“You’re not being Bipartisan.” “No, You’re not being Bipartisan.”

The Obama administration and the gang of six’s Republican Senators Charles Grassley and Mike Enzi continue to trade barbs about who is “not being bipartisan.”

The latest response comes from Senator Grassley responding to David Axlerod who had responded to statements Senators Grassley and Enzi had made over the summer recess.

Mr. Axlerod had the temerity on Monday to accuse the Senators of “negotiating in bad faith,” offering that the Senators actions suggested “that they don’t want to participate” in bipartisan talks. Mr. Axlerod further stated:

“If you’re sitting at a table negotiating in good faith, then you probably don’t send out mailers saying, ‘Help me stop Obama-care.’ That’s just common sense.”

According to A.P.,

Enzi, in a radio address Saturday, said Democratic proposals would restrict medical choices and make the country’s “finances sicker without saving you money.”

In an August fundraising letter, Grassley asked for “support in helping me defeat Obama-care.” He said Democratic-drafted bills would be “a pathway to a government takeover of the health care system.”

Far be it from me to define “bipartisan cooperation,” but I must admit “Help me defeat Obama-care” doesn’t really seem to capture the essence of that spirit.

Jill Kozeny, a spokeswoman for Senator Grassley defended the statement saying, according to A.P., that “Grassley was simply restating his well-known opposition to a government-run health insurance plan.”

In addition, Ms. Kozeny in turn responded to Mr. Axlerod’s  accusation as follows:

“Attacks by political operatives in the White House undermine bipartisan efforts and drive senators away from the table,” but added that “the so-called “Group of Six” senators would continue to work for a compromise despite his comments.”

Having been in a schoolyard tussle or two in my time, I can’t help but feel the similarity as each side accuses the other of failing to be “bipartisan.” As a kid growing up in the late sixties and seventies in working class New Jersey, schoolboys everywhere labored under the same admonition from our fathers: “Don’t you start a fight–but if anyone hits you first–or says something about your Mother–you can hit him.” Except for the truly spontaneous outbreaks, most fights (or putative fights) began with ten or twenty minutes of some form of verbal interchange designed to try to get the other guy to throw the first punch, followed by shoving, and then–if no one broke it up–a fight.

And I’m not entirely sure which category “You’re not bipartisan.” “No, you’re not bipartisan” fits (though I suppose there’s no question as to where all that talk about “pulling the plug on grandma” belongs) –but as I’ve said, the similarity to schoolboys trying to engage in a tussle without blame is keen–far too keen. It would be funny–if it weren’t for all those sick people and the fact that we somehow manage to spend considerably more for health care and get considerably less than most everyone in the world.

Obama is said to be scheduled to address Congress about Health Care Reform on prime-time television come the Wednesday after Labor Day. Maybe he can break it up. If not, it might be time to start shoving– or at least twisting some arms– LBJ style.

The Law, Blogs, and Why Senator Grassley Should Read Our Last Post

Personification of the Faculty of Law; Křižovnické Square, Prague, Czechia, sculpted by Ernst Hähnel

Yesterday’s post (among other things) questioned whether it might be too much to ask that a United States Senator (who has reaffirmed his opposition to a Public Option, but expressed an openness to Health Care Cooperatives) inform himself about a subject via a blog, or more precisely, posts on this blog:

This may be too much to ask, but Senator Grassley (or at least his staff) follows this blog on Twitter– or at least did before this post. But as regards the failed history of health insurance cooperatives in America, the essentially moribund state of those cooperatives which do still exist, and the difficulty of implementing an effective cooperative plan, he might be well served to read these posts by Professors Timothy S. Jost, “Jost on Cooperatives,” and Tim Greaney, “Market Entry by Health Care Cooperatives: Neither Quick nor Easy.”

Although we’ve yet to hear from Senator Grassley in regard to his reading (though last I looked, still following), the role of blogs in the law was nicely summed yesterday by the U.S. Bankruptcy Court, S.D.N.Y., in a decision in the General Motors case. The court cited Professor Stephen Lubben’s blog posts for the proposition that the word “‘interest’ has wholly different meanings as used in various places in the [Bankruptcy] Code.”  In fn. 96 (p. 54), the court directs:

See Postings of Stephen Lubben, Professor at Seton Hall Law School, to Credit Slips,http://www.creditslips.org/creditslips/2009/06/claim-or-interest.html (June 13, 2009, 8:25 PM EST); and http://www.creditslips.org/creditslips/2009/06/claim-or-interest-part-2.html (June 14, 2009, 6:42 PM EST).

Blogs are a fairly recent phenomenon in the law, providing a useful forum for interchanges of ideas. While comments in blogs lack the editing and peer review characteristics of law journals, and probably should be considered judiciously, they may nevertheless be quite useful, especially as food for thought, and may be regarded as simply another kind of secondary authority, whose value simply turns on the rigor of the analysis in the underlying ideas they express.

