Hospitals earned a nearly 11% profit on virtually all of their Medicare business in 1997, including outpatient and post-acute services, rebuffing industry claims that the federal government is not adequately covering their costs, according to data released Friday by the Medicare Payment Advisory Commission.
The American Hospital Association said the MedPAC numbers don't provide a complete picture of hospitals' health because they do not account for all of the costs of treating Medicare beneficiaries.
For example, Medicare pays only a portion of the capital costs related to treating Medicare beneficiaries and reimburses hospitals for only a portion of the unpaid cost-sharing of Medicare beneficiaries, the AHA said.
The association contends that hospitals' total Medicare margin in 1997 was much smaller-3.4%.
MedPAC's first-ever release of a total Medicare hospital margin figure came in response to the AHA's objections to the congressional advisory panel's historical disclosure of hospitals' profit margin on inpatient Medicare services only, known as the PPS margin.
The AHA has said that the PPS margin fails to capture the full effect of Medicare payment policies on hospital bottom lines because Medicare also reimburses them for outpatient, skilled-nursing, home-health and specialized inpatient care. However, MedPAC's numbers show that hospitals turned a 10.9% profit on Medicare in 1997 even when those other services are included. The inpatient PPS margin that year was 16.8%.
In passing legislation this year rolling back Medicare payment policies enacted under the Balanced Budget Act of 1997, Congress reacted to provider groups that claimed Medicare wasn't paying them enough.
The MedPAC report comes a week after the AHA's data showed that hospital overall aggregate profit margin was 5.7% in 1998, the third-highest in a decade (Dec. 6, p. 2).