Nine Key Moments: Hearing with Health System CEOs

WASHINGTON, D.C. - CEOs representing some of the nation's largest health systems, including the largest for-profit and tax-exempt hospital systems in the country, appeared at a Ways and Means Committee hearing during which they were unable to justify their corporate manipulation of legal loopholes and taxpayer subsidies that puts profits over patient access to care and contributes to the 300 percent rise in hospital prices in just over two decades. Sophisticated hospital chains are increasingly engaging in practices such as urban hospitals reclassifying themselves as "rural" to receive lucrative federal subsidies, charging higher prices for the same care provided at a hospital-owned facility compared to an independent physician practice, pocketing steep drug discounts rather than passing them along to vulnerable patients, and spending tax breaks for charity care on stadium naming rights among other non-health items.

2,000 hospital mergers in 20 years has led to only one or two hospital systems controlling all access to care in half of U.S. metropolitan regions and 6.5 percent higher prices for patients and lower wages for employees with employer-sponsored health insurance, as employers are forced to pay more to their workers in the form of health insurance premiums.

Throughout the hearing, Committee Democrats ignored patient concerns on affordability and parroted hospital industry talking points so much that legacy media noted they were "muted in their criticism of the pricing practices of the CEOs who appeared before the committee."

ZERO Hands Raised: Hospital System CEOs Believe Taxpayers Should Pay More for the Same Care

Hospital CEOs were put on the record that they do not want to end the higher reimbursement paid to hospital-owned facilities over independent physicians for the exact same care, even though the CEOs admitted that the practice raises patient costs. In many cases, the difference is several factors larger. The cost of a biopsy at a hospital outpatient department is $800 - more than five times its $150 cost at a physician-owned clinic.

The higher hospital-owned reimbursement has incentivized hospital consolidation that has led to fewer care options as hospital chains buy up independent physician offices and convert them to hospital-owned facilities to receive a higher insurance payment.

Chairman Smith (MO-08): "Medicare relies on outdated and misaligned reimbursements that pay more for the same services delivered in a hospital clinic, than an independent physician's office. Talk about what that means for a senior living in my district in Festus, Missouri.

"Raise your hand if her Medicare bill for a standard X-Ray image would be higher in your hospital-owned clinic than if she went to her local doctor's office."

[ALL hospital CEOs raise their hands in agreement.]

Chairman Smith (MO-08): "Raise your hand if your hospital makes more revenue for that service than the doctor down the street."

[ALL hospital CEOs raise their hands in agreement.]

Chairman Smith (MO-08): "Now, raise your hand if you would support legislation that equalizes such payments at the doctor rate so folks can have more access to care and a bill that they can afford."

[ZERO hospital CEOs raise their hands.]

Chairman Smith (MO-08): "Unfortunate."

"Do You Think New York Presbyterian is a Rural Hospital?"

New York-Presbyterian's CEO was repeatedly asked how his corporation justified his Manhattan flagship hospital's rural hospital designation. Earlier in the hearing, Chairman Jason Smith noted there are no farms or crops near the hospital's Midtown location. The CEO filibustered and then acknowledged New York is not "geographically rural" before citing a regulatory loophole permitting urban hospitals to participate in benefits intended for rural hospitals. The flagship is one of more than 425 urban hospitals nationally who are also classified as rural. In 2017, there were only three.

New York-Presbyterian has used its rural designation to take taxpayer-funded residency slots specifically set aside by Congress for truly rural areas. Only two percent of medical residents work in a rural community, further exacerbating access to care for rural Americans.

Rep. Carol Miller (WV-01): "I understand that eight of New York-Presbyterian hospital campuses are classified as rural despite the proximity to New York City. Can you explain this to me? Do you think New York-Presbyterian is a rural hospital?"

Dr. Brian Donley, President and CEO, New York-Presbyterian: "At New York-Presbyterian, we do not consider ourselves a geographically rural hospital, but under CMS, we are designated as a rural referral center, and we are proud of the thousands of patients from rural America that come to us when there's nowhere to turn for a problem that they have. We're also proud of the 2,500 residents that we train, 65 percent of which leave after their training to go across America, including rural America."

Rep. Miller: "I'd love to know that percentage of how many of them really do go to rural America after being in a big city."

Take Two: Again, Hospital CEOs Refuse to Back Bipartisan "Site-Neutral" Payments

Site-neutral payment is the principle that Medicare and other payers should pay the same price for the same service provided in different settings of care. Presidents of both parties, Obama, Biden, and Trump, included site-neutral payment reforms in budget proposals as potential cost savings to the tune of billions of taxpayer and patient dollars. The hospital system CEOs were reluctant to support site-neutral policy, though one CEO indicated agreement with elements of site-neutral reforms to Medicare payments.