“Food for thought…whose value simply turns on the rigor of the analysis in the underlying ideas they express.” Well said Your Honor.

Professors Jost and Greaney are preeminent in their field. Senator Grassley?

Senate Compromise on Public Plan Begins to Emerge. Half-a-loaf?

The Associated Press reports that a possible compromise has emerged in the Senate with regard to the “public plan” for health insurance:

The compromise offered by Sen. Kent Conrad, D-N.D., would create health care cooperatives owned by groups of residents and small businesses, similar to how electric or other cooperatives operate.

They’d be nonprofit, and without the government involvement that troubles Republicans and business groups about the public plan options.

This attempt at compromise seeks to address the purposeful omission of the issue of a public plan option from Senator Ted Kennedy’s 615 page health reform draft bill. The draft bill, by Kennedy and Democrats from his Health, Education, Labor and Pensions Committee, was said by the LA Times to have faced “furious criticism from even moderate Republicans” when it was released on Tuesday. This despite the attempts to avoid such by the Democrats through the omission of the contentious public plan option.

Kaiser Health News describes the Kennedy Plan as follows:

The plan “would require all Americans to get medical insurance, establish complex new insurance exchanges to facilitate near-universal coverage, and dramatically step up government oversight of the insurance industry.” The plan skips over - for now - the two issues Republicans have most vocally opposed, a government-run insurance option and a mandate for businesses to insure employees. Nevertheless,  the “Republican response was sharply negative” (Levey, 6/10).

The public plan compromise proffered by Senator Conrad, at least in principle (details have yet to surface) has garnered some tentative approval. AP reports that

The chairman of the Senate Finance Committee, Sen. Max Baucus of Montana, said Wednesday the idea could be key to a bipartisan health bill. Baucus raised it in a meeting with President Barack Obama, saying later that Obama showed interest. Baucus’ Republican counterpart, Sen. Chuck Grassley of Iowa, also said the concept had potential.

“It’s a way to bridge the gap,” Baucus told reporters.

AP reports  the outline of the  Conrad compromise as follows:

Profit-making insurance companies wouldn’t run the show, but there also wouldn’t be the federal government backing that Republicans fear would eliminate fair competition with private companies. The co-ops could get federal seed money, Conrad said, but that would be the end of federal involvement. The co-ops would negotiate directly with medical providers.

Grassley and Baucus Seek to Further Define the Difference Between Charity Care and Bad Debt for Nonprofit Hospitals. As a Matter of Collections Timing?

Senate Finance Committee Chairman Max Baucus, left, and Ranking Member Chuck Grassley, right

According to Inside ARM, an accounts receivable management online magazine, the Senate Finance Committee is presently contemplating imposing strictures upon nonprofit hospitals regarding when those hospitals may outsource the collection of unpaid bills and, presumably, the definition of “bad debt” as it relates to “community benefit.” Inside ARM states that “The proposal is meant to provide more free care and make not-for-profit hospitals more accountable for their tax-exempt status.”

Details of the initiative are said to be scant at this point, but according to Inside ARM, “Committee Chairman Max Baucus of Montana and Chuck Grassley of Iowa, the committee’s top ranking Republican, propose requiring not-for-profit hospitals to follow certain procedures before initiating collection actions against patients.” Sen. Grassley has sought to require nonprofit hospitals to justify their tax exemptions since 2005, the year in which he sent what pretty much amounts to interrogatories to the nation’s leading nonprofit hospitals regarding billing practices and questionable characterizations of “community benefit.”

Although without detail, the new timing distinction for collections seems to be based upon the amount owed being designated as “bad debt,” or that which is essentially deemed “uncollectable.” The prospective prohibition would seem to  require the amount owed to be deemed “uncollectable” or “bad debt” before it can be placed with a collection agency. A prospect the nation’s collectors, who generally work on commission, do not relish. But one hopes this provision is but one small piece of further defining “community benefit” in terms of actual charitable care.

Many nonprofit hospitals have characterized their uncollected receivables as a fulfillment of the ill-defined requirement that they offer a “community benefit” in exchange for the tax exemption they receive under 501(c)(3). Senator Grassley has said that “Neither the IRS nor Congress has done a very good job when it comes to establishing the criteria for enjoying this tax status since the IRS scrapped charity care for its community benefit standard in 1969″ (New York Times, 2/13/09).”

He has a point. But unless the prospective timing provision for outsourcing only “bad debt” is coupled with a prohibition upon characterizing mere “uncollected receivables” and  payor “shortfalls” as “community benefit,” it is hard to see what effect this bad debt collections distinction will have–besides the expansion of in house hospital collection  departments. One hopes that the pointed questions Senator Grassley asked of the nation’s leading nonprofit hospitals in ‘05 will play a substantial role in the Senate effort to reform and redefine the obligations of tax exempt nonprofit hospitals now. I believe Mr. Grassley would well agree that a mere shift in the locus of collection activities will not constitute reform worth the name.

