The other healthcare finance: Campaign contributions

I've spent a couple of simultaneously interesting and dismaying months boning up on how healthcare-related organizations in my home state of California spend their money in the political arena.

Those organizations contributed more than $23 million during the last political campaign in contributions toward local and statehouse elections, ballot propositions, and political action committees. I am absolutely certain I am undercounting that sum. Given that money talks is a truism, it makes perfect sense. As Bob Stern, president of the Center of Government Studies told me, "Losers don't legislate." Losers are also almost always underfunded.

I found some amusing things. Blue Shield of California contributed $5,000 to the defense fund of a state senator facing multiple felony counts of perjury and voter fraud, because he apparently fibbed on campaign forms about living in the district he represents. I wonder if Blue Shield would have the same charitable attitude if he fudged his health history while applying for some coverage.

I also found facts that were far less amusing. The state's hospitals actually banded together with the health plans to oppose a bill that would have allowed limited premium regulation. It passed the Assembly by a comfortable margin, then breezed through a couple of senate committees. It looked like the bill had a shot--it had broad Democratic support, and they hold a 10-vote margin in the Senate. The Insurance Commissioner even issued an upbeat press release. But its fate was foreordained when the hospitals and health plans funneled tens of thousands of dollars to the chair of the Senate Health Committee and four other senators. All of a sudden, the legislation was shelved, its author claiming he didn't have support for it in the Senate. Round up the usual suspects.

This is a microcosm of what is occurring all over the nation. Some of the most critical aspects of healthcare finance don't occur in the CFO's office, but in the corridors of state legislatures.

Hospital lobbies often push for important pieces of legislation. One that comes to mind is a hospital fee that is used to leverage additional matching payments from the Medicaid program. California's hospitals were among the first in the nation to push for such a tax, and it was recently renewed for several years. Other states are imitating such fees.

However, given all the money that is being spent, it makes me wonder if all of it is going to a good cause. Hospital lobbies in California and elsewhere have been successful in defeating bills requiring full reporting on medical errors and other healthcare quality issues. The sentiment is understandable: A typical "never-event" report is a mixture of gothic horrors and tragicomedy. Any hospital with a good reputation in the community would be loathe to admit to such mishaps.

But the more open a hospital is about such issues, the more likely it will shore up its quality and cut costs. However, a moral decision has been made that it may be cheaper in the short run to contribute to the right legislators to ensure that some embarrassing news never sees the light of day.

Hospital executives need to look past those short-term considerations. They should keep in mind that every dollar they give to their lobbying group for political activities is one less dollar that flows to patient care. In the end, that is still the "real" aspect of healthcare finance. - Ron