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1994.09.01 : Medicare Payment Rates for Rural, Urban Hospitals

Contact:  Anne Verano     (202) 690-6145
Thursday, Sept. 1, 1994                             


            SHALALA ANNOUNCES INCREASED MEDICARE PAYMENT 
             RATES FOR RURAL, URBAN HOSPITALS IN FY 1995

                         
     Payment rates for Medicare patients treated in short-stay,
acute-care hospitals will be increased 4.7 percent for rural
hospitals and 1.5 percent for urban hospitals, beginning Oct. 1, 
HHS Secretary Donna E. Shalala announced today.

     "The result of these increases for the 1995 fiscal year will be
that, for the first time, rural and urban hospitals will have the
same base payment rates," Secretary Shalala said.  "It will complete
a three-year transition toward equal base rates for rural
hospitals."   

     The rate increases were part of a final rule on Medicare's
payment rates for hospitals published in today's Federal Register.

     Medicare pays hospitals a predetermined rate for inpatient
hospital services furnished to Medicare beneficiaries, using the
prospective payment system (PPS).

     Congress originally mandated different base rates for rural and
urban hospitals when PPS began, but later ordered that separate
rates should be abolished beginning in FY 1995.  Hospitals located
in larger urban areas (more than 1 million people) will continue to
receive slightly higher base payments than facilities in smaller
urban and rural areas.

     "These increases will help to contain medical care cost
inflation, while providing hospitals with sufficient compensation
for treating Medicare beneficiaries," said Bruce C. Vladeck,
administrator of the Health Care Financing Administration. 

     The proposed rate increases will go to approximately 5,200
hospitals paid under PPS, about 2,300 rural and 2,900 urban.
Virtually all short-stay, acute-care hospitals in the United States
are paid under PPS.

     The rate increases are based on projections of the growth in
goods and services purchased by hospitals; the hospital market-
basket is currently estimated to be 3.6 percent for FY 1995.  This
forecast is unchanged from the proposed rule published May 27 in the
Federal Register.

     Medicare paid $75 billion to inpatient hospitals providing
acute, short-term care in FY 1993.  Hospital payments are expected
to grow by 7.6 percent from $81.6 billion in FY 1994 to $87.8
billion in FY 1995. 

     The overall increase in hospital payments under Medicare is due
to the growth in the number of hospital admissions and new
beneficiaries entering the Medicare program, and changes in the
types of cases that hospitals are treating.

     A rate increase ranging from 2.7 percent to 3.7 percent will go
to the 2,000 Medicare hospitals excluded from PPS -- psychiatric,
rehabilitation, long-term care, cancer and children's facilities. 
The increase is based on an estimated 3.7 percent increase in the
market-basket calculated exclusively for these hospitals.

     HCFA is the federal agency which administers the Medicare and
Medicaid programs that help pay the medical bills of 67 million
Americans.  HCFA's estimated FY 1994 expenditures will total nearly
$250 billion.
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