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Teaching Hospital Update - October 5-9, 2009


Email Alert

By Clinton Mikel*

October 9, 2009 

Obama Discreetly Lobbying for Public Option in Senate Health Bill

Despite months of outward ambivalence about creating a government health insurance plan, the Obama Administration has launched a behind-the-scenes campaign to get divided Senate Democrats to take up some version of the idea for a final vote in the coming weeks. While President Obama has said he prefers a public option, he has also been open to health cooperatives and other alternatives. In the last week, however, senior administration officials have been holding private meetings almost daily at the Capitol with senior Democratic staff to discuss ways to include a version of the public plan in the healthcare bill that Senate Majority Leader Harry Reid (D-NV) plans to bring to the Senate floor this month. Among those regularly in the meetings are President Obama's top healthcare advisor Nancy-Ann DeParle, aides to Reid, and staff from the Senate Finance and Health committees, both of which developed healthcare bills.

In addition, President Obama has also been reaching out personally to rank-and-file Senate Democrats, telephoning more than a dozen in the last week to press for action. Two public-plan amendments were defeated in the Senate Finance Committee last week, a development which was viewed by some as the death knell of the public option, but the Obama Administration and its congressional allies are under heavy pressure from the Democratic Party's liberal base to breathe life back into it.

Meanwhile, as the unemployment rate climbs, President Obama is trying to make the case that his healthcare overhaul would create jobs by making small business startups more affordable. In his weekly radio and Internet address on Saturday, President Obama linked one of his biggest challenges, joblessness, with passage of far-reaching changes to the nation's healthcare system.

Obama Discreetly Lobbying for Public Option in Senate Health Bill, BNA'S HEALTH L. REP. (Oct. 8, 2009) (note: registration is required to view this content).

Medicare Fraud, Once a White-Collar Crime, Now Attracts Mafia, Violence

Lured by easier money and shorter prison sentences, mafia figures and other violent criminals are increasingly moving into Medicare fraud and spilling blood over what was once a white-collar crime. Nationally, federal investigators have been threatened; an informant's body was found riddled with bullets; and a woman was discovered dead in a pharmacy under investigation, her throat slit with a piece of a broken toilet seat. For the criminals, Medicare rackets offer more financial gain and shorter prison sentences than those for drug trafficking or robbery.

Medicare scammers typically make their money by billing Medicare for medical equipment and drugs that patients never receive and never needed. Most Medicare schemes are based in cities such as Miami, Los Angeles, Detroit, and Houston. Rather than building an elaborate hierarchy like a mafia or other gangs, many Medicare con artists use common street criminals to recruit patients and doctors, authorities said. A Medicare scammer could easily net at least $25,000 a day while risking a relatively modest ten years in prison if convicted on a single count. A cocaine dealer could take weeks to make that amount while risking up to life in prison.

Kaiser Daily Health Policy Report, Medicare Fraud, Once a White-Collar Crime, Now Attracts Mafia, Violence, Henry J. Kaiser Fam. Fdn. (Oct. 7, 2009).

Details, Caveats of CBO Cost Estimates Emerge

The Congressional Budget Office (CBO) yesterday released its updated cost estimates for the healthcare bill being considered by the Senate Finance Committee. The CBO calculated that the legislation would cost $829 billion by 2019. That tab would be offset by new taxes added to the bill. The projected ten-year cost of the bill increased, from the
$774 billion of Mr. Baucus' original proposal.

The preliminary CBO report sets the stage for the finance panel to vote on Baucus' healthcare blueprint later this week or next--a key step in the Democratic campaign to send President Obama a healthcare overhaul bill by the end of the year. The report contained important caveats. One noted that the estimate does not include the costs of proposed payment increases for doctors serving Medicare patients, roughly $200 billion through 2019. Additionally, a so-called fail-safe mechanism to hold spending in line could result in cuts as large as 15% in federal subsidies designed to help the poor afford insurance, CBO said. Finally, Republicans and other critics are likely to highlight the portion of the CBO's letter that states that the cost estimate of Baucus' bill is preliminary pending an analysis of the final legislative language.

Kaiser Daily Health Policy Report, Details, Caveats of CBO Cost Estimates Emerge, Henry J. Kaiser Fam. Fdn. (Oct. 7, 2009).

Court Finds Hospital Merger Not Bona Fide for Purposes of Medicare Reimbursement

A sizable gap between the purchase price of a hospital and the value of its assets demonstrated that its merger with another hospital was not a bona fide sale for purposes of Medicare reimbursement, a federal district court recently held (St. Luke's Hospital v. Sebelius, D.D.C., No. 1:08-cv-00883-JR, 9/30/09). The U.S. District Court for the District of Columbia held that if a sale is not a bona fide, free-market exchange, the purchase price may be only an illusion designed to make the asset appear to have lost more value than it really has.

The court concluded that St. Luke's merger was not a bona fide sale because the sizable gap between the purchase price and the value of the assets of the other hospital, Allentown Osteopathic Medical Center, and other circumstances surrounding the merger were sufficient to support the Centers for Medicare & Medicaid Services (CMS) administrator's ruling against the hospital.