Perhaps some background is in order. As we posted here a little while back in “The IRS, Nonprofit Hospitals, and the Meaning of “Community Benefit,” the IRS recently published the results of a two year study of nonprofit hospitals functioning under 501(c)(3), a portion of the Internal Revenue Code which garners tax exemptions for those entities it harbors. For those of you who have not yet read our post on the topic, I’ve excerpted it here below (if you have already read the piece, you can scroll down to the paragraph before Grassley’s numbered questions for the concusion to this post). The excerpted post describes how uncompensated care, bad debt and “shortfalls” in payments from Medicare and even Private Insurers can, and often are, characterized as somehow providing a “community benefit” which justifies a tax exemption for nonprofit hospitals:

Under the strictures of 501(c)(3) nonprofits are confined to paying executives “reasonable compensation” and supplying “community benefit.” Unfortunately, neither of these terms are particularly well defined. In the study’s executive summary, the IRS puts it so:

“The community benefit standard is the legal standard for determining whether a nonprofit hospital is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code.”

“Observations. Both the community benefit and reasonable compensation standards have proved difficult for the IRS to administer. Both involve application of imprecise legal standards to complex, varied and evolving fact patterns.”

These limitations may be seen in the characterizations of “community benefit” available to the hospitals in the study. Bad debt and Medicare payment shortfalls may be construed as  “community benefit.” As the debt, the credit injury, and the collection calls all inure to the community member who received treatment but could not pay, one might question if the “community benefit” involved in a failure of collection practices might be distinguishable from the “community benefit” involved in intentional charitable care. In addition, there simply is no set criteria to determine the appropriate amounts to be charged as “community benefit.” The IRS study poses the following under the heading of

“Limitations: …although the IRS designated the general categories of activities that could be reported as community benefit for purposes of the study, determining what was treated as community benefit (for example, bad debt or Medicare shortfalls) and how to measure it (cost versus charges) was largely within the respondents’ discretion.

Which is to say that those being monitored (nonprofit hospitals) to gauge the amount of money spent– to justify their tax exempt  status– were free to characterize their contributions in the manner they thought best.

Medicare shortfalls: So… if a non-profit hospital has a fee schedule rate of $100 for a procedure, and Medicare has a reimburse rate of $80 for that procedure, if a “charge” rate of measurement is used then there has been a $20 “community benefit” if the federally designated tax exempt nonprofit hospital accepts as payment the federally designated and predetermined Medicare reimbursement amount. Significantly, 19% of the hospitals also claimed “shortfalls” in payment from private insurers as uncompensated care/community benefit (See Chart: “Figure 82,” p. 105, full report).

Cost vs. Charge: So… if a procedure has a cost to the hospital of $80 and a fee schedule [or "chargemaster"] rate of $100, and the recipient of the procedure does not pay and the hospital categorizes the non-payment as “bad debt,” it has the ability to count as “community benefit” not only the cost of its unintended largesse, but also the amount it had expected as profit.

Perhaps even more telling than this latitude in characterization are the amounts actually submitted to the IRS as community benefit. Here are a few of the findings:

• The average and median percentages of total revenues reported as spent on community benefit expenditures were 9% and 6%, respectively.
• Uncompensated care accounted for 56% of aggregate community benefit expenditures reported by the hospitals in the study.

Read more

The IRS, Nonprofit Hospitals, and the Meaning of “Community Benefit”

Photo by Maulbagi via Flickr

Kaiser.org has written an interesting article about the recent two year IRS Study of nonprofit hospitals under 501(c)(3). The IRS queried 5oo nonprofit hospitals, with the study’s findings based primarily upon examination of 489 of those. Under the strictures of 501(c)(3) nonprofits are confined to paying executives “reasonable compensation” and supplying “community benefit.” Unfortunately, neither of these terms are particularly well defined. In the study’s executive summary, the IRS puts it so:

“The community benefit standard is the legal standard for determining whether a nonprofit hospital is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code.”

“Observations. Both the community benefit and reasonable compensation standards have proved difficult for the IRS to administer. Both involve application of imprecise legal standards to complex, varied and evolving fact patterns.”

The Kaiser article notes that according to the NY Times, “Lawmakers over the last few years have ‘raised concerns over whether nonprofit hospitals provide enough free care and other community benefits to justify their tax exemptions,’ but no test exists for ‘measuring how much community benefit is enough or even what constitutes community benefit.’”

