Hoping to curb lawmakers' appetite for a freeze on Medicare hospital payment rates, American Hospital Association executives tried unsuccessfully last week to discredit the validity and importance of government data that show hospitals are enjoying near-record profits on Medicare inpatient care.
At a press conference in Washington, AHA President Richard Davidson said the association was meeting with congressional leaders in an effort to "wave a yellow flag" that the push for a freeze on payment rates relies too heavily on a single financial indicator: the prospective payment system profit margin as calculated by the Prospective Payment Assessment Commission.
Thomas Prince, a professor at Northwestern's Kellogg Graduate School of Management serving as a consultant for the AHA, has been criticizing the accuracy of ProPAC's data because they were based on Medicare cost reports rather than audited financial statements from hospitals.
Last month, ProPAC said hospitals' average PPS margin was 11.3% in fiscal 1996 and will be 12.7% in fiscal 1997 (April 21, p. 6).
ProPAC's data are based on Medicare cost reports submitted to HCFA by hospitals, most of which are AHA members.
Flanking Davidson at the press conference were Prince and Terence Mieling, vice president and national healthcare director at John Nuveen & Co., a Chicago-based investment banking firm.
Collectively, they tried to convince lawmakers a freeze on Medicare inpatient payment rates would have a more deleterious effect than ProPAC's data suggest. They argued that a payment freeze could make it harder for hospitals to borrow money and prepare for future marketplace changes.
But Congress listened more to ProPAC than the AHA, as evidenced by last week's federal budget accord.
ProPAC's freeze recommendation-which would save more than $700 million in budgeted Medicare spending in fiscal 1998-was incorporated into the budget deal.
Last week, Sen. Phil Gramm (R-Texas), chairman of the Senate Finance health subcommittee, and Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, said they believe hospitals are capable of surviving a freeze.
Dismissing the AHA's efforts to convince Congress a freeze would be more devastating than ProPAC contends, Thomas said, "I think they did that last year, and the year before that, and the year before that."
Donald Young, M.D., ProPAC's executive director, said he believes the AHA's reaction is member-driven.
"I think they're under a lot of pressure from members . . . and they're taking it on as a cause to show that they have lobbying power," he said.
Young said the AHA never questioned the accuracy of ProPAC's PPS margin figures when they showed hospitals losing money on Medicare inpatient care and helped the association in its lobbying efforts.