Hospitals Quietly Seek Financial Assistance from Capitol Hill

The hospital industry may not be as blatant as other industries in its call for financial help in difficult economic times, but it is lobbying Congress for help funding health information technology and accessing capital markets, an American Hospitals Association spokesman told insideARM.

The AHA is seeking increased Medicare payments to support the ongoing costs of IT and low-interest loans and grants to support both hospitals' initial investments in IT and the development of health information exchange projects.

“Hospitals are facing uncertain times as their financial health falters and ability to borrow funds for improving facilities and updating technology is squeezed,” said AHA spokesman Matthew Fenwick.

At least one healthcare policy expert, however, says that Congress has overdone bailouts to institutions.

“This whole episode is a reflection that we have a broken financing system for Medicare and Medicaid,” said Robert Moffitt, director of the Center for Health Policy Studies at the Heritage Foundation.  “We should be targeting these funds directly to patients, so they can get the health insurance they think is best for them and force the hospitals to compete for patient dollars.”

The AHA defends the requests saying health IT adoption and maintenance is expensive and most of the initial expense is borne by hospitals while the financial benefits flow downstream to other providers, payers and employers.  For that reason, Fenwick said the AHA believes that providers and payers much share in these investments.  Additionally, he said health IT adoption is more difficult for small and rural hospitals because they likely have less developed infrastructures and administrative and technical staff support.  

Jeff Schaub, senior director of Fitch Ratings public finance health care group, said an ancillary benefit of Health IT investment is that hospitals will better track charity care and bad debt expenses, which the Internal Revenue Service says will be mandatory by 2010 reporting year. But with the emphasis the Centers for Medicare and Medicare Services is placing on reporting health care quality, it’s important that smaller hospitals invest in Health IT, he said. Schaub said hospitals that don’t report the information forfeit incentive payments.

“Smaller hospitals are going to find it more difficult than larger stronger hospitals to make investment s in IT that are required for these quality reporting changes,” he said.

President Elect Barack Obama has already signaled he will support health IT in his economic recovery plan.  However, it’s not clear how the new Congress will greet requests for low interest loans and help accessing capital markets.

Lauren Coste, a Fitch director of corporate finance for-profit hospitals, said the for-profit sector has better access to long term financing. “For the most part, they will not need to tap the markets well into 2009 and even then some and wait well beyond that,” Coste said.

Most not-for-profit hospitals, however, have been hard hit by the frozen auction rate markets.
 
Schaub said a lot of hospitals have postponed planned projects, but some hospitals are committed to projects that have begun.  Some hospitals are starting to use their own funds to pay project costs, which could affect patient care.

“Anything Congress can do to ease lending to hospitals is good,” for the industry. “For projects right now, a smaller lower rated facility will be paying a lot of money to borrow money, if they can do it at all.” Schaub said.