The new Medicare funding agreement announced on July 8 by 3 major hospital associations, the White House and Senate Finance Chairman Max Baucus (D-Mont) includes an attempt to destroy physician-owned hospitals, says the Physician Hospitals of America (PHA) trade organization.

The PHA, which represents 220 physician-owned hospitals, calls the deal cut between the Obama administration, Sen. Baucus and the American Hospital Association (AHA), Federation of American Hospitals (FAH) and Catholic Health Association (CHA) a "desperate move" aimed at reducing competition and consolidating control of the industry.

A text of the agreement, which attempts to create $155 billion in savings for Medicare and Medicaid over the next decade, has not been released yet, according to an AHA spokesman. However, part of the agreement apparently applies to physician-owned hospitals, which some major health organizations see as unwanted competition. "We are pleased to see restrictions on physician self-referral to hospitals in which they have an ownership interest," says a joint statement issued by the AHA, FAH and CHA regarding the agreement announced at the White House.

Although she hasn???t seen a text of the agreement, PHA Executive Director Molly Sandvig told Outpatient Surgery Magazine that she assumes it has similar language to a June draft of a finance committee bill that would prohibit existing physician-owned hospitals from expanding. Also, any physician-owned hospital that doesn???t already have a Medicare number would not be eligible to apply for one, says the draft bill, in effect ending the growth of physician-owned hospitals.

"To put this anti-competitive issue into the deal between administration, Congress and the hospital associations makes no sense and demonstrates the desperation of many hospitals," says Ms. Sandvig. "Ownership of a hospital by any party is simply not relevant."

However, she notes that the deal is just a deal and not a law. "Congress still has to pass a bill," she says, adding that other members of Congress and other hospital associations were not happy to be excluded from the deal making. "It looks like the agreement is imploding."

Rep. Henry A. Waxman (D-Calif.) says the agreement was between the White House, Sen. Baucus and the hospital groups, not Congress, according to the Washington Post. "We're certainly not bound by that agreement."

The deal attempts to achieve $155 billion in savings for CMS by over the next decade by further reducing planned reimbursements. In return, the federal government would not cut funding to teaching hospitals and delay reimbursement cutbacks to hospitals that care for a large number of uninsured and underinsured patients. The savings to the federal government would be used to help uninsured patients get coverage, if a health reform proposal in the Congress becomes law.

—Kent Steinriede