Varian Runs a “Clinic” in Effective Lobbying –Harry Reid Rides Shotgun

When lawmakers make last minute “inserts” and/or bury curious provisions “deep in the bowels” of an otherwise huge piece of legislation, there’s usually a reason for it, and it’s not because someone was forgetful. Let me put it this way, when you deliberately bury something “deep in the bowels” of something else, that “thing” you buried will generally carry a stench with it.

A story will run in today’s WSJ where Alicia Mundy looks at a last-minute provision in the fiscal-cliff bill that sharply cut Medicare payments for Sweden’s Elekta AB EKTA-B.SK -0.36%, a maker of radiation tools, while leaving unchanged those of its direct competitor, Varian Medical Systems of Palo Alto. If you followed the fiscal cliff negotiations, don’t you recall waking up on New Year’s Day somewhat relieved? Well just imagine being Elekta and rolling out of bed to learn that your Medicare payments were just cut by 58%, but your key competitor’s payment arrangement was left unchanged. In fact, Varian lobbyists successfully pushed for the last minute change with Senate Majority Leader Harry Reid riding shotgun. And as the article notes, that last minute change/addition looks exactly like the kind of “earmark” provision that lawmakers have repeatedly vowed to stop.

Here is the text of that last minute provision:

SEC. 634. PAYMENT FOR CERTAIN RADIOLOGY SERVICES FURNISHED UNDER THE MEDICARE HOSPITAL OUTPATIENT DEPARTMENT PROSPECTIVE PAYMENT SYSTEM.

Section 1833(t)(16) of the Social Security Act (42U.S.C. 1395l(t)(16)) is amended by adding at the end the following new subparagraph:

‘‘(D) SPECIAL PAYMENT RULE.—

‘‘(i) IN GENERAL.—In the case of covered OPD services furnished on or after April 1, 2013, in a hospital described in clause (ii), if—

‘‘(I) the payment rate that would otherwise apply under this subsection for stereotactic radiosurgery, complete course of treatment of cranial lesion(s) consisting of 1 session that is multisource Cobalt 60 based (identified as of January 1, 2013, by HCPCS code 77371 (and any succeeding code) and  reimbursed as of such date under APC  0127 (and any succeeding classification group)); exceeds

‘‘(II) the payment rate that would otherwise apply under this subsection for linear accelerator based stereotactic radiosurgery, complete course of therapy in one session (identified as of January 1, 2013, by HCPCS code G0173 (and any succeeding code) and reimbursed as of such date under APC 0067 (and any succeeding classification group)),

the payment rate for the service described in subclause (I) shall be reduced to an amount

equal to the payment rate for the service described in subclause (II).

‘‘(ii) HOSPITAL DESCRIBED.—A hospital described in this clause is a hospital

that is not—

‘‘(I) located in a rural area (as

defined in section 1886(d)(2)(D));

‘‘(II) classified as a rural referral center under section 1886(d)(5)(C); or

‘‘(III) a sole community hospital (as defined in section 1886(d)(5)(D)(iii)).

‘‘(iii) NOT BUDGET NEUTRAL.—In making any budget neutrality adjustments under this subsection for 2013 (with respect to covered OPD services furnished on or after April 1, 2013, and before January 1, 2014) or a subsequent year, the Secretary shall not take into account the reduced expenditures that result from the application 9 of this subparagraph.’’

——–

I’m not on a Harry witch hunt, but he does have a deep relationship with Varian. And the stench on this one can fill the room. Among other things, he secured federal funding for Varian to work with the Harry Reid Center for Environmental Studies at the University of Nevada, Las Vegas –a project that looked at technologies that could X-ray cargo shipments in support of anti-terrorism efforts. In addition, the U.S. Department of Energy later transferred Varian’s equipment to UNLV, where Varian and UNLV are now partnering on a multimillion-dollar Accelerator Center for research in the national-security, health and energy sectors. The goal is for the center to commercialize its research and create thousands of jobs in Nevada.

The dance that Varian’s lobbyists executed was clever. If you missed it, what they did was level the playing field by reducing Elekta’s payment arrangement instead of asking for an increase to its own (Varian’s reimbursement rate was roughly half of Elekta’s, because Elekta’s technology was regarded as more effective). Instead of asking for an increase, they took advantage of Congress’s cost cutting mind-set –and Harry Reid’s apparent shamelessness.

For the record, Varian’s political contributions are generally bipartisan, and overall it isn’t a big player. But for investors, the company is on most everyone’s short list of “hot stocks” in 2013.

Elekta, as a non-U.S. company, can’t participate financially in American elections.

—Tom Finn

Comments

  • Barton 'Bo' Cooke:

    Tom, you nailed it. This rider, put in at the last minute and was rushed into the Congressional Budget Office, much like a football team rushes to the line of scrimmage to get a play off before the refs can call for a replay. What Congress was not told is that there was indeed a non-level playing field – that didn’t favor the Gamma Knife but favored LINACs sold by Varian. For a course of treatment the LINACs charge $9,400 for radiation delivery. The Elekta Gamma Knife charges CMS $7,910.

    Harry never told anyone that because of its imprecision vs GK, a LINAC delivers a treatment not in one session but in 3-5 sessions. It is in the repeat sessions that LINACs add to their $3,300 to get to the $9,400. A GK can get the same result in a single session.

    So now, not $7,910 for that single session for GK but $3,300 – vs $9,400 for LINAC. “Level playing field”? Hardly. Corporate cronyism, earmark, graft, corruption? Yes. But more profane is that 18 lobbyists and Harry Reid are dictating health care policy and making patient decisions without any information other than ‘what’s good for Nevada’.

    This is profane. And now it is up to us who own and run Gamma Knife centers to introduce our own legislation and take on Harry Reid whose lobbyists and friends intimidate legislators who do not agree with this legislation.

    Barton ‘Bo’ Cooke
    Managing Partner
    Gamma Knife of Spokane

    • Thomas Finn:

      Thanks for your comment Bo. I do not fully comprehend the differences between the two options, so I speak with full confidence when I state that Harry didn’t and doesn’t know either. If it walks like a duck and quacks likes a duck and stinks like a duck… If Reid gets called on this I’ll be surprised. Having said that, unless and until those of us who get hit by such actions learn how to effectively counter punch, nothing will change. Good luck and keep us posted!

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