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Some medical device manufacturers not paying their share of health reform

As debate over repeal of the medical device excise tax continues on Capitol Hill, evidence has begun to emerge that some medical device manufacturers have chosen to pass the costs of the tax directly to American hospitals and healthcare providers, and ultimately to patients and taxpayers. For hospitals already delivering effective and affordable care on shrinking budgets, this is tantamount to being double-billed for healthcare reform.
Hospitals committed $155 billion over 10 years through cuts in reimbursement to help fund the Affordable Care Act (ACA). To further fund national healthcare reform, Congress imposed a 2.3 percent excise tax on the sale of “taxable medical devices” — everything from pacemakers and surgical tools to canes and wheelchairs — beginning Jan. 1, 2013.
Congress included medical device manufacturers in the financial calculus for healthcare reform because it believed that manufacturers would benefit from the growing ranks of insured patients under the ACA. Congressional intent was to appropriately apportion both the benefits and burdens of the law as fairly as possible.

Although the Healthcare Supply Chain Association did not take a position on the medical device tax at the time — nor do we take a position today — the HSCA joined the American Hospital Association, the Federation of American Hospitals and the Catholic Health Association in urging the IRS not to allow medical device manufacturers to pass on the cost of the device tax to hospitals.
{mosads}Unfortunately, the IRS did not respond directly to our comments at the time, and today maintains that it does not have the authority to police companies that pass on the device tax.
Hospitals are now reporting that, although some suppliers are behaving responsibly, other device manufacturers are billing hospitals directly to cover the costs associated with the medical device excise tax. Although there are more than 40 taxes found in the ACA, hospitals and other healthcare providers report that medical device suppliers are the only parties indicating that they plan to pass the tax on to their customers. That is not right.
The HSCA recently launched Medical Device Tax Watch, a website dedicated to shining a light on efforts by some manufacturers to shift the cost burden of the device tax. The site publicly lists those suppliers that are passing on the costs associated with the device tax or those that have told hospitals that they intended to pass it on. The website also serves as a resource for hospitals and a tool for gathering evidence of manufacturers tacking the costs associated with the tax directly onto their invoices.
We applaud those leading medical device companies that have made appropriate adjustments to their operations and found other ways to respond to this tax rather than passing it on to hospitals. As long as the device tax is in effect, we urge all other manufacturers to stop passing on the costs of the device tax immediately. No one likes paying taxes but, with few exceptions, most Americans make sure they pay the taxes they owe.
National healthcare reform is a shared financial responsibility and hospitals have already paid their share.

Rooney is president of the Healthcare Supply Chain Association (HSCA).


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