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Date: Friday, May 8, 1998 FOR IMMEDIATE RELEASE Contact: HCFA Press Office (202) 690-6145
More than 5,000 acute care hospitals in the U.S. would receive an increase in their Medicare payments in fiscal year 1999 under regulations proposed today.
The recommended payment increases are contained in a proposed rule that is published today in the Federal Register. A 60-day public comment period will follow, and a final rule will be issued shortly after the end of the comment period.
The increases, which are authorized under the Balanced Budget Act (BBA), would affect all acute care hospitals participating in Medicare. Most hospitals will receive a 0.7 percent increase to the base payment rate in their payments and an estimated 360 acute care hospitals will receive a 1 percent increase. These facilities do not receive any other special treatment from Medicare and have lost money on Medicare patients in recent years. The BBA specified a larger increase in payments for these facilities.
"The Balanced Budget Act has guaranteed a decade of solvency for the Medicare hospital insurance trust fund," said HHS Secretary Donna E. Shalala. "These proposed increases recognize the significant contribution that hospitals made to those savings."
Medicare pays for most inpatient hospital care through its prospective payment system (PPS), which pays hospitals a predetermined amount for each Medicare discharge based on the patient's diagnosis. Hospitals in large urban areas (cities with more than 1 million people) receive slightly higher payment rates than those hospitals in other urban and rural areas.
The Balanced Budget Act froze hospital payments in FY 1998 and allowed for an increase in FY 1999 of 1.9 percent less than the projected growth in the inflation rate on prices for goods and services purchased by hospitals. The FY 1999 inflation rate, also known as the hospital "market basket," is estimated to be 2.6 percent for PPS hospitals, sole community hospitals, and Medicare-dependent rural hospitals. So, according to the formula included in the BBA, payments will increase by 0.7 percent.
Under the BBA, the payment rate increase for non-acute hospitals is based on an estimated 2.5 percent rise in the market basket calculated for these PPS-excluded hospitals. These 3,400 non-acute care hospitals and hospital units include psychiatric, rehabilitation, long-term care, cancer, and children's facilities. Increases in payments for those hospitals would range from zero to 2.5 percent. The size of the increase depends on the facility's actual costs in relation to a predetermined cost limit for that facility.
"The bipartisan reforms enacted last year are working to preserve Medicare," said Nancy-Ann DeParle, administrator of the Health Care Financing Administration, the HHS agency that oversees Medicare. "Not only are the savings improving the status of the Trust Fund, they also are financing more preventive benefits for Medicare beneficiaries."
The proposed rule also deals with discharges to post-acute care and payment to non-hospital providers for training medical residents:
Discharges to post-acute care. Currently, a discharge from a PPS hospital is paid at the full DRG rate unless the patient is transferred to another PPS hospital, which results in a lower payment rate. In the Balanced Budget Act, Congress mandated that HHS identify 10 DRGs for which discharges from any one of these DRGs to a post-acute care provider will be considered a transfer, beginning Oct. 1.
The 10 DRGs selected by HHS have a high volume of discharges to post-acute care and an exceptionally high use of post discharge services. Among the proposed DRGs are amputations for circulatory system disorders, hip and pelvis fractures, and certain skin grafts. All cases from these DRGs discharged directly to either a PPS-excluded hospital or unit, a skilled nursing facility, or to home health services, will be paid as a transfer.
Payment to non-hospital providers. The Balanced Budget Act allows HHS to set rules for payments to non-hospital providers for the direct cost of training medical residents. The law provides for payments to qualified non-hospital providers, such as federally qualified health centers, rural health centers, and Medicare+Choice organizations. Historically, Medicare has paid only for training of residents providing hospital care. Under this proposal, Medicare may pay for training of residents that occurs in a non-hospital setting.
HHS is proposing Medicare pay the non-hospital provider directly for the cost of training residents at the non-hospital site when the provider incurs the cost. The hospital may receive graduate medical education payments for residents who train in a non-hospital setting when the hospital incurs all, or substantially all, of the costs.
The proposed rule also includes a limit on capital payments when new hospitals merge with existing hospitals, and a reclassification of DRGs for burn cases.