An old policy battle in Washington has quietly resurfaced, with the potential to shift hundreds of millions in Medicare capital reimbursements.
Northwestern Memorial Hospital in Chicago has renewed its push for more Medicare money to offset the cost of one of the largest healthcare capital projects ever-a $580 million, 492-bed replacement hospital overlooking Lake Michigan. At least three other hospitals have joined in seeking additional funding for their projects.
That lobbying effort is drawing opposition from some formidable provider groups, including the Catholic Health Association and the Federation of American Health Systems.
The four hospitals want to change the requirements so that they will qualify for a "special exception" to receive more money from a $10 billion pool of Medicare funds paid to hospitals for capital expenditures.
HCFA officials said they couldn't identify the other hospitals because they couldn't locate the documents last week.
Under a 1992 law that changed the way hospitals are reimbursed for capital costs, Medicare pays hospitals at least 70% of its share of those costs. The payments are added to DRG payments.
However, the law required capital payments to eventually be set prospectively rather than to be based on hospital costs. That transition is supposed to occur over a 10-year period ending in fiscal 2002.
Two years ago, a group of two dozen hospitals, including Northwestern, tried to get special exceptions for themselves through a provision in the Balanced Budget Act of 1997. However, the provision was stripped from the bill before Congress passed the measure (See chronology).
If such changes were made, Northwestern would qualify for a special exception and could receive up to $250 million in extra Medicare reimbursements over a five-year period, a source familiar with the 1997 lobbying battle told MODERN HEALTHCARE.
Republican healthcare lobbyist Deborah Steelman, whom Northwestern retained in 1997, is still working for the hospital on this issue, a source confirmed.
While the identity of the other three hospitals pushing the changes wasn't known, New York-based Mount Sinai Medical Center is not one of them, said Bruce Vladeck, a former HCFA administrator who is now a professor of health policy at Mount Sinai School of Medicine in New York.
Mount Sinai was one of the 25 hospitals that pushed for the changes in 1997. In 1998, Mount Sinai merged with New York Hospital, another facility that had lobbied for the changes two years ago.
The hospitals revived the debate in this year's proposed rule on Medicare inpatient payment rates, published May 7 in the Federal Register (June 28, p. 8).
In that rule, HCFA solicited comments on the changes those hospitals want, without offering a specific proposal or recommendation. The public comment period on the rule ended July 6.
Northwestern was one of the hospitals that filed comments on the special exceptions suggestions.
"What we're saying is that reimbursement for capital projects under Medicare affects lots of hospitals, and lots of hospitals are seeking clarification from HCFA," said hospital spokesman Stuart Greenblatt. "For a long time, we have seen room for improvement. We want to see that hospitals built during the transition period are treated (the same as) those built before that time."
Northwestern is especially interested in receiving more Medicare dollars because it is planning to build a new hospital for women on its Chicago campus, with a price tag of $100 million to $150 million. The specialty hospital is expected to be completed in 2004.
But the hospital is hardly hurting for cash. In the fiscal year ended Aug. 31, 1997, it boasted investment income of $56 million and operating income of $51 million on net patient revenues of $415 million.
The hospital's net assets that year rose $178 million to $946 million, according to a profile of Medicare cost reports completed by the Center for Health Industry Performance Studies. Northwestern discharged 26,578 patients that year and had 829 days' cash on hand. Its total margin was 21.6%.
The CHA, which in the past has fought the for-profit FAHS on numerous issues, is siding with the federation this time.
The CHA told HCFA that it "strongly opposes" any changes in the special exceptions process and urged the agency "to reject with finality" such lobbying efforts. The CHA represents 1,200 Catholic-sponsored facilities and organizations.
The Rev. Michael Place, the CHA's president and chief executive officer, said the group opposes such changes because the four hospitals would gain Medicare funds at the expense of many other hospitals.
"Reducing the capital rate paid to all hospitals so that a few might benefit is wholly unacceptable and patently inequitable," Place said in a written statement.
The federation said that 10 years is long enough for a transition period.
"Everybody knew we were doing this 10-year phase-in," said Thomas Scully, federation president. "But there were some hospitals that went out in the 1990s and still spent millions on capital projects. And now they want Medicare to pay for it."
The Medicare Payment Advisory Commission is also wary of changes.
"Most of the suggested policy options described in the notice would unnecessarily expand payments beyond clearly disadvantaged hospitals whose financial health is important for maintaining access to care for Medicare beneficiaries," the commission wrote in its comments on the May 7 proposed rule.
In addition, MedPAC noted, only four hospitals cared enough about the changes to provide HCFA with data about their capital projects.
"In the absence of information from a wider array of hospitals, it would be nearly impossible to make reasonable judgments about which policy changes might help to maintain access to care," MedPAC wrote.
The American Hospital Association is not addressing the special exceptions issue in its comments on the inpatient rule, said Carmela Coyle, AHA senior vice president for policy and deputy director of government and public affairs.
Incidentally, Gary Mecklenburg, Northwestern's president and CEO, is a member of the AHA board.
"Our (lobbying) plates are pretty full with the balanced-budget cuts," Coyle said. "This is not something our members have been talking about."