On July 8, three national hospital associations joined with Vice President Joseph Biden at the White House to announce that they had reached agreement with Senate Finance Committee Chairman Max Baucus (D-MT) on proposals to reduce Federal hospital spending by $155 billion over 10 years. The savings will help finance expanded health care coverage for the uninsured, one of President Barack Obama’s health care reform goals. The three associations—the American Hospital Association, the Catholic Health Association, and the Federation of American Hospitals—said in a statement, “Now for the first time, coverage for all is within our nation’s reach as the agreement based upon the Finance Committee proposal will cover 95 percent of all Americans. As we take this historic step, we recognize that everyone must do their part if we are to succeed. . .The reductions of $155 billion over 10 years in the framework are substantial, are linked in part to increased coverage and cannot go any deeper without damaging hospitals’ ability to care for their communities.” 
     
While details on the non-hospital savings portions of the Senate Finance Committee proposal were not released last week, the associations reported that their agreement on hospital savings includes Medicare “market basket” update reductions for hospitals averaging one percentage point per year—with smaller reductions in early years and smaller reductions if insurance coverage goals are not met—for a 10-year savings of $103 billion; phased reductions in Medicare and Medicaid disproportionate share hospital (DSH) payments beginning in 2015, with DSH payments reduced by 40% by 2019 (smaller reductions would apply if coverage goals are not met), for a savings of approximately $50 billion over 10 years (President Obama earlier proposed reductions of 75%); and reductions in payment for hospital readmissions, focusing on avoidable readmissions related to the initial admission, for a savings of approximately $2 billion (President Obama originally proposed readmissions savings of $16 billion). According to the associations, other provisions of the agreement include a budget-neutral value-based purchasing proposal; an increase in teaching hospital residency slots eligible for Medicare reimbursement (the agreement contains no cuts in Medicare indirect medical education payments); pilot projects to test bundling of Medicare payments; restrictions on physician self-referral to hospitals in which they have an ownership interest; and increased charity care reporting.

GNYHA Reaction
In a statement, GNYHA commended the associations for making the powerful statement that America’s hospitals will do their part to help bend the health care cost curve. GNYHA also stated its desire to continue to work with the associations, the President, and Congress to protect our safety net institutions, truly reduce costs so hospitals can absorb the cuts contained in the agreement, and promote improvements in quality and patient safety. “Safety net hospitals, particularly in cities in states like New York and New Jersey, will continue to be severely challenged no matter how successful reform is,” GNYHA stated. GNYHA then reiterated its support for the DSH provision in the House discussion draft released on June 19. “The House… under the leadership of Ways and Means Chairman Charles Rangel and Energy and Commerce Health Subcommittee Chairman Frank Pallone, recognized these realities by protecting Medicaid and Medicare [DSH] payments in the House health reform bill…We continue to strongly support the House approach.”