Hospitals that pay taxes may receive higher Medicare payment rates in 1996, a change that would be a boon to investor-owned and some not-for-profit facilities.
When HCFA publishes next year's prospective payment system rates later this month, the capital-related portion of the rates is expected to include a new adjustment for tax-paying hospitals.
HCFA officials declined to comment on the adjustment until after the update is printed in the Federal Register.
However, last fall HCFA asked hospitals for data on the amount of taxes they pay. At the time, HCFA said such an adjustment would apply to as many as 13% of not-for-profit hospitals in addition to about 1,000 for-profits.
"It's just a matter of fairness," said Thomas Scully, president and chief executive officer of the Federation of American Health Systems, a trade group that represents investor-owned hospitals.
Scully cautioned that the move shouldn't be interpreted as an investor-owned vs. not-for-profit issue, noting that he's tried to minimize the well-publicized squabbling between those two factions recently (See related story, p. 28).
But because changes in PPS must be budget neutral, any increase in payments to tax-paying hospitals will be at the expense of tax-exempt hospitals.
As Congress debates huge Medicare cuts, a small increase "is a small bone to throw into Medicare payments," he said.
In recent years, local governments have become more aggressive about seeking tax payments from not-for-profit hospitals.
For example, Philadelphia's 40 not-for-profit hospitals last year agreed to make payments to the city in lieu of taxes (Dec. 12, 1994, p. 22). Property tax disputes also have arisen in the District of Columbia, Iowa and New York.
When the capital prospective payment system began in October 1991, HCFA used the industry's capital costs, including taxes paid by hospitals, as a base to determine the initial prospective rate.
But the reimbursement for capital costs was spread among all hospitals. Although tax-paying hospitals reported higher costs with the taxes, the reimbursement rate doesn't reflect those costs.
In the current federal fiscal year, Medicare capital payments to hospitals are estimated to be about $6.3 billion.
An adjustment for tax-paying hospitals would be one of many that makes the capital PPS rate one of the most complex finance formulas around.
"Whatever they do is bound to be relatively complex," said Dale Baker, an Indianapolis-based consultant who specializes in Medicare payment.