While payments for inpatient services at acute-care hospitals would get a 2.4 percent bump up to account for inflation, CMS then proposes to reduce payments by 2.9 percent to represent improvements in hospitals’ coding practices in FY 2008 and 2009.
The 2.9 percent reduction is based on recommendations in a January report by the Medicare Payment Advisory Commission, but the cut is deeper than what MedPAC recommended. MedPAC proposed stretching out cuts accounting for coding improvements over three years, so that they would not exceed 2 percentage points in a single year.
The overall 0.1 cut amounts to a loss of $142 million for hospitals in fiscal 2011, just as they are preparing for huge changes in how they will be paid under health reform. Hospitals will benefit from 32 million more insured Americans, but they will lose $150 billion in Medicare payments over 10 years to account for more paying patients.
The AHA is protesting the proposed cut, saying: “Should this rule take effect, billions of dollars would be taken out of the system just as hospitals are grappling with sweeping changes and payment reductions contained in the new health reform legislation.”
Hospital trade associations have been strong proponents of health reform, arguing that it would ultimately benefit the industry. Chip Kahn, president of the Federation of American Hospitals has been upbeat. “In terms of the health of the hospitals, it will make a big difference over time because the kind of accommodations we have to make financially to assure everyone’s care when they come through the doors is a major problem for us,” said Mr. Kahn in March, as cited by former Medical Economics editor Ken Terry. “Coverage expansion can go a long way to solve that problem.”
Some hospital CEOs, on the other hand, have been more skeptical. Chris Van Gorder, CEO of five-hospital Scripps Health in San Diego told the San Diego Business Journal this month, before the cut was announced: “Hospitals aren’t going to see the benefit to the newly insured for nearly four years, but we’re going to start seeing the costs.”
Meanwhile, Kathy Silver, CEO of University Medical Center, a public hospital in Las Vegas, told the Las Vegas Sun the hospital stands to lose tens of millions of dollars a year in Medicaid payments under health reform.
A spokeswoman for the National Association of Public Hospitals and Health Systems, told the Sun Ms. Silver’s predictions seemed too pessimistic, but even by the association’s own reading of the reform law, public hospitals would lose 40 percent of their Medicaid payments by 2024.
Read CMS’ release on hospital payments.
