Hospitals fear they'll pay cost of medical device tax

Hospitals groups are afraid a healthcare reform tax on medical device manufacturers will wind up hurting them more than the device makers.

The reform provision, which is the target of repeal efforts in the House and Senate, imposes a 2.3 percent excise tax on the sale of most medical devices starting in 2013.

But hospital groups are worried the device tax may be implemented in a way that allows the manufacturers to pass the bill onto other healthcare stakeholders, mainly hospitals. In fact, they warn of a “double benefit” if the Internal Revenue Service (IRS) allows the device makers to also deduct the tax.

“This ‘double-dip’ could place device companies in a better financial position than they were prior to health reform, while transferring their financial commitment onto other health care stakeholders,” the American Hospital Association, the Federation of American Hospitals, the Catholic Health Association of the United States and the Health Industry Group Purchasing Association wrote to the IRS.

The groups asked the IRS to explicitly ban device manufactuers from passing the tax onto their purchasers. One way to do this, they say, is to make the device makers certify on federal excise tax returns they did not pass on the cost of the tax to consumers.

“We believe this is appropriate public policy, and reflects the true intent of Congress in establishing the ‘shared responsibility’ network of stakeholders that made passage of [Affordable Care Act possible,” they wrote.

The medical device industry, which mostly supported healthcare reform, is lobbying hard to have the tax repealed this Congress.