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Wednesday, April 10th 2002

The Honorable Robert Byrd
Committee on Appropriations
United States Senate
311 Hart Senate Office Building
Washington, DC 20510

Dear Mr. Chairman:

The American Hospital Association (AHA), which represents nearly 5,000 hospitals, health care systems, networks, and other providers of care, recognizes the serious fiscal constraints imposed upon your committee to stay within the margin of available funding for programs under your jurisdiction. We greatly appreciate your committee’s support in the past and hope that you will continue to give strong and favorable consideration to health care programs that have proven successful in improving access to quality health care. As you begin to deliberate funding for programs within the Departments of Labor, Health and Human Services (HHS), Education and Related Agencies for Fiscal Year (FY) 2003, the AHA asks you to consider the potential effect your committee’s decision will have on hospitals’ ability to combat the nation’s health care workforce crisis and maintain quality health care services for the patients they serve.


Today’s hospitals and health care facilities are facing both immediate and long-term shortages of health care personnel. The shortage not only includes nurses, who are perhaps the most visible, but also encompasses pharmacists, radiological and laboratory technicians, housekeepers, food service workers, and information technology employees, among others. At the same time, our patient populations are growing. And with 78 million “baby boomers” approaching retirement, the stress of the shortages on our health care system will worsen.

Today, we have more nurses than ever working in hospitals, yet because of many factors, we still need more. Between 1995 and 1999, the positions of full-time registered nurses in hospitals increased by more the 29,000 – from 709,767 in 1995 to 730,086 in 1999. A recent study by the First Consulting Group reflects critical shortages of health care workers, particularly registered nurses, with hospitals experiencing vacancy rates exceeding 13 percent. And, both urban and rural hospitals are feeling the effects of these staff shortages.

There are many complex reasons for the current shortage. A growing number of health care workers are retiring from the workforce, and others are seeking alternative career opportunities. In addition, fewer young people are choosing health care as their career. Nursing schools and training programs are experiencing declines in enrollment, and some have even closed.

Hospitals recognize the problem and are actively seeking approaches that will help alleviate this crisis. The AHA has convened a blue ribbon commission of experienced health care administrators, practitioners, academicians and other affected parties from around the country to develop solutions to the health care workforce shortage.

But the problem cannot be solved by hospitals alone. The role of the federal government is pivotal in addressing the supply of the health care workforce. The House and Senate have passed the Nurse Reinvestment Act (S. 1864/H.R. 3487) to address many aspects of the nursing shortage. The bills are currently in conference. We strongly urge the committee to fully fund those programs at levels which reflect this crisis should they be authorized, including the establishment of a National Nursing Corps.

The President’s FY 2003 budget recommends $99 million for Title VIII nursing programs, an increase of $5 million over last year’s level. Because the nursing shortage is so critical, the AHA strongly recommends at least $123 million for the Nurse Education Act, Title VIII of the Public Health Service Act, with $40 million directed towards Basic Nursing Education Grants, the area of greatest need.

The National Health Service Corps (NHSC) awards scholarships to health profession students and assists graduates of health professions programs with loan repayments in return for an obligation to provide health care services in underserved rural and urban areas. We are pleased that the President’s FY 2003 budget recommends an increase of $44 million for the NHSC. This program is of vital importance to many of our citizens. In many areas of the country, the NHSC provides the only source of health care to medically underserved Americans. The AHA supports $250 million for this program to make scholarship awards and loan repayments available for qualifying health professions working in underserved and shortage areas.

The AHA is disappointed that the President’s FY 2003 budget request recommended a $278 million reduction to Health Professions. The programs in the Health Professions cluster address problems associated with maintaining primary care providers in rural areas. The programs also support recruitment of individuals into allied professions with the most shortages or whose services are most needed by the elderly. The AHA also urges the committee to continue to provide funds for strengthening the national capacity to educate students from disadvantaged backgrounds in the health professions. The AHA recommends that the committee restore funding to this program.


The President’s FY 2003 budget recommends $235 million for hospital mutual aid planning and coordination related to bioterrorism; $283 million for improving hospital infrastructure; and $73 million for hospital training exercises with states. We applaud the Administration’s effort to increase the amount of federal funds dedicated to bioterrorism preparedness and allow hospitals to meet their obligations as “first responders.” We believe, however, that additional federal funds should be made available to hospitals in order to ensure that they are prepared for future events.

As you may recall, following the attacks on September 11th, we were asked by senior members of Congress to prepare an assessment of hospital needs in case of additional mass casualty events. At the time, we calculated that it would take approximately $11 billion to improve hospital preparedness. We based our estimates on a scenario that included an event with casualties of 1,000 individuals seeking care at a metropolitan hospital and 200 individuals seeking care at a non-metropolitan hospital. Hospitals would need to sustain these intense demands for approximately 24 to 48 hours or until the Centers for Disease Control and Prevention (CDC) Bioterrorism Preparedness and Response program could be mobilized.

