Under pressure from the American Hospital Association and several of its state affiliates, HCFA appears likely to reverse a change in a Medicare payment formula that would have reallocated millions of dollars in Medicare payments among hospitals.
The lobbying effort by the AHA on behalf of some of its members angered the segment of its membership that would have benefited from the formula change.
"(The AHA) shouldn't be picking one (group of hospitals) over another," said one state association executive who asked not to be identified.
The piece of the formula in question is the "hospital wage index." It's used to adjust Medicare payment rates for varying labor costs in different parts of the country.
In 1994 HCFA released a final regulation that said it would change the way the hospital wage index is calculated to account more fairly for certain physician costs.
To give hospitals time to adjust, the change was scheduled to take effect in fiscal 1999, which begins Oct. 1.
HCFA is expected to release the proposed regulations that lay out the changes to the Medicare prospective payment system for fiscal 1999 later this month, and included in that annual set of regulations was to be the wage-index change.
Specifically, the wage index would be changed so it would no longer reflect the costs of using certified registered nurse anesthetists or of medical residents and interns. The inclusion of those costs resulted in overpayment to some teaching hospitals.
But under pressure from the AHA and several states with a high concentration of teaching hospitals, HCFA apparently has decided to reverse its plans and keep the costs of certified registered nurse anesthetists and medical residents and interns in the wage-index calculation, knowledgeable sources said.
The effect of HCFA's reversal is the redistribution of hundreds of millions of dollars in Medicare reimbursements among the states. For example, New York hospitals would receive about $80 million more in fiscal 1999 than they would have if the changes were enacted as originally planned by HCFA.
California hospitals would receive nearly $50 million less than they would have otherwise, according to estimates by the Federation of American Health Systems.
The AHA's decision to lobby HCFA to reverse its 1994 stance has angered some rural state affiliates disadvantaged by the reversal. "Rural hospitals are really getting the screws put to them," said Darin Johnson, director of government affairs for the National Rural Health Association.
Linda Magno, the AHA's interim vice president for policy, defended the association's stand as the best way to equalize Medicare payments.