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"We were never part of the negotiations and did not sign onto the agreement," said Larry Gage, president of the National Association of Public Hospitals and Health Systems. The group contends DSH payments also help maintain trauma centers, burn units and other community assets that could be threatened.
Nancy-Ann DeParle, who directs the White House health reform office, said there's adequate protection for safety net hospitals in the House bill. The payments would be reduced -- gradually and starting only after the rate of uninsured Americans declines -- in a way that differs greatly from what happened in Massachusetts, DeParle said.
President Barack Obama supports phasing in DSH reductions over 10 years.
"As people get insurance, there will be less of a need for hospitals to get additional funds," DeParle said. She acknowledged it may be "scary" for hospital administrators to shift from getting these additional payments to a reality where more of their patients have insurance cards.
But hospitals can and must adapt, DeParle said. "We will always need safety net hospitals."
It's unclear how much would be cut. The House legislation calls for cuts of $20 billion, representing 8 percent of what the Congressional Budget Office projects in federal outlays to DSH over 10 years. The White House supports larger cuts.
Many urban hospitals already operate on small margins or at a loss. Chicago's Mount Sinai Hospital had only 1.42 days of cash on hand in August. Its bad debt, the bills left unpaid by patients, was $62.3 million last year. It received $10 million in DSH money last year.
Stroger is a public hospital, subject to cuts from Cook County government. The county's health system is considering laying off nearly 500 workers. Chicago's Stroger Hospital received $42 million last year in DSH.
"This is definitely going to be a change. It's not health care as usual," said Stephen Zuckerman, a health economist in the Urban Institute's Health Policy Center in Washington.
Safety net hospitals may need help raising money to spruce up and modernize to become more competitive with private hospitals, Zuckerman said. But they won't disappear.
"The capacity they provide to the system is going to be needed," Zuckerman said. "I don't think the rest of the system is ready to absorb the patient population the public hospitals now serve."
Lawmakers have wanted to cut DSH payments for years, said Wendy Parmet, health law professor at Boston's Northeastern University School of Law. With rising Medicare and Medicaid costs driving up national debt, the payments will continue to be a juicy target, she said.
"Hospitals are going to cry that it hurts," Parmet said. "But it's going to happen, whether or not there's health insurance reform."
On the Net:
National Association of Public Hospitals and Health Systems: http://www.naph.org/
American Hospital Association: http://www.aha.org/
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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