HHS is telling the hospital industry directly and indirectly that it won't be easy to win relief from the Medicare cuts that went into effect last year.
HHS Secretary Donna Shalala delivered that message forcefully and publicly last week during a speech at the National Press Club in Washington-a signal from the Clinton administration that it has hardened its stance on the Medicare cuts.
Echoing an earlier statement made by the Medicare Payment Advisory Commission, Shalala accused hospitals of using their generous Medicare inpatient profits to offset the money-losing deals they arranged with HMOs to bring in business (May 24, p. 6).
"Providers gave steep discounts to the private sector, assuming we'd never get our act together-but we did," Shalala said. "When we did that, they had no place to go for additional resources."
Not surprisingly, hospital groups dispute that assertion.
"Certainly, hospitals face (financial) pressures above and beyond the Balanced Budget Act," said Carmela Coyle, senior vice president of policy at the American Hospital Association. "But to suggest that it's all driven by the managed-care market, that doesn't make sense. What about the small rural hospitals that don't have large managed-care plans in their markets?"
Another hospital executive, who spoke on condition of anonymity, also questioned Shalala's comments.
"Nobody gives discounts to HMOs," the executive said. "Those discounts are extracted. What happened for the larger hospitals is you had a convergence of declining Medicare payments and low payments from HMOs."
Shalala left open the possibility of some mitigation of the sweeping Medicare cuts but said hospitals would have to prove their financial woes have been caused by the Balanced Budget Act of 1997.
"We will have a debate over how far we went (with the cuts), and we do not want to go too far," Shalala said. "However, we will need strong evidence to make those changes."
HHS has also delivered its message more subtly over the past two months.
At a time when the hospital lobby is aggressively courting Congress, HHS' inspector general's office has released several reports identifying new areas for potential fraud (See chart).
A report released in March said the inspector general was considering a new nationwide probe of how hospitals bill Medicare for septicemia, or blood poisoning (April 19, p. 4).
In some cases, the report found a $2,200 difference between the code for septicemia and the code the government believed to be the proper one.
The inspector general's 1999 work plan says that pinpointing such upcoding will be an ongoing project.
In an April report, the inspector general asked HCFA to examine billings for metabolic disorders such as anorexia and abnormal weight gain (May 10, p. 6). The report estimated that Medicare overpaid the 60 hospitals studied about $6.7 million in 1996.
In May, the inspector general identified another area ripe for Medicare fraud-same-day readmissions to hospitals.
According to a report the inspector general released last week, 29 of 100 same-day readmissions to hospitals were "inappropriate" and resulted in overpayments to hospitals.
If such overpayments were extrapolated to all 1996 readmissions in the 18 states studied, they would total $22 million.
The report also raised quality-of- care issues, noting that premature discharges caused a significant number of the readmissions.
"The largest number of errors (about 40% of the inappropriate readmissions) were attributable to premature discharges," the report said. "This is a serious quality-of-care issue that needs to be closely monitored."
The patients involved were medically unstable on the day of discharge or the treatment they received was inappropriate for their conditions, resulting in the subsequent readmission.
In one case, Medicare refused to pay for a readmission, because the hospital failed to treat congestive heart failure adequately the first time around.
The release of the reports seems to be timed to remind Congress that Medicare still overpays many hospitals. In fact, the inspector general estimates that Medicare erroneously paid $12.6 billion to providers in fiscal 1998. That estimate includes payments for fraudulent billings, medically unnecessary services and coding errors.
A spokeswoman for the inspector general said the office releases reports regularly and they weren't planned to coincide with hospitals' lobbying efforts.
"We're always looking at (codes). It's in our work plan," she said. "The research was done way before the push (to change the budget law)."
The AHA said the reports haven't hurt its credibility with Congress.
"I think Congress is saying, 'Yes, there is a problem,' " Coyle said. "We've been taking a case-study approach to the issues, and we're getting a lot of traction with that."