Hospitals blast Medicare cuts in GOP payroll tax bill

By Julian Pecquet - 12/12/11 05:01 PM ET

An array of hospital groups are pushing back against billions of dollars in cuts in House Republicans' payroll tax package.

Senate Democrats oppose paying for the package by charging wealthy seniors more for Medicare, while House Republicans say savings from ending the wars in Iraq and Afghanistan are fictitious. That leaves billions in cuts to Medicare provider payments on the table as lawmakers struggle to preserve payroll tax cuts, unemployment benefits and physician Medicare payments before year's end.

"I want to alert you to several provisions in the bill that will adversely affect hospitals in your district," a lobbyist for the American Hospital Association told congressional health staffers in an email. "The aforementioned provisions are STRONGLY OPPOSED by the hospital field and I wanted to give you the 'heads up' that you may be hearing from your hospitals on these issues."

The hospital provisions include a $10.6 billion cut to federal reimbursements for bad debts; a $6.8 billion cut to payments for hospital outpatient department evaluation and management services; a $4.1 billion cut to payments for hospitals that see a disproportionate share of people without insurance; and an extension of caps on therapy services to outpatient hospital settings, which saves the government another $1.7 billion. Hospitals only account for about 60 percent of federal reimbursements for bad debt.

The AHA says cuts to bad debt payments would disproportionately hurt hospitals that care for the poorest people because they're often uninsured or can't meet their required cost-sharing requirements under Medicare.

The AHA also opposes relaxing the healthcare reform law's restrictions against physician-owned hospitals, which many Democrats view as having a built-in conflict of interest that drives up costs.

Hospitals are also upset about what's not in the bill, including payment boosts for small rural hospitals, so-called "Section 508 hospitals" with high labor costs and psychiatric services delivered by physicians, clinical psychologists and clinical social workers.