Hospital executives had something to smile about last week as top Clinton officials disclosed they may lessen the financial hit from the upcoming prospective payment system for Medicare outpatient services.
HCFA is considering a delay in implementing utilization limits in its proposal for the outpatient PPS, said Deputy HCFA Administrator Michael Hash.
That move and others may come as Congress prepares to draft legislation that would roll back Medicare payment policies imposed by the federal Balanced Budget Act of 1997.
By using regulatory action to cushion the law's blow, the administration may make Congress' budget-relief job easier. In turn, the administration may ask for other healthcare policy concessions, such as passage of a Medicare prescription drug benefit.
The budget law mandated creation of an outpatient PPS, which would pay hospitals on a set fee schedule rather than on a reasonable cost basis. Although scheduled to take effect Jan. 1, 1999, it was put off until 2000 so that HCFA could try to root out year-2000 computer problems.
The move HCFA is considering wouldn't postpone the date the PPS takes effect but would delay a component of the system aimed at keeping hospitals from compensating for reduced payments by increasing utilization.
Under the proposed outpatient PPS, those utilization limits would set an annual target for outpatient department expenditures. If that spending exceeded the target, HCFA would reduce the fee updates the following year.
The department also is considering limiting the losses that academic medical centers, cancer hospitals and low-volume rural and urban hospitals would suffer under the outpatient PPS, Hash separately told the House Commerce healthcare subcommittee and the Medicare Payment Advisory Commission.
But in making that adjustment, HCFA could be picking new winners and losers. Hash told the subcommittee that the adjustments would be "budget neutral." To avoid an overall increase, the government would have to offset hikes for some hospitals with reductions for others.
That raised concerns from at least one industry leader.
"That means it's coming out of somebody else," said Thomas Scully, president and chief executive officer of the Federation of American Health Systems. "That concerns me."
Hash said he could not by law commit to the adjustments for academic, cancer and low-volume hospitals, but he signaled strongly in his MedPAC testimony that HCFA would make those adjustments.
In an analysis that accompanied the proposed formula for outpatient payments released last September, HCFA projected big losses for those specific hospital types. Rural hospitals with fewer than 5,000 outpatient visits per year were projected to lose 17% of their outpatient revenues and 3.1% of their overall Medicare revenues.
Urban teaching hospitals that don't receive disproportionate-share payments would lose 18.6% of their outpatient revenues and 3.7% of their total Medicare revenues.