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Feds say Medicare plan helps hospitals

Hospitals will get more money for treating the sickest of Medicare patients and less for treating some of the healthier ones under new federal regulations issued Tuesday.

The changes are designed to more accurately reflect hospital costs and reduce incentives for hospitals to treat only the most profitable patients, said Mark McClellan, administrator for the Centers for Medicare and Medicaid Services.

For example, if a patient needs a ventilator for more than 96 hours, hospitals can expect a higher payment than they would get now. However, if the patient needs a ventilator for less than 96 hours, the hospital may get less money than they would get now. Also, if a patient is admitted with seizures, the hospital would get a higher payment. But if that patient just had a severe headache, the hospital could see a lower payment.

The new rules become effective for patients discharged on or after Oct. 1.

Overwhelmingly, health care providers had feared that the payment revisions would lead to a substantial reduction in how much they receive for treating Medicare patients. The changes in the reimbursement calculations are the most significant since 1983.

Hundreds of lawmakers also have protested the proposed changes and have asked the Bush administration to delay the most significant ones for a year. To address those concerns, federal officials said they will phase in changes to the reimbursement formula over a three-year period.

That way, hospitals will not experience the fluctuation in their payments as some had feared when the administration first made its proposal, McClellan said.

The Bush administration said the proposal was not designed to save money but to ensure that hospitals were reimbursed for the actual cost of providing care.

Under the new system, the flat rate that Medicare pays for a particular service will be calculated on that cost, rather than on a list price that overstates costs for some services.

"We want to get the payments right, so each patient gets appropriate care," McClellan said.

The trade group representing the large majority of hospitals said the regulations announced Tuesday afternoon after the stock markets closed are an improvement from what the administration had proposed in the spring.

"This is a significant regulation and we will review the details in the coming days," said Rick Pollack, executive vice president of the American Hospital Association. "While we continue to believe a one-year delay is needed given the rule's complexity, we are committed to working with CMS to ensure any needed changes are addressed in future years."

Pollack said that 40 percent of America's hospitals are reimbursed less than the cost of delivering services to hospitalized Medicare inpatients.

"It's essential to build a more equitable and accurate payment system that allows hospitals to continue to serve their communities," Pollack said.

The federal government spends $125 billion a year reimbursing 5,000 hospitals for the care provided to Medicare patients.

For the vast majority of hospitals, the total impact of the changes will be limited, McClellan said. More than 80 percent can expect increases of between 1 percent and 5 percent in their reimbursements. About 2 percent of hospitals can expect to see a reduction in their reimbursement.

The changes reflect recommendations made by an advisory panel to Congress, which found there were incentives for hospitals to invest in certain services, such as cardiac care, because payment rates significantly exceeded costs. As a result of the changes in the reimbursement calculations, payments to specialty hospitals focusing on cardiac care are expected to decline by more than 5 percent between 2005 and 2007, the administration said.

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On the Net:

Centers for Medicare and Medicaid Services: http://cms.hhs.gov