Federal officials are scrambling to make sense of a discovery by Medicare trustees that hospital Medicare reimbursements increased at a faster-than-expected rate last year.
The finding was part of a status report released earlier this month that showed the Medicare Hospital Insurance Trust Fund, which pays Medicare Part A reimbursements to providers, will be insolvent by 2001-a year earlier than projected last year.
"That really surprised us," said HCFA Administrator Bruce Vladeck. "After 12 years of (the Medicare prospective payment system), we thought we had it all figured out," he said.
According to the trustees' report, Medicare paid hospitals $81.2 billion in 1995, about 70% of total trust fund expenditures. While the trustees' report does not give comparable figures for 1994, the Congressional Budget Office estimated Medicare paid hospitals slightly more than $75 billion in 1994.
The trustees said benefit payments from the trust fund were about 3% higher than estimated last year and almost all the unexpected increase went to hospitals.
Vladeck, who is also secretary of the Medicare Board of Trustees, said early HCFA analysis showed much of the increase in hospital payments occurred because hospitals billed Medicare more quickly than in the past. That meant some reimbursements expected to occur in 1996 were made in 1995. Another reason for the spending increase was an unexpected rise in the severity of cases being handled by hospitals.
HCFA data show that the time between when hospitals performed a service and their billing Medicare "shrunk dramatically" in 1995 to an average of 35 days from 30 days.
"Hospitals are definitely trying to improve cash flow," said Richard Wade, senior vice president of communications for the American Hospital Association. "Hospitals are being squeezed by managed-care plans, and (billing Medicare) faster is a way to improve cash flow."
The rule that required physicians to attest that all Medicare procedures billed had been performed, an extra step that slowed the billing process, was eliminated last year. This was another factor in the decrease in the length of the hospital billing cycle, Vladeck added.