- Associated Press - Thursday, August 4, 2011

An obscure provision tucked into the federal health care law has turned into a jackpot for Massachusetts hospitals, but officials in other states are upset because the money will come from their hospitals.

The Medicare windfall for Massachusetts — $275 million a year — adds up quickly, about $1.4 billion over five years.

“If I could think of a better word than outrageous, I would come up with it,” said Steve Brenton, president of the Wisconsin Hospital Association.

The news was buried in a Medicare regulation issued Monday and comes at a time when hospitals face more cuts under the newly signed federal debt deal.

Even Medicare says it is concerned about “manipulation” of its inpatient payment rules to create big rewards for one state at the expense of others.

Hospitals in 41 states will lose money as a result of the change. The biggest loser: New York, which is out $47.5 million.

Seven states come out ahead, though none do as well as Massachusetts. Runner-up New Jersey stands to gain $54 million, a fraction of what Massachusetts will get.

President Obama’s health care overhaul was supposed to lead to reforms in Medicare’s byzantine payment system. Critics say this latest twist will encourage the big players to game the system in a scramble for increasingly scarce taxpayer dollars.

The health care law “was to usher in a new era, based on innovations that focused on quality improvement and more efficient health care,” said Herb Kuhn, president of the Missouri Hospital Association. “What we are seeing is innovation in the area of how to manipulate the payment system.”

“It subverts any notion of fairness and equity in developing the rates,” said Laurens Sartoris, president of the Virginia Hospital & Healthcare Association. “It’s someone going through the backdoor to get special treatment in what amounts to an earmark.”

No backdoor maneuvers were involved, said the head of the Massachusetts Hospital Association, defending the change.

“We do not see this as a manipulation of the rules,” Lynn Nicholas said, noting the higher payments will help compensate Massachusetts hospitals for a Medicare policy change a few years ago that cost them hundreds of millions of dollars.

Massachusetts Democratic Sen. John F. Kerry, a co-sponsor of the provision in the health care law that benefited his state’s hospitals, was also steadfast.

“When [Medicare] changed the rules five years ago, the rest of the country gained at our expense and Massachusetts took a big hit,” Mr. Kerry said. “These new rules just provide some correction.”

The American Hospital Association supported the change when the law was being debated. An official there now says hospitals didn’t understand what they were getting with the obscure provision.


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