The Dallas/Fort Worth Hospital Council may sue the federal government over the way physician salaries are calculated in the Medicare wage index.
The index determines about 70% of the reimbursements hospitals receive from Medicare under the prospective payment system, and equity among regions' indexes is a traditional source of controversy.
The Dallas area council's 80 hospitals say they sacrifice between $5 million and $9 million of their $1 billion annual inpatient Medicare reimbursements because they can't include typically higher physician salaries in their wage index calculation. After repeated discussions with HCFA proved fruitless, officials said the council this week would consider a legal move to recoup lost funds.
Currently, a hospital that employs a physician can include the Part A portion of his salary in the hospital's overall salary amounts. That amount is used by HCFA to calculate a region's wage index. However, if a hospital contracts out for physician services, it cannot include those costs. Texas is one of five states that prohibit hospitals from employing physicians, meaning that their wage indexes may be lower than other states'.
"Whatever we are losing in Texas is going somewhere else," said John Gavras, executive director of the council. He estimates the state loses about $25 million annually because it's unable to include contract physicians in the wage index.
That could change, however. On May 27, HCFA published in the Federal Register its proposed changes to the wage index, including elimination of physician salaries from the index's formula (See story, p. 26).
However, that presents a quandary to the hospital council as it weighs legal action. "Does that mean we can go back and recoup the two years that we had to live under (the current formula)?" Mr. Gavras said.
Ironically, Mr. Gavras said that HCFA staff members had repeatedly told the council and its members that the wage index calculations were not unfair to Texas. However, in the regulation printed last month, HCFA said the physicians component of the wage rate "has been perceived as inequitable." It further states that to "promote payment equity" it recommends that all Part A physician costs be eliminated from the wage index formula.
Even if HCFA changes its calculations, Texas hospitals would not see the effects for some time. For example, 1994 hospital payments are based on wage index information collected from Medicare cost reports in 1990. That means that changes in the 1994 wage index won't affect hospitals until 1998 payments are received.