After months of closed-door meetings, the American Hospital Association has patched a split in its membership over who should benefit from a shift in more than $300 million in annual Medicare reimbursements.
In so doing, the AHA also has mended relations with members who felt the national group unfairly took sides on the issue.
The heads of all state and local hospital associations met in Chicago on Friday and ratified a deal that will slow the redistribution to soften the blow for the losers but ultimately give the winners their money.
The AHA will submit the compromise plan to HCFA, which would have to translate it into a formal regulation before any money can change hands.
A 1994 regulation started the trouble.
That year, HCFA published a final regulation that adjusted the wage index component of the formula the agency uses to set hospital Medicare payment rates.
HCFA made the adjustment to more accurately compensate some hospitals for certain physician costs. The adjustment was to have taken effect in fiscal 1999, which begins Oct. 1.
The adjustment would shift millions of dollars from hospitals in areas with a high density of teaching hospitals, like New York and Philadelphia, to hospitals in areas with a lower density of teaching hospitals. The sum would be about $305 million annually, said James Bentley, executive vice president for policy at the AHA.
But earlier this year, HCFA reversed itself. An intense lobbying effort by hospital groups from New York and Pennsylvania, joined by the AHA, led to HCFA's decision that the change not take effect. Hospitals that would have benefited from the change were angry at their brethren as well as at the AHA for taking sides.
To restore peace, the AHA convened a 16-member task force of hospital association executives. It drew up the compromise, approved Friday, that would phase in the change over a five-year period beginning fiscal 2000, or Oct. 1, 1999.
-With Deanna Bellandi