NY Times - August 12, 2007

Select Hospitals Reap a Windfall Under Child Bill

By ROBERT PEAR
WASHINGTON, Aug. 11 — Despite promises by Congress to end the secrecy of earmarks and other pet projects, the House of Representatives has quietly funneled hundreds of millions of dollars to specific hospitals and health care providers under a bill passed this month to help low-income children.

Instead of naming the hospitals, the bill describes them in cryptic terms, so that identifying a beneficiary is like solving a riddle. Most of the provisions were added to the bill at the request of Democratic lawmakers.

One hospital, Bay Area Medical Center, sits on Green Bay, straddling the border between Wisconsin and the Upper Peninsula of Michigan, more than 200 miles north of Chicago. The bill would increase Medicare payments to the hospital by instructing federal officials to assume that it was in Chicago, where Medicare rates are set to cover substantially higher wages for hospital workers.

Lawmakers did not identify the hospital by name. For the purpose of Medicare, the bill said, “any hospital that is co-located in Marinette, Wis., and Menominee, Mich., is deemed to be located in Chicago.” Bay Area Medical Center is the only hospital fitting that description.

The primary purpose of the bill is to expand the Children’s Health Insurance Program while enhancing benefits for older people in traditional Medicare. But a review of the bill by The New York Times found that it would also direct millions of dollars a year to about 40 favored hospitals, by increasing their Medicare payments.

The bill, for example, would give special treatment to two hospitals in Kingston, N.Y., stipulating that Medicare should pay them as if they were in New York City, 80 miles away. Representative Maurice D. Hinchey, Democrat of New York, who worked to get this provision into the bill, said it would allow the hospitals to pay competitive wages so they could keep top health care professionals.

John E. Finch Jr., a vice president of Benedictine Hospital, one of the two in Kingston, said the bill would “make a significant difference to us financially,” increasing the payment for a typical Medicare case by $1,000.

Some Republicans have complained about what they call “hospital pork.” Representative Pete Sessions, Republican of Texas, said the bill was “littered with earmarks for hospital-specific projects.”

Republicans sometimes did the same thing when they controlled Congress. Under a 1999 law, for example, a small hospital in rural Dixon, Ill., was deemed to be in the Chicago area — 95 miles away — at the behest of its congressman, J. Dennis Hastert, who was then speaker.

When Democrats took control of Congress, they promised to be more open and accountable, saying they would disclose the purpose of each earmark, the name of the lawmaker requesting it and the name and address of the intended recipient.

But Democrats said they had no list of the projects in the recently passed bill and no explicit criteria or standards for judging which hospitals should be reassigned to an area with higher Medicare payments.

Nadeam Elshami, a spokesman for Speaker Nancy Pelosi, Democrat of California, said people should keep the big picture in mind.

“It’s easy to criticize individual provisions of large, complex bills,” Mr. Elshami said, but “the focus should be on the huge number of uninsured children who will be eligible for life-saving health care under our bill.”

Representative Bart Stupak, Democrat of Michigan, who championed the provision for Bay Area Medical Center, lives in Menominee. Alex Haurek, a spokesman for Mr. Stupak, said, “The congressman will not be available for comment.”

The formula for paying hospitals under Medicare is complicated, but the basic idea is to adjust payments for differences in wage rates in different geographic areas. For each Medicare beneficiary admitted to a hospital, the government typically pays a fixed amount, depending on the person’s illness. About 70 percent of the payment is meant to cover labor costs, which vary widely. The standard payment ranges from $4,100 a case in low-wage areas to more than $6,500 in some high-wage counties.

Nancy A. Douglas, executive director of Bay Area Medical Center Foundation, a fund-raiser for the hospital, defended the change. “We compete nationwide and have to offer competitive salaries for nurses, pharmacists and other health care professionals,” Ms. Douglas said.

But Representative Dave Camp of Michigan, the senior Republican on the Ways and Means Subcommittee on Health, said treating the hospital as if it were in Chicago was “absurd on its face.”

“Every hospital in America would like to be reclassified” into a labor market with higher wages because it would then receive more money from Medicare, Mr. Camp said in an interview.

Representative Pete Stark, the California Democrat who is chairman of the subcommittee, acknowledged that “it’s hard to decipher” the cryptic language used in the bill to identify specific hospitals. “It’s always been thus,” Mr. Stark said in an interview. “I am at a loss to explain why.”

Granting relief to particular hospitals is sometimes a way for Congress to improve “the equity and fairness” of Medicare payments, Mr. Stark said. Under Medicare, he added, “you are basically setting prices, and the system is clumsy.”

The two hospitals in Kingston, N.Y., that are beneficiaries of the bill, Benedictine Hospital and the nearby Kingston Hospital, recently announced an agreement that would bring them together under a single parent corporation.

Neither hospital is named in the bill, but they are the only ones that could qualify. The bill guarantees higher Medicare payments for New York hospitals with a “single unified governance structure,” located less than three-fourths of a mile apart in a city with a population of 20,000 to 30,000.

Kingston has a population of 22,828, according to Census Bureau data issued this week.

Under the bill, hospitals in three counties of upstate New York — Albany, Schenectady and Rensselaer — are deemed to be in “the large urban area of Hartford, Conn.” Representative Michael R. McNulty, Democrat of New York, said this provision would bring $28 million to “underpaid hospitals” in his district.

Under another provision, an unnamed hospital in Burlington County, N.J., would be reassigned to the New York City metropolitan area, where wages are significantly higher.

This provision was written for the benefit of Deborah Heart and Lung Center, in Pemberton Township, N.J., more than 60 miles from the bustle of New York City. Donna H. McArdle, a spokeswoman for the hospital, said it was “located in bucolic countryside, surrounded by farms and pine forests.”

Richard A. Rifenburg, the reimbursement manager for Deborah hospital, said the House bill would increase its Medicare payments by $3 million to $5 million a year, or about 10 percent.

This is one of the few provisions added to the bill at the request of a Republican, Representative H. James Saxton of New Jersey.

Representative Artur Davis, a Democrat, secured special treatment for a hospital that may soon be built in his district in rural Alabama. Small rural hospitals can obtain many benefits, including higher Medicare payments, if they are designated “critical access hospitals.”

Under federal law, the proposed Alabama hospital could not qualify because it would be too close to another hospital, in Meridian, Miss. The House bill would waive that restriction “in the case of a hospital that is located in the county seat of Butler, Ala.” That is where Rush Health Systems proposes to build a hospital.

“This is a very narrow, very limited provision in a very big bill,” Mr. Davis said in an interview. “If I can help a rural community in my district get a hospital, I’m glad to do it.”

Urban hospitals would also receive some federal largess.

Representative Marcy Kaptur, Democrat of Ohio, won extra money for St. Vincent Mercy Medical Center in Toledo. Under the House bill, the hospital would be “treated as located in the same urban area as Ann Arbor, Mich.,” more than 40 miles away.

Lawmakers did not identify St. Vincent by name, but referred to a hospital with Medicare provider number 360112. That is the identification number for St. Vincent.

Scott E. Shook, senior vice president of St. Vincent, said this provision would bring $6 million a year in additional revenue to the hospital.

“Ann Arbor has a higher Medicare payment rate that reflects the higher wages there,” Mr. Shook said.

Steven D. Fought, a spokesman for Ms. Kaptur, said the congresswoman was happy to help because “St. Vincent is a major employer, a source of good jobs in a community that has been hard hit by globalization and grievously hurt by the loss of manufacturing jobs.”