Medicare HCFA last week said it plans to raise Medicare prospective payments by 2% next year, but new regulatory reforms could delay that adjustment by a month and cause hospitals to lose out on more than $100 million.
The new base payment rates for Medicare are scheduled to rise about 2% on Oct. 1, the beginning of fiscal 1997, according to rules released by HCFA last week.
The adjustment, or "update," is based on the expected rate of inflation in the hospital sector, estimated by HCFA to be 2.5% next year, less a 0.5 percentage-point reduction mandated by Congress in the 1993 budget law. Absent any further congressional action, the yearly hospital decreases enacted in 1993 will expire next year, allowing hospitals an update equal to the rate of hospital inflation in 1998.
PPS-exempt hospitals will receive a 1.5% increase in fiscal 1997, HCFA said.
However, a bill enacted last year requires a 60-day review period for all major federal regulations. As a result, the new payment rates will not take effect until Oct. 29. That delay is partly because the White House budget office didn't declare the PPS regulation a "major" rule until after HCFA's normal rulemaking procedure was under way, making it impossible to have a 60-day review period before Oct. 1.
There is one possible out, however. Congress, which will be in session in September, can waive the review period. It's unclear whether it will do so.
Capital payments to hospitals will decrease nearly 5% under the rule, from $462 per discharge to $439 per discharge, reflecting a big victory for hospital groups. They had fought an earlier HCFA threat to reduce Medicare capital payments by as much as 16%.
Because of the expiration in 1995 of a provision that reduced capital payments by 10 percentage points, capital reimbursements jumped more than 20% last year. Both the White House and Republican balanced-budget plans called for the reinstatement of the capital reductions. HCFA had threatened to slash the payments unilaterally if no budget agreement was reached.
Another change HCFA made this year is the elimination of regional differences in PPS payments. The net effect is to lower payments to hospitals in the Northeast and the upper Midwest by less than $30 per discharge.