Acute-care hospitals have successfully lobbied HCFA to reverse its proposed payment change on patient transfers, a change that could have cost them millions of dollars.
Under the proposed fiscal 1995 update for Medicare's prospective payment system issued last May, HCFA said it planned to alter payment policy to reflect the growing number of patients sent to long-term-care facilities, psychiatric hospitals, veterans hospitals and other facilities. Under the current system, an acute-care hospital is paid the full rate for the diagnosis-related group even if the patient spends only a short time at the acute-care facility.
The government proposed to end full DRG payments for transferred patients and, instead, pay the transferring facility double a per-diem rate for the first day because most resources are used in that period.
According to HCFA, that per-diem payment change would have resulted in an additional $150 million a year in Medicare revenue to acute-care hospitals. When coupled with the change in transfer policy, which would result in lower payments, the net effect on Medicare outlays was negligible.
HCFA estimates that total Medicare hospital payments will increase 7.6% in fiscal 1995 to $87.8 billion.
Acute-care hospitals complained about the proposed change, arguing that it penalized them for what amounted to a few inappropriate transfers. They also questioned whether HCFA was creating an incentive to send patients to skilled-nursing facilities.
In the final version of the 1995 PPS regulation, which takes effect Oct. 1, HCFA has withdrawn the transfer proposal, bowing, at least temporarily, to criticism from hospital groups. HCFA said it would reconsider the issue for next year.
Another issue HCFA expects to revisit next year is the exclusion of property-tax payments and payments made by hospitals in lieu of taxes from the standard federal capital payment rate. Currently, a standardized amount, designed to cover the cost of property tax payments, is included in the standard capital rate paid to all hospitals, even though HCFA estimates that only one out of six hospitals actually pays property taxes.
In the final regulation, HCFA said it would begin gathering data on tax payments and would start paying separately for property taxes in fiscal 1996.
For hospitals that do not pay property taxes, HCFA estimates the change will lower capital payments by less than 2%. Hospitals that now pay taxes will see about a 10% increase in their capital payments, meaning for-profit facilities stand to make large gains.