The start of the government's 1999 fiscal year Oct. 1 brought good and bad news to the nation's hospitals-most of it courtesy of the federal Balanced Budget Act of 1997.
The date marked the end of the one-year freeze on Medicare hospital inpatient payment rates, which was mandated by the budget law.
Hospital groups' opposition to the freeze was a top lobbying priority, in part because they worried that Congress would extend the freeze beyond one year. They lost the battle but won the war, as Congress did limit the freeze to one year.
For fiscal 1999, hospitals will receive a 0.5% increase in payment rates, which will boost total hospital Medicare payments by about $300 million.
"It may not be much, but it is a hell of a lot better than nothing," said one hospital lobbyist who asked not to be identified.
Hospital lobbyists are still concerned that Congress may again reduce hospital payments if lawmakers seek money for other Medicare changes. Much of that concern is fueled by the Medicare Payment Advisory Commission's estimate that hospital Medicare margins in 1998 reached an all-time high of nearly 16%.
Oct. 1 didn't bring all good news. It marked the start of the new Medicare payment policy on hospital transfers.
To try to end what Congress considered "double dipping" by hospitals, last year's balanced-budget law reduced the Medicare inpatient payments to hospitals when patients are transferred to post-acute-care facilities. The change targets only 10 DRGs, but that list can be expanded at the discretion of HHS Secretary Donna Shalala. The change is estimated to reduce hospital Medicare payments by $100 million this fiscal year.
Hospitals had opposed the change, which they said gave them an incentive to keep patients in the hospital longer. They say they will seek a repeal of the provision next year.
Other provisions that took effect Oct. 1 include:
The extension of a 10% reduction in Medicare hospital payments for outpatient capital costs.
A decrease to 6.5% from 7% in Medicare payments for indirect graduate medical education.
Several provisions were scheduled to take effect Oct. 1 but have been delayed. They include:
An HHS rule requiring distribution of donated organs based on medical need instead of location. The rule was suspended by a federal district judge in Louisiana. The temporary stay will last at least until an Oct. 14 hearing, during which the court will consider whether to permanently suspend the rule.
The hospital outpatient prospective payment system. HCFA delayed implementation of the new PPS until after 2000 while it devotes resources to fixing the year-2000 computer problem.
-With Jonathan Gardner