A day before Congress gave hospitals at least $11 billion in extra Medicare and Medicaid payments, a congressional advisory board said hospitals still enjoyed a 12% Medicare inpatient margin and a 5.9% overall Medicare profit margin last year.
The Medicare Payment Advisory Commission's annual release of hospital financial data has resuscitated claims that private payers are more to blame for hospitals' current struggles than Medicare payment-growth restraints enacted in the Balanced Budget Act of 1997.
"What happens with the private payers has so much more of an effect on what happens to hospitals than the cuts contained in the (balanced-budget law)," said Stuart Guterman, a former MedPAC analyst.
The hospital inpatient margin measures hospitals' profitability from providing inpatient care to Medicare beneficiaries. The overall Medicare margin measures hospitals' profitability from all lines of Medicare business, including inpatient, outpatient, skilled-nursing, home health, psychiatric and rehabilitation units.
Last year's results represent a slight drop from hospitals' prospective payment system margin and overall Medicare margin of 13.7% and 6%, respectively, in 1998.
Despite the dip, things are looking up this year, according to the Medicare Payment Advisory Commission.
Although the commission didn't release projections on its Medicare inpatient and overall Medicare profit numbers for 2000, a survey MedPAC, the American Hospital Association and HCFA conducted shows that for the first six months of 2000, hospitals' total profit margin, which includes revenue from all sources, was an estimated 5.1%. That compares with a total profit margin of 2.7% for all of 1999.
That improvement in hospitals' financial picture coincides with the first year of a law authorizing Medicare and Medicaid spending increases worth at least $7 billion to hospitals between 2000 and 2004.
A second round of relief is expected to take effect in 2001 (See story, p. 2).
That uptick in hospitals' total profit margin has led MedPAC analysts to conclude that 2000 represented a comeback year for hospitals.
"I believe hospitals are rebounding" without the new legislation, said MedPAC Chairwoman Gail Wilensky.
But Carmela Coyle, the American Hospital Association's senior vice president for policy, argued that the good news MedPAC presented in its aggregate data is masking bad news for some hospitals.
She cautioned against the use of the term "rebound" to describe hospitals. "I think that declaration is not only premature, but could be misleading," Coyle said.