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Mass. hospitals may lose $322m

US deficit talks target Medicare

By Tracy Jan
Globe Staff / July 8, 2011

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WASHINGTON - Massachusetts teaching hospitals would lose $322 million, or about two-thirds of the federal dollars they receive for the training of medical residents, under a bipartisan proposal to tamp down the rising costs of Medicare and reduce the federal deficit.

The proposal, a slice of at least $1.6 trillion in spending cuts over the next decade being considered as negotiators try to forge a broad agreement to raise the nation’s debt limit, could be a body-blow to the region’s health care industry, a key part of the overall economy, analysts said.

It also promises to intensify the debate over the role of hospitals and the best way to deliver high-quality services to patients in a cost-effective manner.

For the hospitals, a $322 million reduction in Medicare reimburse ments - a one-time cut that would be in force for at least a decade - would be devastating, industry representatives said. Training programs would be eviscerated, with fewer doctors taught and fewer specialties served. Cuts in other hospital jobs and specialized services such as burn and transplant centers would be inevitable, they said.

“Our big fear was that [graduate medical education] would be used at some point to reduce the deficit, and now it’s coming to fruition,’’ said John Erwin, executive director of the Conference of Boston Teaching Hospitals. “It may not be tomorrow, but this will be felt by beneficiaries if there are not enough physicians in the pipeline.’’

Negotiations over this Medicare reduction and other cuts are intensifying in Washington, and there is no guarantee the plan will be included in any final deal, given the support the Medicare program has among key constituents and lawmakers. If the cuts are approved, Massachusetts General Hospital lose the most, $50 million, followed by $47 million loss for Beth Israel Deaconess Medical Center and $39 million for Brigham and Women’s Hospital, Erwin said.

The economic impact would particularly fall on states with large numbers of teaching hospitals, such as Massachusetts, potentially hurting the training of doctors and also other medical jobs and hospitals’ bottom lines, said Stuart Altman, a professor of health care economics and policy at Brandeis University.

“Academic medicine is big business in Massachusetts,’’ Altman said. “Aside from New York, Boston is probably the city that’s going to be hit the hardest because we train a disproportionate number of doctors.’’

Some analysts say that while the cuts would be painful, they are long overdue as part of a broad rethinking of the ways the industry delivers care.

“The hospitals are screaming bloody murder, but what Medicare has done for years is overpay them for teaching because it’s been politically expedient to do so,’’ said Nancy Kane, a professor of management at the Harvard School of Public Health. In May, she finished her six-year term as a member of the Medicare Payment Advisory Commission, an independent agency that helps Congress on Medicare matters.

Since the early 1980s, Medicare has provided extra money to some hospitals to help them educate the next generation of physicians. The size of the payment has been highly controversial and has faced previous reductions. Executives at teaching hospitals contend it helps compensate for the high costs of treating a sicker, often lower-income patient population and for specialized services, such as burn and transplant centers, unavailable in community hospitals.

No oversight exists, however, to ensure that such payments are being used to address education and specialty needs at these hospitals, and executives are not held accountable for their use, said Alan Sager, a professor of health policy and management at Boston University School of Public Health. He likened hospital payments to “being governed by anarchy.’’

Massachusetts has the most expensive health care in the world, with hospital costs 56 percent above the national average, said Sager, who has conducted an analysis based on data hospitals provide to the American Hospital Association.

“Massachusetts hospitals can withstand these cuts. They won’t like it, but they can withstand it,’’ Sager said. “They’ve got the money. The challenge is to spend the money they have better.’’

In December, a bipartisan fiscal commission set up by the president to examine options for reducing the nation’s ballooning deficit recommended an annual reduction of $6 billion from the $9 billion subsidy. That has spurred negotiators from the White House and Congress who are trying to slice an amount between $1.6 trillion and $4 trillion from the nation’s rising deficit over the next decade.

The cuts are a bargaining chip to secure the votes of deficit hawks in Congress on a measure that raises the limit on how much the government can borrow, ensuring the country does not default on its obligations for the first time. With an Aug. 2 deadline for a deal, talks over these cuts - and Democrats’ attempt to yoke them to increases on tax rates for the wealthiest Americans and to the elimination of some corporate tax loopholes - have intensified this week.

President Obama met with congressional leaders from both parties yesterday to discuss the options and will reconvene talks Sunday to extend the “hard bargaining that’s necessary to get a deal done,’’ he said.

“Nothing is agreed to until everything is agreed to,’’ Obama said. “And the parties are still far apart on a wide range of issues.’’

Pain will be felt politically on all sides, said Obama. He has agreed to consider cuts to Medicaid and Social Security as well as to Medicare - social programs Democrats long considered untouchable - because Republicans have come around to discussing new tax revenue by closing some loopholes.

Making cuts to Medicare programs for hospitals has been a Sisyphean task on Capitol Hill. And that is expected to remain the case with the education payments.

Key Democratic negotiator Charles Schumer of New York and both Bay State senators, John Kerry, a Democrat, and Scott Brown, a Republican, vowed they would fight to protect the payments.

“It just doesn’t make sense to cut training for doctors who keep kids healthy, run trauma centers, and save lives through both medicine and science,’’ Kerry said in a statement.

Brown said he has met with the heads of many of the state’s teaching hospitals and recognizes their value as a major employer.

The senators will have plenty of company in their battle. Lobbyists from the hospitals have pledged to use their resources on Capitol Hill.

The Massachusetts Biotechnology Council and the Conference of Boston Teaching Hospitals this week fired off a letter to members of the Massachusetts delegation urging them to oppose the proposed cuts. The reduction, the letter said, would follow the commonwealth’s elimination of all Medicaid funding for medical education and would precede the national health care overhaul, which calls for $500 billion in overall Medicare cuts.

Dr. Lynda Young, president of the Massachusetts Medical Society, said her group also plans to join the fight, given the national shortage of primary care physicians.

“There already are not enough residency slots,’’ Young said. “We can’t improve the physician shortage if the slots are going to decrease significantly further.’’

Tracy Jan can be reached at tjan@globe.com

Proposed cuts in payments for teaching programs

Massachusetts General Hospital, Boston, $50.10 million

Beth Israel Deaconess Medical Center, Boston, $47.31 million

Brigham and Women’s Hospital, Boston, $38.96 million

UMass Memorial Medical Center, Worcester, $32.39 million

Boston Medical Center, Boston, $23.58 million

Baystate Medical Center, Springfield, $25.52 million

Tufts Medical Center, Boston, $18.01 million

Lahey Clinic Hospital Inc., Burlington, $17.14 million

St. Vincent Hospital, Worcester, $13.55 million

St. Elizabeth’s Medical Center, Boston, $12.73 million

SOURCE: Conference of Boston Teaching Hospitals