These limitations may be seen in the characterizations of “community benefit” available to the hospitals in the study. Bad debt and Medicare payment shortfalls may be construed as  “community benefit.” As the debt, the credit injury, and the collection calls all inure to the community member who received treatment but could not pay, one might question if the “community benefit” involved in a failure of collection practices might be distinguishable from the “community benefit” involved in intentional charitable care. In addition, there simply is no set criteria to determine the appropriate amounts to be charged as “community benefit.” The IRS study poses the following under the heading of

“Limitations: …although the IRS designated the general categories of activities that could be reported as community benefit for purposes of the study, determining what was treated as community benefit (for example, bad debt or Medicare shortfalls) and how to measure it (cost versus charges) was largely within the respondents’ discretion.

Which is to say that those being monitored (nonprofit hospitals) to gauge the amount of money spent– to justify their tax exempt  status– were free to characterize their contributions in the manner they thought best.

Medicare shortfalls: So… if a non-profit hospital has a fee schedule rate of $100 for a procedure, and Medicare has a reimburse rate of $80 for that procedure, if a “charge” rate of measurement is used then there has been a $20 “community benefit” if the federally designated tax exempt nonprofit hospital accepts as payment the federally designated and predetermined Medicare reimbursement amount. Significantly, 19% of the hospitals also claimed “shortfalls” in payment from private insurers as uncompensated care/community benefit (See Chart: “Figure 82,” p. 105, full report).

Cost vs. Charge: So… if a procedure has a cost to the hospital of $80 and a fee schedule rate of $100, and the recipient of the procedure does not pay and the hospital categorizes the non-payment as “bad debt,” it has the ability to count as “community benefit” not only the cost of its unintended largesse, but also the amount it had expected as profit.

Perhaps even more telling than this latitude in characterization are the amounts actually submitted to the IRS as community benefit. Here are a few of the findings:

• The average and median percentages of total revenues reported as spent on community benefit expenditures were 9% and 6%, respectively.
• Uncompensated care accounted for 56% of aggregate community benefit expenditures reported by the hospitals in the study.
• Uncompensated care was the largest reported community benefit expenditure for each of the study’s demographics, other than for a group of 15 hospitals reporting large medical research expenditures (93% of all research expenditures reported by the study’s respondents).
• Further, the group of 15 hospitals reporting large medical research expenditures materially impacted the overall numbers in this area. For example, when the research group is removed, the percentage of total community benefit expenditures reported as spent on uncompensated care increases from56% to 71%, and that spent on medical research decreases from 15% to 1%.
• Uncompensated care and community benefit expenditures were concentrated in certain hospitals and unevenly distributed. For example,9% of the hospitals reported 60% of the aggregate community benefit expenditures of the overall group; 14% of the hospitals reported 63% of the aggregate uncompensated care expenditures.

So… if we were to take the 15 research hospitals out of the mix, 73% of the “community benefit” for the remaining 474 hospitals was in the form of uncompensated care–Medicare (and private insurance) shortfalls and bad debt inclusive.

In addition, of the substantial uncompensated care component, hospitals contributions were disparate: 14% of the hospitals reported 63% of the total–which is to say that roughly 68 hospitals out of the 489 accounted for 63%, while the other roughly 421 hospitals chipped in a somewhat less magnanimous 37% of the total. This despite the considerable latitude in characterization.

The Kaiser article notes that according to the NY Times

“In a statement, Sen. Chuck Grassley (R-Iowa), who since 2005 has sought to require not-for-profit hospitals to justify their tax exemptions, said that the study did not include adequate definitions or comparable information on community benefits for-profit hospitals provide. He said, “Neither the IRS nor Congress has done a very good job when it comes to establishing the criteria for enjoying this tax status since the IRS scrapped charity care for its community benefit standard in 1969″ (New York Times, 2/13)”

Bill Would Require Transparency of Physician Relationships with Pharma, Medical Device Companies

Yesterday Sens. Chuck Grassley (R-Iowa) and Herb Kohl (D-Wis.) announced a bill (S 301) that would require pharmaceutical and medical device companies to publicly disclose any gifts and payments to physicians valued at $100 or more per calendar year, according to CQ Healthbeat.

The bill introduced yesterday requires companies to report such gifts and payments to the U.S. Department of Health & Human Services once per year. Similar legislation introduced last year would have required quarterly disclosure of gifts or payments over $25 per year.

Additionally, if passed, the legislation would pre-empt state laws that require disclosure of gifts and payments to physicians.

So far, the bill has gathered support from various sectors. Proponents of the bill argue that it will allow patients to “fully trust the relationship they have with their doctor.”

Representatives of the pharmaceutical and medical device industry have expressed support for a “uniform national standard . . . [as opposed to] a patchwork approach by all 50 states.”

It seems that the only group unlikely to support the proposed legislation is physicians. However, the bill allows for physicians to contest the reports made by pharmaceutical and medical device companies, which would be reviewed by Health & Human Services.