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CLEVELAND, Ohio — The federal government’s push to overhaul the U.S. health care system dominated headlines and political conversation in 2009, and it likewise fueled Ohio health care companies and hospitals’ lobbying spending.
Issues surrounding government reimbursement and federal tax policy topped the agenda among Ohio health companies and hospitals’ major priorities last year, interviews and publicly filed lobbying reports revealed. The Cleveland Clinic, Elyria-based Invacare Corp. and Dublin-based Cardinal Health Inc. led the way in lobbying spending amongst Ohio health care groups and companies, all spending in excess of $700,000 in their federal lobbying efforts last year. (That may sound like a lot, but, for comparison’s sake, the American Medical Association spent more than $20 million, while drug-industry trade group PhRMA spent $26 million.)
The concept of lobbying often gets a bit of a black eye, with the public focusing on the Jack Abramoff scandal, or the perception that lobbying allows big business to exert too much influence on Congress. But lobbyists were quick to defend the practice, calling it an essential component of the legislative process that allows them to fill in the blanks in lawmakers’ comprehension of complex issues.
“It’s an essential part of educating lawmakers who can’t possibly have a grasp of all the details they’re responsible for,” said Cara Bachenheimer, Invacare’s senior vice president of government relations.
Connie Woodburn, Cardinal’s senior vice president of government relations, echoed those sentiments. “Legislators have to know everything about everything, and that’s impossible to do,” she said. “If all of the lobbyists went away, you’d have a lot more legislators writing laws with the best of intentions but unintended consequences, and you would need to go back and fix those things later.”
The reasons why corporations and institutions lobby go beyond mere education, however. Simply put, it pays off. A study by University of Kansas researchers showed that a single tax break in 2004 earned companies $220 for every dollar they spent lobbying on the issue. Though it’s just one example, and perhaps an extreme one, that colossal 22,000 percent rate of return starkly illustrates why lobbying has become a $3 billion industry.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Invacare the top health spender
Invacare, which makes power wheelchairs, oxygen delivery devices and other medical equipment, was the top spender among Ohio health companies at $1.2 million, and for good reason. Most of its sales are through government programs, particularly Medicare, so any proposal to cut reimbursement rates on hospitals or other customers has a big impact on the company.
“With our customers dependent so much on federal government money, [reimbursement cuts] can be life or death for our customers,” Bachenheimer said.
Invacare also advocated for a component of health reform that would implement sophisticated technology to sniff out patterns of fraud, waste and abuse in government health reimbursement. The idea is to employ technology similar to what banks and credit card companies use to detect “abhorrent spending patterns” on high-dollar items, which would leave more money in the system for legitimate expenditures, such as Invacare’s products, Bachenheimer said.
Near the end of 2009, Invacare’s priorities, like those of many other medical device makers, shifted to combating a proposed tax on device makers that sought to raise $2 billion a year to help fund the expansion of health coverage. Earlier this month, the company warned that the possibility of the device tax coming to fruition had prompted it to suspend matching 401(k) contributions, stop merit-pay increases for management and freeze hiring.
Pharmaceuticals and medical products supplier Cardinal Health and sterilization products maker Steris also closely watched the debate surrounding the device tax proposal, representatives of both companies said. As a supplier of a wide array of products, including gloves, hospital gowns and surgical kits, Cardinal would be subject to the device tax, said Woodburn.
Ohio’s largest company, Cardinal spent $935,000 lobbying the federal government last year, employing three firms to lobby on its behalf. “Cardinal spends the majority of its lobbying time not on asking for preferential treatment, but on educating the legislators on how the health system works,” Woodburn said.
One slightly under-the-radar issue that attracted the company’s attention and lobbying dollars was the shortage of medical isotopes, caused by the shutdown of a Canadian reactor last summer that was the only North American supplier of the isotopes, which are used to perform diagnostic imaging tests. The isotope shortage is a big deal to Cardinal because the Dublin company supplies medical isotopes to hospitals and imaging centers, and the reactor’s disruption forced the isotopes’ prices to jump. The company backed legislation that would pave the way to establishing an American reactor to produce the isotopes.
Steris wasn’t as big a spender as Invacare or Cardinal last year, but the Mentor-based company did plunk down $625,000 to three firms to lobby on its behalf. Among the fruits of the company’s lobbying efforts was a $6 million research and development grant as part of the Defense Department’s 2009 appropriations bill, said Stephen Norton, the company’s director of corporate communications. The company will use the grant to study and develop a system that would sterilize and decontaminate military aircraft after exposure to biological weapons, and examine ways to prevent infections acquired in military hospitals, Norton said.
Cleveland Clinic leads Ohio hospital spending
Among Ohio hospitals, the Cleveland Clinic was the biggest spender on lobbying at $740,000. In regard to the health overhaul, the Clinic lobbied to include in the legislation pilot programs that would encourage “integrated delivery systems,” essentially networks of physicians that collaborate to provide a broad spectrum of care to patients, according to Oliver “Pudge” Henkel, the Clinic’s chief of government relations.
“We are about to undergo a wholesale change in the way health care is delivered in this country,” Henkel said. “When that happens, there will be enormous pressure on all hospitals to restructure how we do things.”
Issues surrounding the tax-exempt status of nonprofit hospitals are always a top priority for the Cleveland Clinic, and 2009 was no exception. Congress, and in particular Iowa Sen. Charles Grassley, have in recent years been taking a hard look at how hospital’s define “charity care,” and considering whether to require hospitals to provide a minimum level of charity care to justify their tax exemptions. The Clinic’s ability to “remain financially viable” hinges in large part on its ability to “understand and shape” legislation surrounding hospitals’ tax exemptions, Henkel said.
Another major player in Cleveland’s health community, University Hospitals Health System, did not make its vice president of government relations, Heidi Gartland, available for comment. UH spent $286,000 lobbying the federal government last year.
While it doesn’t have the same financial might or international renown as the Cleveland Clinic, Columbus nonprofit Nationwide Children’s Hospital still places a high priority on federal lobbying, said Morna Smith, the hospital’s director of federal relations and government policy. The hospital spent nearly $450,000 on federal lobbying last year.
About half of the hospital’s patients use Medicaid, a government-sponsored program for low-income patients, so Nationwide lobbied for increases to Medicaid’s low reimbursement rates, which on average pay about 30 percent less than Medicare, Smith said. “The pay is abysmal, and as a result access to care [for those on Medicaid] is abysmal,” she said.
Sticking with the theme of access to care, Nationwide Children’s is concerned about a shortage of pediatric specialists in the fields of endocrinology, surgery and psychiatry. As a result, the hospital lobbied for a bill sponsored by Ohio Sen. Sherrod Brown that would create a loan-forgiveness program for pediatric specialists who work in underserved areas.
“It’s only responsible to the children and families we serve that we’re engaged in the conversation in Washington about the future of children’s health care,” Smith said.
