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Wednesday, June 11th 2003

The Honorable Bill Frist
Finance Committee
United States Senate
416 Russell Senate Office Building
Washington DC 20510

Dear Senator Frist:

On behalf of the nearly 5,000 hospitals, health systems, networks, and other provider members of the American Hospital Association, we are writing to urge the Finance Committee to approve the Prescription Drug and Medicare Improvement Act of 2003.  The bill would provide significant relief to our nation's hospitals and the communities they serve, and rejects the notion of cutting future payments to hospitals as some have suggested.

We strongly support the provisions of the bill related to improvements for rural and small urban hospitals.  Rural hospitals provide essential health care services to nearly 54 million people, including 9 million Medicare beneficiaries, and this legislation would help these hospitals deal with the intense pressures they are currently experiencing.  

Specifically, the bill would: permanently equalize the standardized payment amount; equalize Medicare disproportionate share payments; revise the labor share of the hospital wage index; expand the rural hold harmless for outpatient services; and make other improvements for hospitals, particularly in rural areas.  These provisions would go a long way toward helping these hospitals that, because of their small size, modest assets, and higher percentage of Medicare patients, face increasing pressures even as government payments decline.

We also support the provisions of the legislation related to the Medicaid Disproportionate Share Hospital program (DSH).  The bill would eliminate scheduled cuts in Medicaid DSH for one year, and increase the floor for extremely low DSH states.  The provisions will assist those providers who are serving a large number of the poor and uninsured, and will help offset deep reductions in Medicaid payments that have occurred over the past year.
We are concerned about one provision related to coinsurance for clinical diagnostic laboratory tests.  Under the bill, beneficiaries would be charged a 20 percent coinsurance amount for hospital-based and physician office laboratory tests, but would make no copayment for independent laboratories.  This creates an unlevel playing field for various clinical labs, and may cause beneficiaries to utilize independent laboratories when that might not be the best choice in terms of patient care.  We would like to work with you to resolve this inequity.

It is our understanding that two amendments may be offered during committee mark-up, and we would like to ask your support for those initiatives.  The first would close a loophole currently in the Stark self-referral law that permits so-called niche providers to violate the intent of that statute.  The amendment would help maintain the viability of community hospitals by preventing niche providers, who refrain from treating sicker and uninsured patients, from  siphoning off profitable services.  In addition, we ask your support of an amendment contained in S. 1222 that would prevent the Centers for Medicare and Medicaid Services from implementing regulations that would be extremely harmful to rehabilitation hospitals and the special population they serve.

Finally, we would like to work with you as the bill moves to the Senate floor regarding indirect medical education (IME).  The Balanced Budget Act reduced payments to teaching hospitals, some of which have been delayed by subsequent Congressional actions.  However, an additional reduction of 17 percent in payments for IME took place this year, and is having a devastating effect on these organizations.  We would like to urge that, when the bill proceeds to floor consideration, restoration of the IME funds cut over the next two years be included in the package.
We look forward to working with you as the legislative process moves forward.  We appreciate your continued support of America's hospitals, and we are urging all senators on the Finance Committee to vote for passage of the legislation during committee consideration.


Rick Pollack
Executive Vice President

This letter was sent to all members of the Senate Finance Committee

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