Because we can never know which hospitals will be the most affected by an attack, we believe that every hospital should have some minimum level of preparedness. While the President’s budget allocations are an improvement, they amount to a fraction of what is needed. A recent AHA survey of the nation’s hospitals, found that while most hospitals have taken a number of very important steps to improve their state of readiness (e.g. 70% have added a bioterrorism component to their disaster plans; 89% have established relationships with community partners; 87% have procedures to report unusual cases to authorities) much remains to be done. A vast majority, 78.4% of responding hospitals, indicated that there are additional readiness activities or actions that they feel they should be engaging in, but cannot because of a lack of resources or funds.

The House and Senate have passed bioterrorism preparedness measures (S. 1765/H.R. 3448). We support these efforts, but are concerned that the conference may not target specific funds to hospitals. We strongly urge the committee to fully fund the President’s FY 2003 budget request and work with the authorizing committees to ensure that increased funding is made available to hospitals.


HHS has issued rules establishing new standards for the electronic transmission of health information, privacy of medical information and the electronic and physical security of electronic information. In mandating these regulations, under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Congress sought to modernize the system of electronic transactions that form the basis of payment and claims processing and other similar transactions among health care providers. In addition, Congress mandated the development of medical privacy and security standards to protect medical records. The federal regulations implementing both the electronic transaction and medical privacy standards are extremely complex and will require major technological overhaul of many hospital information systems.

The final regulations governing security requirements are expected to be similarly complex when they are released later this year.  AHA supports the goals of the HIPAA regulations. However, we remain concerned about the costs and disruptions that hospitals and their patients will face in implementing these sweeping regulations. While some long-term savings will be achieved through implementation of electronic transaction standards, the onset of these anticipated savings will be delayed at least a year as a result of legislation enacted last session to extend the implementation date of the regulations.

In the meantime, hospitals are still incurring significant costs to upgrade technology, training, and other efforts to become compliant with the regulations. Moreover, according to an AHA study of the regulations, the costs for hospitals to comply with the medical privacy regulations will be as much as $22 billion over five years. That estimate could be exceeded, however, because HHS recently released (March 2002) proposed rules to fix major deficiencies in the current medical privacy regulations with which hospitals will need to comply by the current start date of April 14, 2002. There is currently no estimate of the additional cost of compliance with the security regulations.

The AHA urges the committee to provide grants directly to hospitals to help them pay for the technology, training and other activities required under HIPAA and to support a phasing in of the medical privacy regulations to ensure that hospitals have a reasonable amount of time to comply.


The AHA strongly supports efforts to expand access to health care. More than 42 million Americans are uninsured, and at least 48 million do not have regular access to health care. The Community Access Program (CAP) was designed to assist communities and consortia of health care providers to develop the infrastructure necessary for integrated health systems that coordinate health services for the uninsured and underinsured. We are disappointed that the President’s FY 2003 budget recommends eliminating the CAP. Last year, Congress appropriated $120 million for this program, which enabled many institutions to provide health care services to the uninsured. The AHA strongly supports continued funding for this program and would urge Congress to increase the allocation to $125 million.

The AHA also supports expanding the Medicaid program to ensure health care coverage to legal immigrant children and pregnant women. Currently, states have the option to provide Medicaid to lawfully present immigrant children if they arrived in the United States prior to August 22, 1996, the date the welfare reform legislation was signed into law. However, legal immigrant children arriving after that date cannot be served under Medicaid. Providing states with the funding and flexibility to ensure access to preventive and routine health care would be a sound public health investment.

Likewise, the AHA supports increased flexibility to states to extend Medicaid to pregnant qualified aliens who entered the country after August 22, 1996. This would ensure that the children to whom these women give birth, who will be U.S. citizens, would get the best possible start in life.

The AHA strongly recommends at least $200 million for emergency health care for undocumented immigrants. The Immigration and Naturalization Services (INS) estimates that 275,000 undocumented immigrants enter the U.S. each year. Some incur injuries while crossing the border or come to a hospital emergency room with life-threatening conditions. Federal law mandates that hospitals and emergency medical personnel treat anyone who needs emergency care, including undocumented aliens. But the federal government only pays for the care of illegal immigrants who are in the custody of the INS or other authorized federal agents. The costs of caring for those individuals not in federal custody are borne by the hospital or other health care provider and represent an increasing burden on these hospitals.


We are disappointed that the administration has recommended reductions to the Children’s Hospitals Graduate Medical Education program from last year’s level of $285 million to $200 million for FY 2003. Children’s hospitals serve a unique role in our nation’s health care system, taking care of some of the most vulnerable populations. Because Medicare is the largest single payer of GME funds, and because our nation’s children’s hospitals typically treat very few Medicare patients, these hospitals receive no significant federal support for GME. This is true despite the fact that these institutions train more than 5 percent of all medical residents nationwide and nearly all pediatric specialists. The AHA strongly supports full funding of $285 million for Children’s Graduate Medical Education.


The AHA urges $50 million for the Medicare Rural Hospital Flexibility Program (FLEX) for FY 2003. The Balanced Budget Act established this nationwide program to help retain access to essential health care services in rural communities by creating a new Medicare hospital classification, known as Critical Access Hospitals (CAHs). AHA advocates maintaining $25 million in funding for FLEX grants and an increase of $10 million over FY 2002 funding levels for small rural hospital performance grants. Last year, Congress expanded the scope of the FLEX grant and appropriated an additional $15 million to help rural hospitals address issues related to HIPAA, quality improvement and upgrading billing systems. The AHA supports this effort to help rural hospitals improve performance and comply with these and other regulatory requirements.

