Three measures of significance to hospitals still were in play last week on Capitol Hill, and the early returns show mixed results.
A provision that would reduce hospital Medicare inpatient payments when a beneficiary is transferred to a post-acute setting first was killed by negotiators and then revived.
Hospitals say the measure will create a perverse incentive to keep Medicare patients in the hospital longer. Lawmakers say they are trying to craft a compromise that will slow post-acute spending while not giving hospitals an incentive to game the Medicare system.
Under the original provision, hospitals that transferred a patient to any post-acute setting before the average length of stay for that diagnosis would receive a reduced inpatient payment rate.
For example, if a patient was transferred on the fifth day, and the average stay for that illness was 10 days, the hospital would receive half the payment. But Medicare would pay a double amount for the first day, under the assumption that the most acuity occurs in the first day, resulting in a payment in this example of 60% of the usual amount.
Supporters of the measure, which include congressional Republicans and the Clinton administration, say hospitals have been "double-dipping" by collecting a full DRG payment for the inpatient stay, then transferring the patient early to a cost-based reimbursement facility.
According to the Congressional Budget Office, reducing inpatient payments when a patient is transferred early would save from $2 billion to $4 billion over five years, depending on how the provision is crafted.
But hospital groups say the effect actually would be much greater.
Opposition from hospital groups led lawmakers to first kill the transfer measure. But when Republicans began talks with the White House, both sides agreed to revive the measure in a limited form.
Last week, both sides sought a compromise formula that would reduce post-acute spending but not give hospitals an incentive to keep patients in the hospital longer to maximize Medicare payments.
There was better news for hospitals in the area of Medicare bad-debt payments.
Medicare currently reimburses hospitals for the costs incurred when beneficiaries do not pay their copayments and deductibles. But lawmakers, saying hospitals aren't making enough effort to collect the debts, sought to reduce the reimbursement to 50%, saving about $600 million over the five-year budget period.
Hospitals, led by the Federation of American Health Systems, argued that a reduction to 75% of cost would give them the incentive to collect debts but not unfairly penalize institutions that care for the poor.
Last week lawmakers relented and agreed to reduce payments by only 25% instead of 50%.
Meanwhile, a provision that would have shifted as much as $1 billion to a group of large, urban hospitals at the expense of other institutions appears to be dead.
Under a 1994 HCFA regulation, a handful of large, urban hospitals that serve a high proportion of the indigent have been eligible for extra Medicare capital payments.
But a small item added to the budget would have expanded the eligibility for the payments to nearly all large, urban hospitals and also increased the amount they could receive in added reimbursements.
Those hospitals that would not have benefited from the measure argued that it was an unwarranted giveaway. They convinced lawmakers to eliminate it from the budget.