A proposal to use neighboring facilities for the purpose of computing a hospital's Medicare wage rate has been shelved by HCFA, according to the congressional advisory panel that proposed the idea.
At a meeting of the Prospective Payment Assessment Commission last week, Stuart Altman, chairman of the panel, said the Health Care Financing Administration was "prepared to drop" the "nearest-neighbor" plan as a solution to the inequities in the current labor market configurations.
ProPAC officials plan to meet with HCFA chief Bruce Vladeck to discuss the proposal. But Mr. Altman indicated that, for now at least, the plan was unlikely to win HCFA support and thus wouldn't win congressional approval.
Currently, wage indexes are determined by metropolitan statistical areas. Because labor costs account for 70% of hospitals' Medicare payments, the process used to calculate those costs is a crucial reimbursement issue for the industry. A geographic reclassification process, which has allowed many rural and small urban hospitals to claim higher wage indices, has exacerbated longstanding geographic and boundary tensions. The nearest-neighbor plan was intended to make the basis for determining hospitals' labor costs more equitable.
As a ProPAC commissioner, Mr. Vladeck had been a staunch supporter of the nearest-neighbor proposal, Mr. Altman said. But since last May, when the agency published wage indices based on hospitals' 10 nearest neighbors within 50 miles, the industry reaction has been intensely negative, said Julian Pettengill, senior policy analyst for ProPAC. Hospitals fear major redistributions of Medicare reimbursement under the plan.
For example, a ProPAC analysis that calculated the impact of grouping hospitals with their 15 nearest neighbors within a 20-mile radius found that 1,827 hospitals gain substantially from the current system because their labor costs are much lower than the prevailing Medicare rate. Under ProPAC's nearest-neighbor groupings, most of those hospitals would see the payments for the labor portion of their reimbursement drop 6% to 17%.
In contrast, some 3,685 hospitals that lose 14% to 16% under the current system would see those losses cut to 3% to 8% under the nearest-neighbor plan.
Despite HCFA's resistance to the proposal and the unlikely prospects for congressional approval, ProPAC voted to rec ommend that Con gress implement such a plan.
Commissioners also recom mended:
|An average fis cal 1995 operat ing update for Medicare rates of 2.7%, with a capi tal update of 3.6%. ProPAC suggests urban hospitals get a 2.2% hike, rural facilities a 5.3% boost, and sole community hospitals a 2.7% hike.
|Reducing indirect medical education payments to 7% in fiscal 1995 from the current 7.7%.
|Retaining the current Medicare peer review program until it can be replaced with one that's been proven to be more effective.-Lynn Wagner