KHN Morning Briefing

Summaries of health policy coverage from major news organizations

Analysis: How Will $155 Billion Deal With White House Really Affect Hospitals?

When hospitals agreed to accept a $155 billion pay cut from the federal government to help Washington raise money for reform efforts earlier this month, it was "to the amazement of many," the Economist reports. "How can they justify giving away such a vast sum? There are several explanations, not all of them altruistic. Taken together, they show that the industry's leaders are bracing themselves for a period of upheaval."

Here are some motivating factors, according to the Economist: The industry will gain new customers from expanded access to health care, a chief goal of reform, the American Hospital Association says. Under the current system, hospitals treat lots of uninsured people who don't pay their bills, netting around $34 billion in uncompensated care in 2007. Even though the government gives them money for some of this, they say that compensation fails to make them whole. "The huge sums the hospitals stand to gain from reducing such losses make even $155 billion over ten years look like a reasonable amount of money to sacrifice to secure such a bonanza," the Economist says.

In addition, hospitals have sought to remain at the health reform negotiating table in hopes of thwarting plans for a new, government-run insurer they say would undercut their pricing and changes in the tax status of nonprofit hospitals that would cost many millions. Another "explicit concession wrung by the hospital bosses from the White House was a promise to crack down on clinics owned by doctors," which represent potential, unwanted competition for established hospitals. "As this back-room deal illustrates, the strongest motives behind the hospitals' ostensibly generous price cut were self-serving ones: to reduce competition, not boost it, and to head off any increase in government influence over their price," the Economist reports (7/16).

Meanwhile, in Cook County, officials are complaining that health reform could harm Stroger Hospital, in Chicago, Chicago Public Radio reports. Its primary business is treating the uninsured and poor. "Those who have insurance don't necessarily go to a safety net hospital," said Warren Batts, the chairman of the board that oversees Cook County's health system. If that trend continues in a post-reform world, the hospital could see a 40 percent cut in the $85 million Washington pays them to treat the uninsured, with few gains of paying customers (Spitzer, 7/16).

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