Healthcare Business News

MedPAC mulls 1% bump in hospital rates

By Rich Daly
Posted: December 6, 2012 - 2:30 pm ET

(Updated with comment from the American Hospital Association at 2:30 p.m. ET.)

Hospitals should receive a 1% increase in their inpatient and outpatient Medicare payment rates, according to draft recommendations released Thursday by the head of Congress' primary Medicare advisory group.

Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission, issued the draft increase based on his staff's conclusion that patients' access to care and the quality of care have generally improved, while the number of hospitals has continued to increase and costs have slowed.

The rate increases, on which the full commission will vote in January, are based on current rates and do not account for the effect of a looming 2% cut to all Medicare providers from a separate deficit-reduction deal that is scheduled to begin in February.

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Among the justifications for the rate change was the finding that Medicare hospitals' overall spending grew by 2% from 2010 to 2011, while critical-access hospital spending grew by 6% in that timeframe. Additionally, the number of hospitals has continued to grow, with newly opened hospitals exceeding the number of hospitals closing in every one of the past 10 years.

Meanwhile, inpatient hospital stays have continued to drop by about 1% each year from 2004 through 2011. That change was credited to an increasing use of outpatient treatment and the use of outpatient observation status.

George Miller, CEO of Okmulgee (Okla.) Memorial Hospital, and a commission member, said the increasing use of observation status was used by his facility as part of their efforts to avoid negative findings by Medicare recovery audit contractors.

The small increase came despite MedPAC's finding that overall Medicare hospital margins averaged -5.8% in 2011; while nonteaching hospitals averaged -8.3%; not-for-profit hospitals were at -7.2%; and urban hospitals were -6.2%.

MedPAC's justifications for the relatively small increase drew fire from a hospital advocate.

"There are real increases in patient severity linked to trends in obesity, growing shares of patients with multiple chronic diseases, and more patients dually eligible for Medicare and Medicaid," said Caroline Steinberg, vice president of trends analysis for the American Hospital Association. "These trends need to be recognized in reimbursements. Plain and simple: today’s hospital patients are sicker."

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