State, National Lawmakers Scrutinize Hospital Costs
State Rep. Mitch Greenlick calls for a global budget for Oregon hospitals, while U.S. Sen. Chuck Grassley strengthens the IRS rules
March 25, 2010 -- Despite an influx of new dollars flowing into Medicare because of Congressman Peter DeFazio’s leadership, hospital costs are coming under the radar screen like never before at the state and national level.
State lawmakers have instructed the Division of Medical Assistance Programs to meet with stakeholders – hospitals and managed care plans – and come up with a common reimbursement mechanism to contain hospital costs.
That group must report its findings to the interim Joint Ways and Means Committee or the Emergency Board by Sept. 30, according to a budget note approved by the February legislative session.
Meanwhile, Oregon’s physicians and hospitals are expected to receive enhanced Medicare reimbursement over the next two years. During last-minute negotiations, DeFazio convinced White House officials to include $400 million of new dollars into the health reform bill. That money will be split among 17 states. It’s still unknown how much money will flow into Oregon’s coffers.
Oregon officials were quick to praise DeFazio’s leadership. “I’m really thrilled that the Congressman stood up for us as a state,” said Dr. Bruce Goldberg, director-designee of the Oregon Health Authority and director of the Department of Human Services.
Goldberg also applauded lawmakers for passing such a forward-looking health reform package. “All in all it’s going to be a great benefit to Oregon and is very much in the same direction that the Health Fund Board is moving,” said Goldberg.
Because of DeFazio’s efforts, Kathleen Sebelius, Secretary of Health and Human Services, will conduct two in-depth studies to analyze Medicare reimbursement, and gather data on geographic payment variation among physicians and hospitals. Later this year, she’ll convene a national summit on this topic.
In response, DeFazio couldn’t have been more pleased, “Because of a faulty 40-year-old formula, Oregon suffers from one of the lowest Medicare reimbursement rates in the country, despite being one of the highest quality, best outcomes providers of medical care to seniors in the country. This is wrong. We’ve been working for more than a decade to correct this inequity.”
Hospitals Eat Up 31 Percent
Meanwhile, it’s no secret that hospital expenditures absorb the highest percentage of healthcare costs – 31 percent, according to the latest findings by the Kaiser Family Foundation, followed by physician expenditures at 21 percent.
To bring hospital costs under control, Rep. Mitch Greenlick (D-Portland) would like to see the major payers – Medicare, Medicaid and the commercial insurers – create a global budget for hospital expenditures.
“Hospitals just can’t keep increasing their revenue by doing more services,” he said. “They need to become cost rather than revenue centers. We cannot go on with this craziness. Adding new cancer centers, doubling the size of hospitals, adding new children’s hospitals are huge drivers of cost. We need to figure out how we can rationally produce a hospital budget.”
Everyone who’s analyzed the healthcare system knows this to be true, he said. “Hospitals just can’t keep increasing their revenue by doing more services. But how to get this to happen is a whole different question.”
A study commissioned by the Oregon Health Leadership Task Force found that hospitals and physicians were underpaid $1.7 billion in Medicare and Medicaid dollars during fiscal year 2007. Of that, slightly over $1 billion represented Medicare alone, said Andy Van Pelt, director of communications for the Oregon Association of Hospitals and Health Systems. That study, which was done by Milliman for America’s Health Insurance Plans, was paid for by Providence, Legacy, OHSU, Regence, ODS and Kaiser.
Meanwhile, hospitals aren’t the only area where Greenlick’s focusing his energy. He’s eager to spend more resources on the primary medical home model and stop the escalation of spiraling drug and specialty care costs.
“The issue is to drive more services into lower cost models,” he added. “Cardiologists will still make a ton of money, but what we need to do is to avoid people having to use them.”
Hospitals Must Prove Charity Status
Legislation signed into law by President Obama on March 23 requires tax-exempt hospitals to prove to the Internal Revenue Service that they provide a charitable service to their community (Pub. L. No. 111-148).
These hospitals must complete a community needs assessment every three years and publicize their financial assistance policies. Otherwise they could face a $50,000 excise tax penalty (202 DTR G-5, 10/22/09).
Sen. Charles Grassley (R-Iowa), who led the effort to enact this law, said in a March 24 statement: “The provisions take steps to differentiate tax-exempt hospitals from for-profit hospitals and provide further transparency about tax-exempt hospitals' fulfilling their charitable mission. Congress, the IRS, and the public will now have additional tools and information to ensure that charitable hospitals act charitably.
“Tax-exempt hospitals don't have many measures of accountability for their special status. The law hasn't given them much direction, and so they've defined standards for themselves,” he added.
“Sometimes that's resulted in providing very little charitable patient care or other community benefits, failing to publicize charitable care to patients, charging indigent, uninsured patients more than insured patients, and using very aggressive collection practices.”
For more information
The Kaiser Family Foundation analyzed healthcare costs, using data from the Centers for Medicare and Medicaid Services. Learn more here.
To read about the Oregon Medical Association’s position on remaining neutral on the reform bill click here.
Here is specific hospital-related reform information from the Oregon Association of Hospitals and Health Systems.
For more information on the study commissioned by the Oregon Health Leadership Task Force click here.
Mar 25 2010