April 26, 2013

Rare defeats put hospitals on offensive

In a social media initiative targeted at lawmakers and their constituents, the N.C. Hospital Association says that hospitals are “fighting for their economic survival.”

Stung by a series of unusual setbacks at the General Assembly, the North Carolina hospital industry is launching a public relations campaign aimed, in part, at protecting revenues and staving off competition from lower cost surgery centers.

In a social media initiative targeted at lawmakers and their constituents, the N.C. Hospital Association says that hospitals are “fighting for their economic survival.”

The association and some of the state’s bigger hospitals also are hiring more GOP lobbyists to make inroads with the Republicans who control the state House, Senate and the governor’s mansion.

The hospital association on Tuesday began promoting a new website – www.healthyhospitalsnc.org – that describes an array of financial threats. Hospitals have already been denied expanded Medicaid funding and, in coming years, will receive fewer federal dollars. Other threats include a loss of sales tax refunds and competition from same-day surgical centers.

For years, the state hospital industry had been accustomed to getting its way in Raleigh. With a squad of lobbyists and generous donations to elected officials, it has long been one of the most powerful interest groups in state politics.

It used to be that hospitals had so much sway at the General Assembly that they rarely had to appeal directly to the public, said Adam Linker, an analyst at the N.C. Health Access Coalition. Hospital CEOs met privately with lawmakers, and seldom suffered legislative defeats.

That’s changed, Linker said.

Now, with hospitals facing an unprecedented string of setbacks in Raleigh, they are trying a new approach: appealing to the masses, not just the powerful, Linker said.

“It’s been a big shift in philosophy,” he said. “Now (hospitals) are reaching out to the public and saying here’s what’s happening to us.”

Among many Republicans, ideological opposition to “Obamacare” has trumped concern about the well-being of hospitals, some observers say.

“You see a lot of things that were once considered sacred now under attack,” Linker said.

Tougher times

N.C. hospitals face “harsh economic realities,” the hospital association says on its new website.

The Affordable Care Act and other federal decisions will reduce payments to the state’s hospitals by $7.8 billion over the next decade, the website says.

The site does not mention that the Affordable Care Act is designed to assist hospitals and other providers by helping many North Carolinians buy health insurance. That would reduce the number of patients who can’t afford to pay their bills.

The association also says N.C. hospitals will be deprived of $440 million a year because of a recently passed law to reject federally driven Medicaid expansion.

One of the first bills passed by the General Assembly this year rejected major pieces of the federal health care law, denying about 500,000 low-income people health care coverage under an expanded Medicaid program. Despite objections by the hospitals, Gov. Pat McCrory signed it into law in March.

The majority of states have accepted the federal money, including Republican-controlled Florida and Arizona.

Some N.C. politicians have also discussed removing the sales tax refunds to the state’s nonprofit hospitals – a move that would increase the taxes they pay by more than $220 million, the association says.

There are no pending bills to eliminate those tax refunds. A 2011 bill that would have capped refunds to the state’s larger hospitals never got out of committee. The bill would have affected 28 hospitals and six universities and would have generated an additional $108 million in state and local tax revenue.

Sen. Bob Rucho, a Matthews Republican who is leading tax reform efforts in the Senate, said that lawmakers are looking at the possibility of reducing sales tax refunds to large, profitable nonprofits, including some hospitals.

Giving tax breaks to profitable hospitals that pay millions to their executives makes little sense, Rucho argued.

“It kind of circumvents the law,” Rucho said. “It wasn’t designed to give breaks to big businesses like that.”

Ailing finances?

The state’s hospitals are also fighting a bill that would open them up to competition from lower cost same-day surgery centers. That proposal would amend the state’s certificate-of-need laws to make it easier for doctors to open ambulatory surgery centers. In its public relations campaign, the hospital association is encouraging lawmakers and residents to keep the status quo.

About a third of N.C. hospitals – many of them small and rural – are losing money, the hospital association has noted.

“We can’t have healthy communities if our hospitals are strapped financially and can’t make ends meet,” the association says on the new website.

But many of the state’s large urban hospitals are flourishing, a 2012 investigation by the Observer and the News and Observer of Raleigh found.

Some hospitals had profit margins of more than 25 percent, helping their parent companies amass billions in reserves, the newspapers found. According to one 2011 study, hospitals in the Charlotte region were more profitable than those in all but one of the nation’s 40 largest urban areas.

The newspapers’ stories also explored how the growing market power of hospitals has driven up prices, and how some hospitals are paying top executives millions, while spending relatively little on charity care and aggressively pursuing uninsured patients who are delinquent on their bills.

The hospital association notes that its members have also boosted the economy, employing more than 190,000 people and paying more than $17 billion in wages. Hospitals are the state’s third-largest employer.

The association says it has spent “a little less than $200,000” on the public relations campaign so far, and is promoting its website to lawmakers and the public through ads and social media efforts.

New access to power

The N.C. Hospital Association has hired heavyweight Republican lobbyists to make their case to lawmakers. They’ve contracted with Gov. Pat McCrory’s former associates at Moore & Van Allen, the Charlotte law firm where McCrory worked until days before his inauguration.

One lobbyist is Brian Nick, who was the chief spokesman for the McCrory campaign. They’ve also hired Walter Price, who told The News & Observer this year that he’s known McCrory 15 years.

“He’s been a longtime friend, and we have relationships with people all over the government sector, and that’s part of the value we add for our clients,” Price said. “We have strong relationships on both sides of the aisle, both in the legislature and the executive branch.”

The hospital association also hired Cody Hand, who was a staff attorney for Republicans at the legislature for six years.

Carolinas HealthCare System, the state’s largest hospital system, has hired Thomas Bugbee, a former intern for House Speaker Thom Tillis and two other Republican legislators.

For three years, Novant has been using Joseph Lanier, a former aide to the late Sen. Jesse Helms and Senate Minority Leader Mitch McConnell.

As the hospital association’s longtime top lobbyist, Hugh Tilson will be leading the persuasion campaign. He acknowledged that the environment in Raleigh has shifted.

“It’s a new day,” he said.

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