Heated exchange on hospital payments may be precursor for congressional battle to come

A recent heated, public exchange between one of President Bush’s top advisers and a hospital industry executive could be a harbinger of the year ahead for the lobbyists who represent hospitals in Washington.

Hospitals once again are turning to Congress and the administration to ask for higher payments for treating Medicare patients, citing declining profit margins they say threaten their financial viability.

The industry has many allies in Congress and close ties with Washington Republicans but failed to achieve that objective of higher payments last year. They were left to cope without a pay raise from Medicare.

Nevertheless, the hospitals and the trade associations that represent them are stiffly resisting one of the White House’s favored healthcare policy proposals. The administration wants hospitals and other healthcare providers to disclose publicly the prices they charge for medical services, a notion that has not been warmly received by the hospital sector.

The administration is preparing to take steps on its own that could pressure hospitals and other medical providers to cooperate.

Under an initiative set to be unveiled this week, Medicare and Medicaid will disclose what they pay hospitals and doctors, The Wall Street Journal reported yesterday. Health and Human Services Secretary Mike Leavitt planned to tout price transparency and quality improvement in a speech to the Commonwealth Club in San Francisco yesterday.

The Federation of American Hospitals held its conference last week, a well-attended annual gathering of executives from the for-profit hospital sector, lobbyists, congressional aides, agency staffers and reporters. Speakers this year included Sens. Hillary Rodham Clinton (D-N.Y.) and John Ensign (R-Nev.), former House Speaker Newt Gingrich (R-Ga.) and U.S. Chamber of Commerce President and CEO Tom Donohue.

Also addressing the conference was Allan Hubbard, the director of the White House’s National Economic Council and an ardent proponent of what Bush calls “price transparency.” Hubbard is regarded as one of the gurus behind the president’s healthcare agenda this year.

After Hubbard outlined the White House’s vision for the future of healthcare, he took questions from the audience.

After listening to a handful of tepid questions, one hospital executive took the offensive, demanding to know why the government is asking hospitals to reveal proprietary information.

“We have a private healthcare marketplace,” he said, adding, “assuming that the administration wants to protect it,” before Hubbard cut him off to defend the president’s agenda. A person who attended the meeting later identified the speaker as Daniel Waldmann, vice president of government relations for Tenet Healthcare.

“I feel strongly about this,” Hubbard said during the exchange. “I can’t understand how you can look at yourself in the mirror and say, ‘I should not provide pricing and quality information to prospective customers.’”

“We don’t consider anything in our society without considering price,” Hubbard said. “That’s the American way,” he added.

The public confrontation echoed a recent meeting at the White House between Hubbard and hospital industry lobbyists, including top executives from the federation and the larger American Hospital Association, which includes both for-profit and not-for-profit companies.

As during the White House meeting, Hubbard made plain that the administration seeks a voluntary price-reporting program but will back a compulsory one if hospitals do not play ball.

“I hope you all will think about this,” Hubbard told the conference audience. “And I hate to use … a threat, but if you don’t, it is going to be imposed.”

The industry was similarly cool to a voluntary program under which it would provide information on the quality of the care hospitals provide. But when Congress linked hospitals’ Medicare payments to the program in 2003, participation soon approached 100 percent.

Congress will begin its formal involvement in the issue this morning, when Rep. Nathan Deal’s (R-Ga.) Health Subcommittee of the House Energy and Commerce Committee holds a hearing on pricing transparency. Gingrich is slated as the first witness.

Hospitals typically do not disclose the prices they charge for individual medical services. For most patients, the price is not relevant because an insurance plan or a government program that pays substantially less than the list price covers their care.

In a speech Friday, Bush summed up his views on the issue: “I think it’s very important that there be more transparency in pricing in healthcare. It’s really the only industry, when you think about it, where somebody else decides whether the price is worthwhile.”

Bush contends that public disclosure of prices will drive them down and that the current system is unfair because people without health insurance or who have to meet high deductibles are not able to shop for less expensive treatments.

Not coincidentally, high-deductible health insurance is a required complement to health savings accounts, a favorite of the president and of conservatives looking to increase the influence of market forces on the healthcare system.

Waldmann noted that, under the current system, “it would be difficult for me as a hospital, for a consumer to just call me” to get that information.

Hubbard seized on that remark. “You are absolutely right,” he said twice. “It is absolutely impossible for a consumer to call you to get the price, and that is indefensible, absolutely indefensible.”

Citing Bush’s price-transparency proposal, House Ways and Means Committee Chairman Bill Thomas (R-Calif.) describes hospitals’ charges as “so grossly inflated above their private market rates so as to be almost meaningless” in a letter sent to Health and Human Services Secretary Mike Leavitt on Friday.

Thomas complains that the Office of the Inspector General in Leavitt’s department has failed to issue regulations to discourage “excessive” charges, but he also offers harsh criticism of “those who wish to keep real prices shrouded in order to gouge the public, employers and insurers.”

The hospital industry maintains that health insurance companies should be more open with the prices they negotiate and should be responsible for steering their subscribers to the most efficient, highest quality healthcare providers.