build on it and improve it.”

Even so, many hospitals around the country do not agree with their national associations,

Jeff Goldsmith, a hospital consultant, said he has met with 60 hospital groups since March 2010. “I asked them all, ‘Do you think passing this bill was a good idea?’” All but one group voted “no,” he said.

“We should repeal it all and start over,” said Milton Brooks, administrator of the Pineville, Ky. Community Hospital in rural Appalachia where Medicaid is a major payer.

He believes that reducing extra payments to hospitals with a “disproportionate share” of Medicaid and Medicare patients will be a death sentence for many rural hospitals. “Most hospitals are barely breaking even,” he said. “When you take a couple million dollars out of our pocketbooks, we’re gone.”

The Kentucky Hospital Association, while not calling for outright repeal, argued that the law would cost its hospital members $1.28 billion over 10 years in reduced Medicaid payments for more Medicaid patients as well as lower federal payments to make up for losses.

The Kentucky association called for repeal of the individual mandate and repeal of the changes in the disproportionate compensation.

“The law needs to be scrapped,” said Max Ludeke, chief executive of North Texas Community Hospital, a two-year-old start-up in Bridgeport, Tex. He argues that the law makes it “almost impossible for a small stand-alone hospital to survive.”

Jimmy Childre, Jr. chief executive of Washington County Regional Medical Center in Sandersville, an economically distressed city in a rural Georgia clay mining area, said the bill was “hastily put together. I think we could have taken this in stages. I am concerned about what’s in the bill for the near future and the long-term future.”

Washington lobbyists for hospitals, doctors and drug makers want to rein in a new Independent Payment Advisory Board that would make it harder for Congress to revise new cost cutting edicts after the law takes full effect in 2014.

“We agreed to have $155 billion of our future hospital payments deployed into paying for coverage of more Americans,” Mr. Umbdenstock of the American Hospital Association said. “We did not feel it would be appropriate to be subjected to an annual rate cutting process by the Independent Payment Advisory Board.

But he added that the new law “is very consistent with underlying trends in the hospital world anyway.”

Those trends include changing traditional fees-for-service that can be an incentive for extra tests and procedures; more coordination of patient care among hospitals, doctors and other providers; emphasizing quality and patient safety; transparency in reporting successes and failures and, above all, increasing coverage, he said.

Mr. Williams at Norton in Louisville said it is “an absolute necessity to change the basic financial and patient care models.” He added, “As we continue to spend more we have not gotten the value.” He said the health status of Americans has fallen to 37th in the world. (WHO 2000 ranking)

Dr. Kirk A. Cahoun, president of the 100-bed University of Texas Health Science Center in Tyler, said that unless the new law is changed, it could add 600,000 children and 1,400,000 adults to the rolls of Texas Medicaid. which pays only 70 percent of actual hospital costs.

“We are looking for ideas that can help preserve patient access and save money,” he said. The Tyler hospital is considering group visits for outpatients, special programs for people on both Medicaid and Medicare and restricting coverage for certain expensive drugs.

“We are all for improving the law but if you start taking it apart, the supports for expanded coverage don’t work,” said Marilyn Tavenner, the deputy administrator and chief operating officer of the federal Medicare and Medicaid agency.

Mr. Priselac at Cedar-Sinai said people should wait and see how the expansion of coverage plays out, compared with the reduction in disproportionate share subsidies. “The overall goals and efforts of the reform act are a positive thing,” he said.

Dr. Darrell G. Kirch, head of the Association of American Medical Colleges which includes teaching hospitals, said opponents “do not confront the core issue: 50 million uninsured Americans. It is a terrible burden on our health care system and for those people.” he said “Their health status is worse than the health of those who have insurance.”

The uninsured total “is way beyond a manageable number,” said Sister Carol Keehan, president of the Catholic Health Association. “We are very concerned that we give this act a chance to work.”

This post has been revised to reflect the following correction:

Correction: March 27, 2011