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Tax deal reduces funds for hospitals

Mass. health industry cites mounting losses

By Tracy Jan
Globe Staff / February 28, 2012
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WASHINGTON - The recent payroll tax cut package passed by Congress - heralded as a bipartisan nod to working families - has Massachusetts hospitals reeling over a little-noted section that will cost them tens of millions of dollars.

Tucked into the legislation are cuts to the rates paid to hospitals to care for the elderly and poor, as well as a provision slicing a new preventive care fund by about a third. The cuts amount to at least $62 million over 10 years in Massachusetts and possibly significantly more, and they come on top of other reductions that have administrators feeling they have been pushed to the edge.

“We wonder how many more reductions we can sustain,’’ said Tim Gens, executive vice president of the Massachusetts Hospital Association. “We’re not in a position to continually absorb these additional cuts and still provide the services and access that we want to provide.’’

Already the health care overhaul law has set into motion $5.7 billion in reduced payments - about 9 percent of Medicare funding - to Massachusetts providers over the next decade. Health care providers here are slated to be hit by another $1.1 billion over the same period if Congress fails to hash out a deficit reduction deal by Dec. 31. And President Obama’s proposed cuts to teaching hospitals would cost Massachusetts about $438 million.

Lawmakers demanded the newest cuts as a way to pay for one part of their payroll tax deal: the delay in scheduled reductions in Medicare reimbursement rates for doctors.

The biggest of these cuts, $62 million over the next decade in Massachusetts, targets a program to help hospitals defray costs from patients who don’t pay their bills. The dollar impact is not yet known for other cuts - including subsidized insurance coverage for low-income patients and capping the amount of physical and occupational therapy services in hospital outpatient departments.

Representative Stephen Lynch, the South Boston Democrat, who voted against the payroll tax cut extension in part because of the health care reductions, said it made no sense to pay for the temporary fix to doctors’ Medicare rates by robbing hospitals. As a result, he said, hospitals serving a high number of uninsured or underinsured patients, such as Boston Medical Center and Quincy Medical Center, will suffer.

“They gave with one hand and took away with the other,’’ Lynch said. “The problem is that those areas that are now being shortchanged are enormously important to our state.’’

Nearly 15 percent of the state’s economy is based on health care, said Senator John F. Kerry.

He also expressed concern about the impact that a 2 percent reduction in Medicare payments to clinical laboratories in 2013 could have on about 630 such facilities in the state.

While industry lobbyists insist that hospitals need to be protected, some health care economists say alternative cost-cutting measures could hurt patients directly. Hospitals, they say, can be extraordinarily bloated, expensive, inefficiently run organizations - making cuts to them less likely to cause harm in the long run.

“Look, hospitals around the country are very well compensated overall,’’ said Stuart Altman, a national health policy professor at Brandeis University. “If we’re going to do anything to impact health care spending, hospitals are going to be affected because that’s where the money is.’’

Altman, who said the cuts would probably not affect patients, chided hospital officials for their protestations. “It is a little bit like the boy who cried wolf all the time,’’ he said. “Any balanced assessment goes ‘Give me a break.’ ’’

Len Nichols, an economist and director of the Center for Health Policy Research and Ethics at George Mason University, said many hospitals have, in effect, inflated their rates in order to claim a higher amount of uncompensated care to collect more money from Medicare. So the move to lower Medicare reimbursements for so-called bad debt is reasonable, he said.

“What the Affordable Care Act did was, it signaled quite clearly that business as usual is over,’’ said Nichols, calling the latest hospital complaints “white noise.’’

And given that Boston has among the lowest uninsured rates in the nation, the impact of these cuts should not be traumatic, Nichols said.

“I would hasten to remind them that 2014 is going to bring hospitals way more insured people, so even in Massachusetts, there is going to be more federal money than there is now,’’ he said.

In addition to further reducing Medicare reimbursement rates, the payroll tax deal decreases a fund for prevention and public health that was created under the health care law. The money was intended to save on costs by preventing chronic and infectious diseases and premature deaths.

The cuts amount to about $5 billion nationally over the next decade. Massachusetts thus far has received more than $24 million in grants from the fund for initiatives ranging from diabetes care training to obesity prevention.

Doctors and other health care advocates were most disturbed by these cuts, which were supported by Republicans who oppose the health care overhaul and liken the prevention program to a slush fund.

Backers of the prevention efforts call them among the most important provisions of the new law.

“We think that holds the most promise for long-term cost control and improving the health of Massachusetts,’’ said Brian Rosman, research director at Health Care For All in Massachusetts. “If we can prevent people from getting sick in the first place, we can run a much better health care system.’’

Tracy Jan can be reached at tjan@globe.com. Follow her on Twitter @GlobeTracyJan.

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