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Date:  August 31, 1995
For Release:  Immediately
Contact:  HCFA Press Office (202) 690-6145

HHS Issues Medicare Hospital Payment Rates
for FY 1996, Eliminates Physician
Attestation Requirement

Payment rates for Medicare patients treated in short-stay, acute-care hospitals will be increased 1.5 percent per discharge, beginning Oct. 1, HHS Secretary Donna E. Shalala announced today. The proposed 1.5 percent increase will be applied to the base payment rates for operating costs, affecting payments to the approximately 5,200 hospitals paid under the prospective payment system -- virtually all the short-stay, acute-care hospitals in the United States.

Under the final rule, payment rates also will rise 1.5 percent per discharge for 720 community hospitals recognized as the sole source of hospital care in an area for Medicare beneficiaries. The increase is the same as the recommendation in the proposed rule published in the Federal Register June 2.

The forecast for the market-basket percentage increase calculated exclusively for 3,350 Medicare hospitals and hospital units excluded from the prospective payment system -- psychiatric, rehabilitation, long-term and children�s facilities -- is estimated at 3.4 percent, down 0.2 percentage points from the proposed rule. The rate of increase for excluded hospitals is based on this market basket, minus a 1 percent reduction, resulting in an increase of 2.4 percent for FY 1996.

"These increases will fairly compensate the nation's hospitals, while at the same time encouraging them to reduce the rate of inflation in health care costs," Secretary Shalala said.

The rate increase was part of a final rule on Medicare's payment rates for hospitals to be published in tomorrow's Federal Register. The rates in the final rule follow guidelines established by Congress.

The final rule also eliminated the form, known as an "attestation statement." Physicians had to complete the form to certify the accuracy of all diagnoses and procedures for each Medicare hospital patient before a claim could be submitted to Medicare. This change was not in the proposed rule, but was announced by Vice President Gore in July as part of a series of health care regulatory reforms within the Health Care Financing Administration.

"This change will eliminate 11 million forms and save 200,000 hours of physician time," said HCFA Administrator Bruce C. Vladeck, who oversees the Medicare program. "The reduction in red tape also will cut labor costs by about $22,500 annually for each hospital."

Medicare paid $81.4 billion to hospitals providing acute, short-term inpatient care in fiscal year 1994. Hospital payments are expected to grow by 7.7 percent from $86.9 billion in FY 1995 to $93.6 billion in FY 1996.

"Various factors are contributing to the increase in overall hospital payments under Medicare, not just the increase in payment rates," Vladeck said. "Other factors include increasing numbers of hospital admission rates, new beneficiaries becoming eligible for Medicare, and the fact that hospitals are admitting people with more serious health problems."

Medicare pays hospitals a predetermined rate for inpatient hospital services furnished to Medicare beneficiaries, using the hospital prospective payment system (PPS). Under PPS, base payment rates are multiplied by a measure, called a diagnosis related group weighting factor, which reflects the severity of a patient's condition. Hospitals in large urban areas (cities with more than 1 million people) receive slightly higher base payment rates than those in other urban and rural areas.

The rate increases are based on projections of growth in the prices of goods and services purchased by hospitals, known as the hospital market-basket, minus 2 percentage points. The market basket is currently estimated to be 3.5 percent for FY 1996, which begins Oct. 1. This forecast is unchanged from the proposed rule published June 2 in the Federal Register.

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