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As Health Reform Effort Intensifies, Hospitals Seek to Protect the Bottom Line

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By Dan Eggen
Washington Post Staff Writer
Saturday, July 25, 2009

Just two weeks after President Obama was sworn into office, Richard Umbdenstock, head of the powerful American Hospital Association, visited the White House.

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Over the next five months, the former Seattle hospital executive made eight other trips to the White House, making him the most frequent visitor among major health-care leaders, according to a list released by the Obama administration. The treks were part of an expansive lobbying effort by the hospital association as the health-care reform debate has intensified this spring and summer.

The hospital association, which spends millions of dollars each year on lobbying and campaign contributions, is in many ways typical of the medical interests now seeking to minimize the damage to their bottom lines. The health-care fight represents one of the largest lobbying battles in congressional history, embroiling an industry that accounts for one-sixth of the U.S. economy and a worsening drain on the federal treasury. Hospitals account for nearly a third of that spending, and their lobbying illustrates the complicated relationship between an industry with much at stake and the lawmakers who could reshape its future.

Like insurers, doctors and stakeholders, the hospitals have agreed to concessions, joining Vice President Biden this month to announce $155 billion worth of cuts in Medicare reimbursements and other payments over the next decade. But in recent weeks, the group has also ratcheted up its opposition to proposals for a public insurance option and an independent agency to set Medicare rates; it says the changes would dramatically hurt hospital finances at a time when many institutions are struggling.

"We are very much interested at being at the table and are very pleased that we have been included," said Umbdenstock, who previously served as executive vice president of Providence Health & Services, a Seattle-based regional network of hospitals and clinics. "But there are certain issues that are very serious and grave concerns for us."

The AHA, which represents more than 5,000 public, nonprofit and for-profit hospitals around the country, has spent more than $7 million this year in its Washington lobbying campaign, ranking it near the top of the industry. More than two dozen lobbyists from the group have been closely involved in talks with lawmakers and staff members with the Senate Finance Committee, the House Energy and Commerce Committee and other key panels as they have wrangled over reform, according to disclosure records.

The organization also ranks as a major donor to members of Congress. It contributed more than $2 million to congressional candidates during the last election cycle, primarily to Democrats, according to data from the nonprofit Center for Responsive Politics.

Top recipients include House and Senate leaders from both parties, such as House Speaker Nancy Pelosi (D-Calif.) and House Minority Whip Eric Cantor (R-Va.), as well as leaders of the key committees shaping health-care legislation, including Finance Chairman Max Baucus (D-Mont.) and House Ways and Means Chairman Charles B. Rangel (D-N.Y.). Other top recipients include Rep. Bart Stupak (D-Mich.), who is part of the "Blue Dog" coalition of conservative Democrats, and former congressman Rahm Emanuel (D-Ill.), now Obama's chief of staff.

Hospital opposition to key reform proposals has been an important factor in slowing the pace of negotiations in the House, contributing to this week's announcement that the Senate would not meet Obama's August deadline for a final bill. Unlike other top industry groups, including the American Medical Association, the hospital group has yet to endorse any current reform bills, and it has signaled that such approval is unlikely unless the public insurance and Medicare payment options are scrapped.

Richard Kirsch, national campaign director for Health Care for America Now, a pro-reform advocacy group, characterized the hospital lobby as similar to others in the debate, including doctors and pharmaceutical companies -- all of whom are seeking to minimize the negative financial impact they might face. Kirsch noted that Obama had initially called for $200 billion in cuts from the hospital sector; the group agreed to $45 billion less. Pelosi said this week that she might still push for more.

"They want to make the fewest cost concessions that they can get away with, and they want to design those cost concessions themselves," Kirsch said.

The hospital lobby's clout is especially strong among the Blue Dogs, a group of more than 50 conservative Democrats whose concerns effectively halted the progress of health reform legislation in the House this week. A key sticking point is the complaint from rural hospitals -- many of which are located in Blue Dog districts -- that they are not paid enough under varying reimbursement rates through Medicare.

Rick Pollack, executive vice president of the hospital association, said close ties between hospitals and their communities mean that lawmakers pay close attention to such concerns.

"We have a hospital in every district in the country, and in many communities we're the single largest employer," he said. "The grass roots and the ground game is always the most important thing in terms of influencing and interacting with legislators."

At the same time, hospitals have locked horns with Blue Dogs over a recent proposal to take Medicare payment authority away from lawmakers and give it to an independent agency, amounting to a beefed-up version of a current advisory panel called MedPAC. Hospitals already complain loudly about Medicare reimbursement rates set by Congress -- which they say do not cover their costs -- and argue that giving the final decision to a government panel would only make the problem worse.

"Two proposals now circulating in Congress could hit future hospital reimbursements hard," the hospital group wrote in an "action alert" to hospital executives this week. "We need to stop this effort!"

Alwyn Cassil, public affairs director at the Center for Studying Health System Change, a nonpartisan policy-research group, said that the financial condition of hospitals varies greatly and that the gap between wealthy institutions and those that are struggling has widened. Many hospitals have wasted money on unnecessary expansions and have not tried hard enough to be more efficient in delivering care, she said.

"Some hospitals are doing very, very well despite the economic downturn," Cassil said. "But others are struggling, and their ability to contribute to the effort may be limited."


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