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Tuesday, May 13th 2003

House and Senate
Subcommittee on Labor, Health and Human Services and Education
Committee on Appropriations

Dear Senator/Representative:

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) 2004, 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 continue to experience 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, information technology employees, and other allied health professionals.  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.

While we have more nurses than ever working in hospitals, we still need more.  The Department of Labor has projected that by 2010, there will be a need for at least 1 million new nurses.

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.

Hospitals recognize the problem and are actively working to help alleviate this crisis.  The AHA 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.   Their report, In Our Hands, issued last year, recommends actions that hospitals can take to help address the critical shortage of health care workers.

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.  Last year, Congress passed and the President signed into law The Nurse Reinvestment Act (NRA, P. L. 107- 205) to address many aspects of the nursing shortage.  In addition, Congress provided $15 million in the Consolidated Appropriations Resolution of 2003 (P.L. 108-7) to fund programs within the NRA.

The President's FY 2004 budget recommends $99 million for Title VIII nursing programs, including $7 million for the NRA.  Because the nursing shortage is so critical, the AHA strongly recommends at least $175 million for the nursing programs, including the NRA and Title VIII.

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 2004 budget recommends an increase for the NHSC, to $213 million.  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 at least $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 2004 budget request recommends level funding for 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 increase funding to this program cluster.


The President's FY 2004 budget recommends $518 million for hospital bioterrorism preparedness.  The hospitals preparedness program was initiated last year to help states, territories and municipalities develop and implement biological and chemical preparedness plans focused on hospitals.  The tragic events of September 11 and the subsequent anthrax infections in our nation's capitol have forced us to realize that we must enhance our hospitals' capacity to deal with any nuclear, biological, or chemical attack.  Hospitals need to be able to train their clinical and laboratory staff to recognize the symptoms of biological terrorism.  They need personal protection equipment for health care workers, who are often times the first responders to a biological terrorism attack.  And they need dedicated decontamination facilities.  Funds provided to hospitals will be helpful in meeting these needs. We applaud the Administration's continued support to help hospitals meet their obligations as "first responders" and urge the committee to ensure this funding is included in your bill.


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 2004 budget recommends eliminating the CAP.  In the FY 2003 Consolidated Appropriations Resolution, 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 strongly supports H.R. 819 and S. 412, the "Local Emergency Health Reimbursement Act of 2003" and urges the Committee to fully fund this legislation, which is pending. The former Immigration and Naturalization Services (INS) estimated 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.  And, the problem is not confined only to hospitals serving our border states.  Many hospitals across the nation have reported significant and growing costs associated with providing health care services to undocumented immigrants.


The AHA strongly recommends $305 million for Children's Graduate Medical Education for FY 2004.  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.  Although they represent less than one percent of all hospitals, independent children's teaching hospitals train almost 30 percent of all pediatricians, almost half of all pediatric subspecialists, and two-thirds of pediatric critical care physicians.  Equitable GME funding for children's hospitals is a sound investment in the future of children's health.


The AHA urges $50 million for the Medicare Rural Hospital Flexibility Grant Program (FLEX).  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).  The program helps communities ensure that needed services, such as emergency medical services, will be available when needed.  In 2001, Congress and the Administration expanded the scope of this program and appropriated additional funds to help rural hospitals address issues related to HIPAA, quality improvement and upgrading billing systems.  The AHA supports $50 million for this program.

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 recommends $20 million for Rural Health Policy Development (Research).  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 is pleased that the Department of Health and Human Services will serve as an "interested government agency" that reviews J-1 visa waiver applications.  This program allows qualified foreign doctors who trained in the United States to remain in this country and serve in rural, underserved communities.  Each year, approximately 1,000 physicians serve rural communities through J-1 visa waivers.  The AHA supports $2.5 million to ensure the viability of this program.


For America's hospitals, 2003 is the year of implementation for the Health Insurance Portability and Accountability Act (HIPAA).  On April 14, all hospitals were required to be compliant with the medical privacy rules.  On April 16, hospitals that in October 2002 requested a year's extension for complying with the electronic transactions standards were required to begin testing their standardized transactions.  By October 16, 2003, all hospitals must be fully compliant with the electronic transactions and code sets standards, including all modifications and technical corrections that were published by the Department of Health and Human Services (HHS) on February 20, 2003.  In addition, after waiting for more than two years for the release of the final security rule, hospitals now have to accelerate their efforts to address security of their electronic information systems.  They must be compliant with the new security rule by April 20, 2005.

Hospitals' longstanding support for standardization of financial and other administrative transactions was premised on the belief that such standardization would eventually lead to significant efficiencies and savings for hospitals.  The electronic transactions standards, in fact, are the only part of HIPAA expected to result in long-term cost savings for providers. While hospitals can anticipate some long-term savings through implementation of the electronic transaction standards, the onset of these anticipated savings has been delayed as a result of legislation enacted in 2001 to extend the implementation date for the standards to October 2003.

In the meantime, hospitals continue to incur significant costs for technology upgrades, training, and other efforts to become compliant with the HIPAA regulations related to electronic transactions and to maintain compliance with the extremely complex medical privacy requirements.  In early 2001, an AHA study estimated that the costs for hospitals to comply with the medical privacy regulations could be as much as $22 billion over five years. Even with subsequent changes by HHS to fix some unintended negative consequences for patient care and essential hospital operations, there were very little, if any, changes in hospitals' costs of compliance. Moreover, the newly released federal regulations implementing the security requirements will require major additional technological overhaul of many hospital information systems.  There is currently no estimate of the additional costs of security rule compliance.

Hospitals must make these expenditures at a time when already inadequate reimbursement levels continue to erode and they are struggling to meet the growing demands of other burdensome regulatory requirements, fulfill expanded obligations related to bioterrorism and disaster preparedness, pay for new and costly technologies, and care for a growing Medicare population.

In addition, the long delay - more than two years - in issuing the final security rule unnecessarily strains hospitals' already scarce resources.  Failure to expedite the release of the final security rule means hospitals face needless added costs to modify the "reasonable safeguards" required by the privacy rule to comply with the security rule.  The final security rule requires hospitals to perform a number of tasks that clearly mirror and even duplicate tasks already performed as part of their efforts to comply with the privacy rule.  For hospitals, these tasks certainly could have been performed more efficiently as part of a comprehensive compliance effort focused simultaneously on both privacy and security concerns.  The additional implementation burdens caused by the delayed release of the final security rule make an even stronger argument for a flexible approach to enforcement of the privacy rule.

The AHA urges the committee to provide funds directly to hospitals to help them pay for the technology, training, and other activities required under HIPAA and to support flexibility in compliance enforcement for the medical privacy regulations to ensure that hospitals have a reasonable amount of time to become fully compliant with the complex requirements of the rule.


The AHA supports an increase of $271 million over current funding for health care programs within Indian Health Services (IHS) for FY 2004.  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 recommends $390 million for the Agency for Healthcare Research and Quality (AHRQ).  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.  Funding of $390 million for AHRQ in FY 2004 will ensure that critical research to improve the quality of health care can be undertaken and accomplished.


The AHA is pleased that the President's budget request increases 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 provide at least $751 million for this valuable 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 provide at least $99 million for FY 2004.

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 2004 budget proposal, the President provides $248 million for Medicare certification and survey activities.  In addition, the budget authorizes the Secretary of Health and Human Services to impose a user fee for each duplicate or "unprocessable" claim submitted by providers ($195 million).

We strongly urge the committee to reject the Medicare survey and certification user fee and to fund the program at the administration's recommended level.   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.  In addition, 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 2004.  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


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