U.S. Government Relations Update

There are quite a few articles in circulation that call into question the actions of US tax-exempt hospitals. It only confirms the importance for AHP’s continued involvement in educating the news media, the public, and elected officials on the role of philanthropy and of tax-exempt hospitals in serving their communities. Below is one article printed by The Wall Street Journal and AHP’s response. We’ve also included an article printed in The New York Sun with interesting data issued from Standard & Poor’s and Moody’s that demonstrates the tremendous strain hospitals are experiencing. The last item we’ve provided is the news release issued by Senator Grassley with copies of two letters sent to M.D. Anderson Cancer Center and the University of Chicago Medical Center.

Nonprofit Hospitals Flex Pricing Power
The Wall Street Journal
by John Carreyrou
August 28, 2008


ROANOKE, Va. -- In 1989, the U.S. Department of Justice tried but failed to prevent a merger between nonprofit Carilion Health System and this former railroad town's other hospital. The merger, it warned in an unsuccessful antitrust lawsuit, would create a monopoly over medical care in the area.

Nearly two decades later, the cost of health care in the Roanoke Valley -- a region in southwestern Virginia with a population of 300,000 -- is soaring. Health-insurance rates in Roanoke have gone from being the lowest in the state to the highest.

Carilion's market clout is manifest in other ways. With eight hospitals, 11,000 employees and $1 billion in assets, the tax-exempt hospital system has become one of the dominant players in the Roanoke Valley's economy. Its dozens of subsidiaries include businesses ranging from athletic clubs to a venture-capital fund.

The power of nonprofit hospital systems like Carilion over their regional communities has increased in recent years as their incomes have surged. Critics charge this is creating untaxed local health-care monopolies that drive the costs of care higher for patients and businesses. Read article at:
http://online.wsj.com/article/SB121986172394776997.html


Letter to the Editor
The Wall Street Journal
September 3, 2008

Dear Sir:

At the same time your August 28 article, "Nonprofit Hospitals Flex Pricing Power", raised questions about possible high fees at one particular facility, both Standard and Poor's and Moody's issued reports noting that nonprofit hospitals in both New York and around the country have small operating margins and are under great financial strain.

The latter forecast is the real world scenario that most nonprofit hospitals face. We estimate that more than 30 percent of nonprofit hospitals are deep in red ink due to increased capital expenditures, paperwork requirements brought on by HIPAA, meeting the health care needs of the uninsured - particularly non-citizens - and replacing old equipment.

Despite the financial squeeze, health care institutions in the latest year raised $8.32 billion through philanthropy. Read letter at: http://www.ahp.org/in-the-news/articles/090408.php


Bill McGinly references this article in his Letter to the Editor:

Hospital Woes are Worse in NY Than Rest of US by E.B. Solomont
August 26, 2008


Two separate financial reports are depicting growing financial problems for nonprofit hospitals nationwide and in New York, where analysts said hospitals have smaller operating margins and are under greater financial strain than in other areas of the country.

In a report released yesterday on the credit quality of the nonprofit health care sector, analysts from Standard & Poor's described an increase in negative rating changes and outlooks in the first half of 2008, when they downgraded 31 hospitals and health systems; 11 were downgraded in the first half of 2007. They projected the number of downgrades would eclipse upgrades this year and next. Read article at:
http://www.nysun.com/new-york/hospital-woes-are-worse-in-ny-than-rest-of-us/84591/


Another Letter to the Editor:

Nonprofits Can Have Power for the Ill, or for Good or Ill As a longtime member of the medical community in Roanoke, Va., and a member of the Carilion Medical Group board of directors, I am well aware of the issues and individuals mentioned in your article "Nonprofit Hospitals Flex Pricing Power" (page one, Aug. 28).

However, a closer look at the region demonstrates that competition is alive and well in southwestern Virginia.

The Roanoke region has nearly 500,000 residents and a number of hospitals. According to the American Hospital Directory, the newly named Carilion Clinic has eight hospitals with 1,264 beds and 45,958 annual discharges, while HCA has four hospitals with 648 beds and 29,923 annual admissions in the region. It should be noted that the Salem Veterans Medical Center and the state-owned Catawba Hospital are also located in the Roanoke Valley, and there are four other hospitals in the region. Likewise, there are strong medical groups. So, unlike in some regions, the Roanoke region doesn't have a single provider of inpatient or outpatient medical care.

According to the Virginia Hospital and Healthcare Association, the average cost of a hospital stay in 2007 for a market basket of seven diagnoses in Roanoke is below the state average and, with the exception of "major hip surgery," is well below prominent providers in Fairfax, Richmond and Norfolk. If insurance rates are, in fact, higher in Roanoke than elsewhere in the state, there must be some other reason than exorbitant hospital charges.

The purpose of establishing Carilion Clinic, as publicly expressed by CEO Edward Murphy, isn't to be anticompetitive, but is to raise the quality and lower the cost of providing care through a more tightly integrated system of health care that has as little waste as possible. In health care, quality is less expensive. Health-care providers who share this goal (whether employed or not) remain welcome to participate in this effort. To many of those concerned about the future of health care in the U.S., it doesn't appear that maintaining the status quo is a successful strategy.

Henry R. Ivey, M.D.
Carilion Medical Group
Vinton, Va.

News Release – Grassley Questions Two Tax-exempt Hospitals on Certain Practices

M E M O R A N D U M
To: Reporters and Editors
Re: Letters to two tax-exempt hospitals
Da: Tuesday, Sept. 2, 2008


As part of his ongoing oversight of tax-exempt issues, Sen. Chuck Grassley, ranking member of the Committee on Finance, sent separate inquiries in the last several weeks to two tax-exempt hospitals whose public service and tax-exempt purpose have come into question. On July 23, Grassley wrote to M.D. Anderson Cancer Center in Houston, a hospital that was featured in an April 28, 2008, Wall Street Journal article regarding the hospital’s billing practices involving a leukemia patient. On Friday, Grassley wrote to the University of Chicago Medical Center after a story in The Washington Post last month described the hospital’s efforts to steer under-insured and uninsured patients away from the hospital to clinics. Grassley made the following comment on his two letters. The text of the letters is attached.

"I keep hearing that tax-exempt hospitals are changing their ways. At the roundtable I convened last year, the hospital community told me to wait and see before legislating, that the new 990 Schedule H would not only provide data to make informed decisions but also would change behavior. It’s troubling then to hear about two world-renowned hospitals engaging in questionable practices. One made it into the limelight for reportedly requiring a critically ill patient to come up with exorbitant amounts of cash upfront and badgering her for cash during medical treatment. Another appears to be culling the least profitable patients from its emergency room. The answers to the questions I’m asking are critical to understanding whether these hospitals are setting standards for their peers. Those standards might include losing sight of the public service that comes with tax-exempt status."

Letter to M.D. Anderson Cancer Center – Read letter at: http://grassley.senate.gov/private/upload/Letter-to-MD-Anderson-7-23-08.pdf

Letter to University of Chicago Medical Center – Read letter at: http://grassley.senate.gov/private/upload/August-29-2008-CEG-to-CEO-of-University-of-Chicago-Medical-Center.pdf

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