HCFA appears to be backing off its plan to limit hospitals' ability to receive Medicare reimbursement for borrowing expenses.
In a letter to Medicare fiscal intermediaries, HCFA said the new measure, which had been scheduled to take effect March 1, shouldn't be implemented until HCFA works out a compromise with hospital groups.
Under current law, hospitals can be compensated for interest on loans for acute-care services. However, hospitals must deduct any nonacute-care revenues, called "nonpatient income" in federal terminology.
HCFA proposed to change the way hospital interest expenses can be accounted for in several ways. For example, it would redefine income from freestanding ambulatory surgical centers or other nonhospital units as "nonpatient income." That would result in lower reimbursements to hospitals.
Those changes were scheduled to take effect last March. But after a coalition of nearly a dozen hospital groups sent a letter to HCFA opposing the change, the implementation was delayed.
HCFA contended the changes were merely codifying existing rules. Hospitals argued the changes represented a major expansion of HCFA's authority that should be implemented only after passing through the federal government's lengthy rulemaking procedures.
HCFA and hospital groups were also at odds over the cost of the changes. HCFA contented that because it was only clarifying existing rules, the cost to hospitals would be minimal. Hospitals, however, said the change would cost them millions.
Even after hearing the hospital groups' case, HCFA said as late as April that it still intended to implement the changes. But now HCFA appears to be reconsidering.
"This is probably going to lead to additional clarifications as we come to agreement on the issues with (hospital groups)," said Charles Booth, HCFA's director of the office of hospital payment policy.
Booth said it was unlikely any changes would take effect before Jan. 1, 1997.
The agency is scheduled to meet again with hospital representatives in early October.