Rep. Jodey Arrington (TX-19): "If we just did what President Obama suggested in his budget, what Joe Biden included in his budget, and yes, Donald Trump included in his budget in his first administration, we could save $160 billion that would go to reducing the deferred tax on our children, the national debt…It's a simple, straightforward thing…Raise your hand if you think that's a straightforward, common-sense idea that we ought to do to help save the system from collapse, if not the entire country, from a fiscal or debt related crisis that could be potentially irreparable? Do you think it's a good idea to have site-neutral, or are you against it?"

[No hands raised]

Rep. Arrington: "No hands. No takers for that…I didn't get any takers on site neutral."

Mr. Sam Hazen, CEO, HCA Healthcare: "I think there are certain aspects of your discussion here that have merit. I think there's also merit to the hospitals receiving a premium in certain circumstances."

"Short Answer is No": Little Difference Between For-Profit and Non-Profit Hospitals

Non-profit hospital systems enjoy tax-exempt status with the expectation that those tax savings will go toward providing the public benefits of charity care for uninsured or financially vulnerable Americans. Many tax-exempt systems resemble their for-profit competitors with real estate and equity investments, purchase of stadium naming rights, green initiatives, and political activism. The nation's largest tax-exempt corporations admitted to investing $718 million and earning $134 million gain on those securities, among questionable expenses including $21 million compensation for its prior CEO, $14 million compensation for the current CEO, and $163,703 for board meetings in foreign countries, according to public filings.

Rep. Lloyd Smucker (PA-11): "I noticed one of you is a for-profit [HCA Healthcare]. Three are not-for-profit [CommonSpirit, New York-Presbyterian, ECU Health]…When I look at your systems, I don't know that I see a lot of difference between a for-profit and a nonprofit. Mr. Hazen, you're the for-profit. Do you think there's much difference in the way hospitals that are designated for-profit operate differently than a non-profit?"

Mr. Sam Hazen, CEO, HCA Healthcare: "The short answer is no."

…
Rep. Lloyd Smucker (PA-11): "You invest in publicly traded securities, is that right? $718 million invested in publicly traded securities? $134 million gain on those securities?"

Wright Lassiter III, President and CEO, CommonSpirit: "Yes."

Medicare Paying Doubled Facility Fees to Hospitals "Aren't Reasonable"

Hospital-owned facilities or outpatient departments, many of whom are former independent physician practices, receive lucrative Medicare facility fees that pad corporate profits. Before dodging the heart of a question about this perverse incentive, a hospital system CEO briefly allowed that the example of a hospital system receiving a facility fee double that paid to a physician-owned facility may not be "reasonable."

Rep. David Kustoff (TN-08): "I'm going to show you data from CMS about a colonoscopy performed at an ambulatory surgical center and one at a hospital…This shows the cost of a colonoscopy performed at a surgery center owned by a physician or group of physicians at $656. That's CMS's fee that they pay. The facility fee at a hospital is almost double that - $1,222. I'm asking this and showing this to you because you [Dr. Donley] raised your hand that you set the fees and that the facility fee can be higher than the surgical center fee…Is a 100 percent increase in the fee that you charge versus the surgical center, does that seem reasonable to you?"

Dr. Brian Donley, President and CEO, New York-Presbyterian: "I think there are absolutely opportunities as we look at site neutrality, to look where things aren't reasonable."

Lax Reporting Standards Make It Hard to Track and Confirm Community Benefit Spending by Large Health Systems

Non-profit health systems benefit from tax-exempt status and the current federal guidelines which fuel a lack of transparency surrounding how much charity care and community benefits are actually being provided to patients in exchange for the tax break. This problem is intensified with larger health systems that are allowed to aggregate community benefit spending across their entire system - making it impossible for the Internal Revenue Service (IRS) or, more importantly, the citizens of any given community where providers in that system operate to know whether or not the tax-exempt facilities are providing community benefits and charity care commensurate with their generous tax benefits.

Rep. Kevin Hern (OK-01): "Solo providers report their community benefit spending based on its individual facility. Do large systems like New York-Presbyterian report community benefit spending on a facility-by-facility basis or does the hospital report all of the community benefit spending across all of the facilities in one Form 990?"

Dr. Brian Donley, President and CEO, New York-Presbyterian: "We report - following the federal guidelines - as one facility."

