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AHA: Obama Budget Proposes 'Troubling Reductions'

 |  By smace@healthleadersmedia.com  
   April 11, 2013

Healthcare leaders' brows were mostly furrowed by the Obama Administration's proposed budget for the fiscal year 2014, released Wednesday.

"Today's proposal contains troubling reductions to assistance to hospitals that help defray some of the costs of caring for low-income seniors known as bad debt," said Rich Umdenstock, president and CEO of the American Hospital Association in prepared remarks.

"In addition, the budget would jeopardize the ability of hospitals to train the next generation of physicians by cutting funding for graduate medical education, and hinder care for people in rural communities by reducing funding for critical access hospitals."

Proposed cuts to post-acute providers, particularly to inpatient rehabilitation hospitals, would limit specialized care, while an expanded Independent Payment Advisory Board would remove elected officials from the Medicare decision-making process, Umdenstock said.

By limiting charitable deductions, the administration may discourage private giving to hospitals, Umdenstock added, urging that charitable giving be excluded from any limitations on deductions and the existing federal tax charitable deduction be maintained.

"Unfortunately, the Obama Administration's budget proposal for fiscal year 2014 contains yet another new round of hospital funding cuts, piling on to the most recent hospital payment reductions used to finance half of the nearly $30 billion Medicare 'doc fix' contained in the New Year's Eve fiscal cliff agreement," said Chip Kahn, president of the Federation of American Hospitals in a statement released by the organization.

Kahn says the Administration's new cuts would be added to more than $320 billion in hospital cuts under the Affordable Care Act, and would aggravate the effects of hospital Medicare payments which have remained below the cost of care for 11 straight years.

The Obama Administration and Congress should seek "a more transformational approach to reduce costs," said Blair Childs, senior vice president of public affairs for the Premier healthcare alliance in remarks released to the media.

"We urge a focus on accelerating and expanding delivery system reforms that simultaneously achieve sustainable savings and improve healthcare quality," Childs said. "Providers need tools to bend the cost curve and improve quality. We should look to bipartisan reforms such as accountable care organizations and bundled payments that have proven to incent quality and successful outcomes and improve coordination, thereby generating better value for beneficiaries and the government."

The American Medical Association applauded the new budget's recognition of the need to eliminate the SGR Medicare physician payment formula.

"The president's proposals align with many of the principles developed by the AMA and 110 other physician organizations on transitioning Medicare to include an array of accountable payment models," said AMA president Jeremy Lazarus, MD, in a press statement. "It is critical for physicians to have a period of stability and the flexibility to choose options that will help them lower costs and improve the quality of care for their patients."

While eliminating the SGR would be a step forward, the budget takes a step backwards by aiming to achieve more savings through the Medicare Independent Payment Advisory Board (IPAB), which would set another arbitrary spending target and rely solely on payment cuts to reach it, Lazarus says. The AMA strongly supports bipartisan proposals to eliminate this panel, he added.

"We are also concerned with other proposals in the president's budget, including cuts to graduate medical education (GME) programs known as residencies," Lazarus said. "In 2013, 528 U.S. medical school seniors failed to match to a residency program. As the nation deals with a physician shortage, it is important that all medical students can complete their training and care for patients."

Both the AHA and the National Association of Public Hospitals and Health Systems (NAPH) applauded the Administration's willingness to delay cuts to disproportionate share hospital (DSH) payments until 2015, given the uncertain future of Medicaid expansion. "But we're concerned the delay comes at the expense of higher DSH cuts the following two years and a $3.6 billion baseline adjustment in 2023," said Bruce Siegel, MD, MPH, president and CEO of NAPH in prepared remarks.

Siegel says the DSH reductions "remain a looming threat to hospitals that care for our most vulnerable patients. Congress and the administration must repeal or reduce these damaging cuts and work toward a policy that achieves savings and recognizes the actual level of uncompensated care nationally. Further, savings from long-term baseline adjustments to DSH should be reinvested in the nation's safety net."

NAPH also urged lawmakers and the White House to carefully weigh Medicare cost savings proposals against their potential to financially burden beneficiaries and their providers. "In particular, we oppose the cuts to Medicare coverage of bad debt and to medical education payments—both would weaken the ability of hospitals to provide comprehensive services to communities and to train the next generation of physicians, nurses and allied health professionals," Siegel said.

The Association of American Medical Colleges (AAMC) applauded the proposed budget's modest funding increase for the National Institutes of Health, but its president expressed concern about cuts to Medicare.

"The proposed drastic reductions in Medicare indirect medical education (IME) payments will make it increasingly difficult for teaching hospitals and their physicians to provide care for the sickest in their communities, especially seniors and the underserved," said AAMC president and CEO Darrell G. Kirch, MD, in a statement released by the group. "These cuts also may force teaching hospitals to curtail vital services such as 24/7 trauma and burn units that are not available anywhere else in the community, and will worsen an already critical shortage of doctors in the United States."

In addition to training new physicians, teaching hospitals train nurses and first responders. Cutting essential federal support for teaching hospitals could mean up to 10,000 fewer physicians trained every year when the nation already faces a shortage of nearly 92,000 doctors in the next 10 years, Kirch said.

Cuts to health professions training programs, including doctor training programs at the nation's children's hospitals (CHGME), will endanger the supply of pediatricians and pediatric specialists that all children need, he added. 

In a statement, the Children's Hospital Association stated it was pleased that Obama's budget protects funding for Medicaid by avoiding short term cuts to the program, but it echoed the NAPH's concerns about proposed cuts to DSH payments, and AAMC's concerns about cuts to CHGME.

"The reality is that one in four hospitals operate in the red, so additional cuts will hamper their ability to provide access to the latest treatments and technologies, and could result in fewer caregivers and longer waits for care," the AHA's Umdenstock also said.

Concerns over potential Medicare cuts were also echoed by the Healthcare Supply Chain Association (HSCA) and the Center for Medicare Advocacy.

Scott Mace is the former senior technology editor for HealthLeaders Media. He is now the senior editor, custom content at H3.Group.

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