Hospitals Reach Deal With Administration

By Ceci Connolly and Michael D. Shear
Washington Post Staff Writers
Tuesday, July 7, 2009

The nation's hospitals agreed last night to contribute $155 billion over 10 years toward the cost of insuring the 47 million Americans without health coverage, according to two industry sources.

The agreement that three hospital associations reached with White House officials and leaders of the Senate Finance Committee is the latest in a series of side deals that aim to reduce the cost of revamping the nation's health-care system and to neutralize influential industries that have historically opposed such reforms.

With President Obama out of the country, a formal announcement is expected tomorrow from Vice President Biden.

"Getting health-care reform is absolutely critical," said one hospital negotiator, who was not authorized to speak for attribution about the deal before the official announcement. "This is our attempt to act in good faith."

Most of the savings -- about $100 billion -- would come through lower-than-expected Medicare and Medicaid payments to hospitals, said the two industry sources. About $40 billion would be saved by slowly reducing what hospitals get to care for the uninsured, they added. The reductions would probably not begin for several years, after a significant number of people have enrolled in the new insurance programs.

For their part, hospital officials have an understanding that, if the final legislation includes a new government-sponsored insurance program, it will not pay at Medicare or Medicaid reimbursement rates, which the industry has long argued do not cover the cost of services.

"We have concerns about a new public program where you have Medicare rates," one industry representative said. "That would not be part of the plan."

Agreeing to the plan were the American Hospital Association, the Federation of American Hospitals and the Catholic Health Association.

A source close to the negotiations said a deal was struck after discussions about the "shared responsibility" of the entire health-care system -- including doctors, insurers, individuals and the government -- and an understanding that each part of the system would sacrifice to make it work.

"The assumption is that everyone has got to do it," the source said.

Obama has left much of the bill-writing to Congress, but he has worked feverishly to build public support and recruit the help of influential stakeholders.

Two weeks ago, drugmakers agreed to sacrifice $80 billion over the next decade in expected revenue. Last week, Wal-Mart, the nation's largest private employer, announced it was endorsing a requirement that nearly every business in the country contribute to their employees' health costs.

Obama last month laid down a powerful incentive for the hospital industry to come to the bargaining table, saying in a weekly radio-and-Internet address that his team had identified $200 billion in hospital reductions over 10 years.

"There was no way we could tolerate $200 billion," another industry executive said over the weekend.

White House officials would not discuss the deal last night.

The negotiations took place via conference calls in recent weeks, and in meetings on Capitol Hill and at the White House.

Sources said the negotiators included health czar Nancy-Ann DeParle and deputy chief of staff Jim Messina, from the White House, along with committee staff. Their desire, the source said, was to reach a deal that could legitimately be supported by Republicans as well as Democrats.

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