Healthcare Reform Gets Boost From Hospital Groups

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"In the face of mounting Republican opposition to its healthcare agenda, the Obama administration received a boost Wednesday, winning a preliminary agreement with leading hospital groups to cut federal payments to the industry over the next decade," The Los Angeles Times reports. "Under the plan, negotiated primarily by Senate Finance Committee Chairman Max Baucus (D-Mont.), hospitals would accept $155 billion in cuts if the administration and its congressional allies succeeded in extending health insurance to tens of millions of people who are now without coverage. None of the hospital groups has signed a written agreement backing the cuts, nor is there any guarantee that the cuts will be included in versions of the healthcare legislation being developed by lawmakers other than Baucus" (Levey, 7/9).

In exchange for the deal, hospitals may be getting "a little less pain," NPR reports. "Richard Kirsch of Health Care for America Now, a consumer group working for a health overhaul bill," says that the recent deals give hospitals and drug companies "a chance to say how they make less money, as opposed to Congress and the president basically shoving it down their throats." But hospitals may not be giving much up: "A significant portion of the funds are currently for payments to help hospitals offset the cost of caring for patients who are uninsured. But in a newly reconfigured system, 'there will be fewer uninsured,' says Kirsch, 'and it makes perfect sense that as the number of uninsured drop, that hospitals should get less money from the federal government for taking care of those people if they now are paying customers'" (Rovner, 7/8).

Following the hospital deal, the Obama administration is now "confronting deep dissension on several fronts within Democratic ranks and possible defections among key constituencies," The Washington Post reports. "Rep. Henry A. Waxman (D-Calif.), lead House architect of the landmark health legislation, warned yesterday that he is not obligated to abide by deals struck recently by the White House, Senate Finance Committee, industry executives and interest groups such as AARP. 'The White House is not bound. They tell us they're not bound by that agreement,' Waxman, the chairman of the House Energy and Commerce Committee, said at a National Journal breakfast. 'We're certainly not bound by that agreement. The White House was involved, and we were not.' Waxman's comments came amid several other warning signs for the administration, including a slipping timetable in the Senate, internal division in the hospital industry and mounting tensions between AARP and the pharmaceutical industry that threaten a temporary detente between the two negotiated last month by the White House" (Connolly and Shear, 7/9).

Meanwhile, The New York Daily News reports that "New York hospitals are breathing a bit easier today after the Obama administration agreed to downsize its proposed hospital cuts by some $70 billion. The White House had called for slashing Medicaid and Medicare payments to hospitals by around $224 billion over 10 years to help pay for health-care reform, but agreed Wednesday to a more modest $155 billion target." William Van Slyke of the Hospital Association of New York State, notes that "cuts actually could have gone as high as $254 billion." But "Officials in New York are hoping for still more. 'We're hopeful we'll be able to negotiate down [further].' Van Slyke said, adding New York is especially vulnerable to cuts because its hospitals have among the worst operating margins in the country" (McAuliff, 7/9).

In the market, "volatile shares of Tenet Healthcare Corp. (THC) gained for a second day, as analysts said the hospital operator could be continuing to rally on news that the White House has reached an agreement with the hospital industry over potential health-care reform," Dow Jones Newswires reports. "The hospital sector posted strong gains Tuesday after The Wall Street Journal reported that a deal had been reached. … In exchange for these lower payments, hospitals are hoping proposed health-care reform will generate more revenue - and lower bad-debt expenses - by significantly increasing the number of insured patients, Soleil Securities analyst Albert Rice said" (Cummings, 7/8).

This information was reprinted from kaiserhealthnews.org with kind permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery at kaiserhealthnews.org.

© Henry J. Kaiser Family Foundation. All rights reserved.