Proprietary hospitals in 1994 shifted 15 cents more for every dollar of cost to private payers than not-for-profits did, even though the proprietary hospitals suffered smaller losses on Medicare, Medicaid and uncompensated care, new data show.
That disclosure will be included in the June report to Congress of the Prospective Payment Assessment Commission, which advises Congress in Medicare Part A payment issues.
According to the study, proprietary hospitals received $1.43 in payments for every $1 of cost from private payers, compared with nearly $1.28 for voluntary hospitals. Urban government hospitals, a category that includes primarily large, inner-city public institutions, received $1.35 for every $1 of cost (See chart). The numbers are based on 1994 payments.
The additional cost shifting by proprietary hospitals came despite the fact they suffered smaller losses on Medicare, Medicaid and uncompensated care.
As a percentage of total costs, proprietary hospitals suffered a loss of 0.7% on Medicare, 0.6% on Medicaid and 4% on uncompensated care. By comparison, voluntary hospitals' losses were 2.9% on Medicare, 1.7% on Medicaid and 4.5% on uncompensated care, according to ProPAC data.
The proprietary hospitals' higher cost-to-payment ratios are primarily due to lower costs, according to ProPAC. Last year, ProPAC released data showing that for the first time hospital costs per discharge in 1994 actually declined by 0.5%. The best performance was by proprietary hospitals, which decreased costs by an average of 2.3%.
The combination of smaller losses on federal programs and higher rates of cost shifting to private payers had a positive effect on the margins of proprietary hospitals. According to ProPAC data, proprietary hospitals had an average margin of 8.7% in 1994, compared with 4.6% for voluntary hospitals and 3.2% for large, urban government institutions.