St. Luke's primary argument for overturning the CMS administrator's decision was that the U.S. Department of Health and Human Services Secretary Kathleen Sebelius's (HHS Secretary's) interpretation making statutory mergers subject to the bona fide sale requirement is plainly contrary to the regulations. The court, however, found that the Secretary's interpretation is supported by the text of the regulation and by common sense.

At the time of the merger, 42 C.F.R. § 413.134(f) allowed for the realization of gains or losses only upon a bona fide sale. The court found that the reason for that was obvious--only an arm's length transaction for reasonable consideration ensures that the purchase price is a better reflection of actual value than the net book value.

"At the time of the merger, Allentown's current and monetary assets alone were nearly double the value of the liabilities assumed; its total assets were more than five times the 'price,'" the judge found. "The Administrator's finding is thus supported by more than substantial evidence, and in fact well demonstrates why a bona fide sales requirement is necessary to prevent Medicare from making payments that bear no relation to actual costs." When Allentown Osteopathic Medical Center, in Allentown, PA, merged with St. Luke's Hospital in January 1997, the fiscal intermediary disallowed the loss claiming that the statutory merger from which the loss of $2.9 million arose did not meet the requirements of a bona fide sale.

Court Finds Hospital Merger Not Bona Fide for Purposes of Medicare Reimbursement, BNA'S HEALTH L. REP. (Oct. 8, 2009) (note: registration is required to view this content).

Tax Panel Says Finance Committee Plan Would Hit Industries Harder Than First Estimated

Congressional tax experts say Senate healthcare legislation would impose $29 billion more in taxes on healthcare industries than originally thought. The Joint Committee on Taxation says drug companies, medical device manufacturers, and insurers would pay $121 billion over ten years as a result of taxes in the Senate Finance Committee bill. That's compared with the $92 billion originally calculated. The tax experts said the reason for the change is that the companies will not be able to deduct the fees from their corporate income taxes.

The new numbers come as the Finance Committee is preparing to vote on the bill and could bolster Republicans' arguments that it contains too many new taxes.

Tax Panel Says Finance Committee Plan Would Hit Industries Harder Than First Estimated, Modern Healthcare's Daily Dose (Oct. 6, 2009) (note: registration is required to view this content).

Swine Flu Meant Hospitalization for Many Patients, Study Finds

One quarter of Americans sick enough to be hospitalized with swine flu last spring wound up needing intensive care and 7% of them died, the first such study of the early months of the global epidemic suggests.

That's a little higher than with ordinary seasonal flu, several experts said. What is striking and unusual is that children and teens accounted for nearly one half of these cases, including many who were previously healthy. "Contrary to the perception among many people that this influenza, novel H1N1, is mild, these data vividly demonstrate that influenza can make you very, very ill," said William Schaffner, a Vanderbilt University flu expert and spokesman for the Infectious Diseases Society of America. "Clearly, the best way to protect yourself and your family is to get vaccine as soon as it becomes available," said Schaffner, who had no role in the study but has consulted for swine flu vaccine makers.

The study was done by researchers at the U.S. Centers for Disease Control and Prevention (CDC), working with hospitals and state and local health departments. Results were published online by the New England Journal of Medicine.

Swine Flu Meant Hospitalization For Many Patients, Study Finds, Modern Healthcare's Daily Dose (Oct. 8, 2009) (note: registration is required to view this content).

Greens, Eggs, Tuna Among Riskiest Foods

Leafy greens, eggs, and tuna fish top the list of the ten "riskiest" foods regulated by the U.S. Food and Drug Administration (FDA), according to a new report by the Centers for Science in the Public Interest (CSPI). Taken together, these foods have accounted for nearly a thousand disease outbreaks in the United States since 1990, according to Sarah Klein, food safety attorney for CSPI. The entire top-ten list--which also includes oysters, potatoes, cheese, ice cream, tomatoes, sprouts, and berries--accounts for nearly 40% of all food-borne outbreaks among FDA-regulated foods, the organization said.

"Unfortunately, many of the foods that made the list of riskiest foods regulated by FDA are an important part of a balanced and healthy diet," Klein said.

Leafy greens accounted for 363 outbreaks and 13,568 cases of illness since 1990, according to the study, which comes from an analysis of CSPI's Outbreak Alert database, which culls data from CDC reports. The three most common pathogens were Norovirus, E. Coli, and Salmonella. "Large-scale production of leafy greens has started to mimic the well-known problems of ground beef contamination," Klein said, "where a single contaminated cow, or head of lettuce, can contaminate an entire day's production as it co-mingles with uncontaminated products."

Kristina Fiore, Greens, Eggs, Tuna Among Riskiest Foods, MedPage Today (Oct. 6, 2009).

*We would like to thank Clinton R. Mikel, Esquire (Hall Render Killian Heath & Lyman PLLC, Troy, MI), for providing this week's update.

AHLA Teaching Hospital Updates are intended to provide quick summaries of cutting-edge issues of interest to teaching hospitals and their counsel. Additional information and more in-depth coverage on these topics may be available from AHLA Health Lawyers Weekly and appropriate AHLA Practice Groups.

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