Rep. Hern: "So how can the IRS determine if an individual facility is satisfying the community benefit standard if no information is reported about the community benefit spending by the individual facility?"

Dr. Donley: "I think that would be a discussion we'd be happy to have. As I said right now, the federal guidelines have us reported as one facility."

Hub and Spoke Model Helps Maintain Maternal Care in Rural Communities

The hub and spoke model allows small hospitals in rural communities to remain financially viable and maintain services like primary care or an emergency department while rural patients are referred to the large "hub" facility for care by a specialist. ECU Health, one of the hearing witnesses, uses this model to preserve access to care in rural eastern North Carolina, including keeping vital maternal care close to expectant mothers and their families.

Rep. Randy Feenstra (IA-04): "Maternity units are closing at an alarming rate. I did my doctorate in this very vein showing that maternity units are closing at this crazy rate, and we're seeing a dramatic increase in infant mortality. The problem is we have less births and the costs, and med malpractice, and there's a lot of other things. In the hub and spoke model, you can give early care, but you still need a main hospital to have maternity care. How do we change the system where we get more of these spokes to have maternal care and maternity unit care?"

Dr. Michael Waldrum, CEO, ECU Health: "I think it's important to understand the hub and spoke model…We match the needs of the patient to care locations and keep it as close to home. I have five hospitals and very remote rural organizations that we maintain maternity units. AI will not deliver a baby, and so I pay doctors and nurses and drug companies to catch one baby or maybe two babies a day. They may come five a day. We know that if we close those units, that more moms and babies die in rural America. We take the profit on the academic medical center that is in a rural community called Greenville, North Carolina, and we cross-subsidize it."

Rep. Feenstra: "You nailed it. We're having higher infant mortality rates and mom mortality rates."

Hospitals Are the "New Heavyweight Champion of Rising Prices"

A serious lack of faith in corporate health systems to be willing partners in the effort to bring down health care costs and expand access sits atop decades of broken promises from the industry. At every turn, hospitals have been given the opportunity to be true to their word - whether its generous tax benefits, higher reimbursements, or Washington looking the other way as a wave of consolidation has eaten up physician practices across the country. But, as Representative Aaron Bean (FL-04) highlighted in questioning the CEOs of these health care empires, they just raised their prices.

Rep. Aaron Bean (FL-04): "There is a new heavyweight champion of rising prices. It's the hospital industry… This is from the Bureau of Labor Statistics that has charted all industries on how you have risen your prices. This top line is not the outline of Mount Everest. It's the outline of the price curve for hospitals - how much you have risen. In fact, I think the person that invented the phrase "This is off the charts" probably was looking at the prices that hospitals charge…

"We've tried to work with you. You said: 'give us tax-exempt status. Give us rural designation.' And what did you do? We got less charity care, and you raised your prices. You said: 'pay us more money when we do procedures in the hospital,' because you said 'we have to support an ER, an emergency room that loses money.' So we helped to support that. What did you do? You now build free-standing ERs on every street corner at least in the free State of Florida, and you raised your prices. You said: 'let us consolidate. Let us share overhead, and we can be a healthy industry.' What did you do? You invented something called a facility fee that when you buy a physician practice you charge more, and you raise prices. How do we believe anything you said? How do we restore trust in an industry that we've given you every chance there is; yet, this Mount Everest is where we are headed."

Hospitals Have Role to Play in Combating Chronic Disease Epidemic

Tackling the high cost of health care must involve promoting healthier lifestyles to avoid the need for expensive treatments and the prevalence of chronic diseases that drive so much of health care spending. Hospitals have a role to play in promoting healthier living, better nutrition, and more exercise. As one witness testified, reaching folks at a young age can have a longer and more lasting impact on their health - particularly given the high rate of obesity among children.

Ways and Means Health Subcommittee Chairman Vern Buchanan (FL-16): "We must prioritize prevention as a key to reversing trends in heart disease, obesity, and diabetes. Hospitals not only treat people that are sick but hospitals can and should take more time to make sure what we are doing is the right thing long-term…"

Dr. Brian G. Donley, President and Chief Executive Officer, New York-Presbyterian: "It is one of the four things that we are working on in order to develop more affordable care. I strongly agree with you, and what we do is we are embedded in our communities. We work with our schools. We work with faith-based organizations. We work with non-profit organizations around teaching healthier lifestyles, around teaching proper nutrition, around teaching healthy exercise. We work with our schools so that we can reach people at a younger age because then the impact is longer lasting. They also work with their families."