Varian Lobbied For and Got Cuts in Competitor's Medicare Payments

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The Wall Street Journal reports that a provision in the fiscal cliff package sharply cuts Medicare payments for Elekta AB, a Swedish manufacturer of radiation tools. Palo Alto-based Varian Medical Systems, Elekta’s direct competitor, is unaffected by the cuts and lobbied for the provision, which was inserted into the bill on the last day of 2012.

The provision, which is now law, mandates that Medicare pay for any one session with Elekta's Gamma Knife (HCPCS code 7731) technology at the same rate that would otherwise apply for a one session treatment with linear accelerator based stereotactic radiosurgery, aka Varian's Linac, (HCPCS code G0173). Since the former was being paid for at a rate of 58 percent more than the later, this equalizing of the payments presents a significant cut for Elekta.

Although Varian Medical Systems' stocks fell after the Wall Street Journal published its article, the company has done well for the start of the year. Just this week, it released its financials for the first quarter of 2013, reporting $678 million in revenue, an 8 percent increase over last year, and prices per diluted share rose by 9 percent. The quarter results included a $4.1 million restructuring charge related to an enhanced retirement program.

Varian is not a big political contributor. What it does spend in Washington D.C. goes primarily toward well-connected lobbyists, according to OpenSecrets.org data.

The Wall Street Journal report, however, draws connections between Varian and Senate Majority Leader Harry Reid (D-Nev.), one of the major architects of the fiscal cliff bill and according to the newspaper, the source of the payment equalizing provision.

Varian has not given directly to Senator Reid according to OpenSecrets.org. However, the Wall Street Journal reports that it did receive funding to work with the Harry Reid Center for Environmental Studies at the University of Nevada, Las Vegas (UNLV). In addition, Varian has donated equipment to UNLV and is partnering with the University on accelerator research that may create thousands of jobs for Senator Reid's constituents in Nevada.

Elekta, as a foreign company, is barred from making political contributions that can influence U.S. elections, although it can hire lobbyists. It hired its first lobbyist just last week, according to the Wall Street Journal. View the text of the provision here.