The Medicare payment changes mandated by last year's balanced-budget law will force psychiatric hospitals to lay off workers and trim services, according to a report commissioned by a trade group that represents psychiatric hospitals.
The National Association of Psychiatric Health Systems wouldn't disclose how much it paid for the report, which was prepared by Health Economics Research of Waltham, Mass.
The consulting firm based its research on 1995 Medicare cost report data from 557 psychiatric hospitals and 1,288 inpatient psychiatric units at general acute-care hospitals.
The balanced-budget law reduces Medicare payments to psychiatric hospitals and units by $224 million this fiscal year, which began Oct. 1.
The reduction in spending will result in a 5.5% decrease in the average Medicare payment per psychiatric discharge this year, according to the NAPHS report, which was released last week.
With the payment reduction factored in, the average operating profit margin of psychiatric hospitals and units would drop to -8.7% this year from -3% in 1995, the report said.
"This is a real blow," said Mark Covall, executive director of the Washington-based association. "There are 6% of the facilities having cuts per discharge of greater than 20%. Over 10% of the facilities have cuts (per discharge) of more than 10%."
The Medicare payment reductions affect 84% of psychiatric hospitals and psychiatric units, the study said.
The NAPHS is lobbying Congress to implement a potential three-year transition period to implement the $224 million in Medicare payment reductions and will use the report's results in its effort.