Trying to persuade Congress to increase Medicare payments, the American Hospital Association last week released a study showing seven out of 10 hospitals will be losing money on Medicare by 2002.
But providers' campaign for payment hikes was rebutted by a new federal report.
The AHA study, prepared by the Lewin Group, said total hospital Medicare margins will fall to -4.4% in 2002 if hospital Medicare costs rise at 1 percentage point less than projected rates.
Those figures include all sources of Medicare revenues, including inpatient beds, outpatient departments, hospital-owned home health agencies, inpatient rehabilitation and psychiatric care.
Medicare inpatient margins will remain positive, however. They will drop to 7.5% in 2002 from 12.6% in 1998 if Medicare inpatient costs rise at 1 percentage point less than projected rates.
The report blamed payment policies enacted under the Balanced Budget Act of 1997, which will reduce Medicare hospital payments by $71 billion over five years, one-third more than projected when the law was enacted, according to the report.
"It's kind of like the unexpected earthquake, and it's about an 8 on the Richter scale," said AHA President Richard Davidson at a press conference last week.
The AHA used the study to argue in favor of a package of payment changes, some of which have been formally introduced as congressional bills, that would increase Medicare payments by $25 billion to $30 billion over the five years of the budget law.
Congressional aides cast doubt on whether the AHA would be successful in achieving all of its goals, however.
The hospitals' argument lost some credibility after a congressional advisory panel released its analysis of an earlier report that made many of the same claims as the AHA study.
The Medicare Payment Advisory Commission's analysis of a March report by the Federation of American Health Systems said hospitals are as much to blame for their declining financial fortunes as is the federal government.
MedPAC said the fat Medicare inpatient profits hospitals have enjoyed in recent years-reaching 16.1% in 1997-allowed them to grant big discounts to private payers. But with the enactment of the budget law, the Medicare cushion has been deflated.
"We believe that continuing pressure from the private sector has contributed substantially to the degree of financial distress hospitals are experiencing," said MedPAC Executive Director Murray Ross in a memo to Capitol Hill aides.
"(Medicare) is not a support-the-hospital-sector program," added MedPAC Chairwoman Gail Wilensky. "I don't think it's the role of the government to bail out an inappropriate decision with another payer."
That is much the issue Rep. Fortney "Pete" Stark (D-Calif.), senior Democrat on the House Ways and Means health subcommittee, has asked a congressional watchdog agency to address.
In a letter sent late last month, Stark requested a General Accounting Office study comparing what Medicare and managed-care plans pay hospitals.
"They may be hurting, but is it Medicare's fault?" said a Stark aide.