The AHA recommends $20 million for the Rural Health Research Grant Program. This program supports critical rural health policy research and analysis. This information then is made available to policymakers, including Congress and HHS, to help address emerging health issues for rural America.

The AHA supports funding of at least $60 million for Rural Health Outreach, Network Development, and Telemedicine Grant Program. This program supports projects that demonstrate new and innovative models of outreach in rural areas, such as integration and coordination of health services. Since 1991, this program has enabled rural communities to implement innovative strategies for improving access to health care in underserved areas, such as mobile primary care outreach for migrant and seasonal farm workers, telemedicine, and trauma care services. Notably, most projects funded continue after completion of the federal grant.


The AHA supports an increase of $209 million for health care programs within Indian Health Services (IHS). The IHS provides care to approximately 1.5 million American Indians and Alaska Natives who are members of more than 560 federally recognized tribes. Recent statistics reflect that the overall death rate for Native American people has increased by approximately 4 percent over the years 1994 – 1999. At the same time, the US “all race” mortality rate dropped by about 6 percent. In addition, the morbidity rates for diabetes, alcoholism and depression are greater in Native American populations. An increase in funding would help ensure access to medical treatment and preventative health care services to Native Americans.


The AHA is concerned that the President’s FY 2003 budget proposes to reduce funding to the Agency for Healthcare Research and Quality (AHRQ) by $48 million. The AHRQ serves as the focal point within the federal government for determining what works best in health care. As such, it generates and disseminates valuable information aimed at improving the delivery of health care in an increasingly complex and sophisticated environment. Research goals of the agency include determining best medical practice, maximizing the cost-effectiveness of health care resources, providing consumer information, and measuring the quality of care.

The AHA supports funding of $390 million for AHRQ to ensure that critical research to improve the quality of health care can be undertaken and accomplished.


The AHA urges the committee to continue funding programs affecting persons with psychiatric and substance abuse disorders. In addition to the many millions of adults in this country experiencing mental illness, alcoholism, or other substance abuse problems, there are an alarming number of children and adolescents facing similar plights. Accordingly, the AHA supports increasing funding to $3.2 billion, consistent with the administration’s recommendation, for programs within the Substance Abuse and Mental Health Services Administration in FY 2003.

The AHA requests full funding for maternal and child care initiatives, including the Maternal and Child Health Block Grant (MCHBG), to ensure and promote health care for mothers and children. Last year, Congress allocated $739 million for MCHBG. We urge the committee to increase funding for this program.

Of particular importance to hospitals is the Healthy Start Program. This program has been instrumental in identifying and demonstrating useful approaches to reduce infant mortality. The AHA urges you to fund this program at least at last year’s level of $99 million for FY 2003.

The AHA advocates funding for Medicare contractors sufficient to ensure that services to Medicare beneficiaries and health care providers are maintained. Over the last year, a number of the more experienced contractors have opted to discontinue their relationship with the Medicare program. The AHA is concerned about maintaining expertise in the field and about what may happen to the quality of the products if this trend continues.

The AHA recommends continued funding for Emergency Medical Services for Children that was first authorized by Congress in 1985. Injury is the leading cause of death in children over one year of age. Saving the lives of children in medical emergencies and preventing disability from trauma requires special equipment and specially trained personnel.


In his FY 2003 budget proposal, the President requests $248 million for Medicare survey and certification activities, a reduction of $6 million, and $115 million in proposed user fees, including:

  • Paper Claim Filing Fee – The HHS secretary would assess a $1.50 fee on any claim not filed electronically. Estimated savings: $65 million.
  • Duplicate Claim Fee – The secretary would assess a fee of $1.50 for duplicate or “unprocessable” claims submitted by providers. Estimated savings: $50 million.

We strongly urge the committee to reject Medicare survey and certification user fees and to fund the program at least at last year’s level of $254 million. Survey and certification ensures that institutions and agencies providing care to Medicare and Medicaid beneficiaries meet federal health, safety, and program standards. Onsite surveys are conducted by state survey agencies, with a pool of federal surveyors performing random monitoring surveys.

A majority of hospitals filing claims through the Medicare program do so electronically. The few who file paper claims, however, do so because it is the most cost effective and efficient way to submit them. Hospitals should not be penalized for continuing to submit paper claims when it is more efficient and cost-effective. Likewise, hospitals should not be held liable for mistakes of the intermediary that might cause claims to be classified as “unprocessable.”

The AHA appreciates and is grateful for the support you have provided us over the years, and hopes that the committee will continue to support funding for these valuable programs in FY 2003. We look forward to working with you as you move forward with your funding proposal for the next fiscal year.

Please do not hesitate to contact either Carla Luggiero at 202/626-2333 or Kristen Morris at 202/626-2677 on our staff if we can be of assistance to you.


Rick Pollack
Executive Vice President

This letter was also sent to the other Congressional committee members

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