In a possible blow to the hospital industry's latest campaign for additional Medicare payment increases, the Medicare Payment Advisory Commission said hospitals' overall profit margin improved substantially last year-to 4.7% from 2.7% in 1999.
MedPAC's data reflect all private and public revenue sources, including Medicare and Medicaid.
In the memo to congressional aides, MedPAC said expenses per case dropped at a greater rate, by 3.3%, in 2000 than revenue per case, which dipped 1.6%, resulting in greater profitability. The data come from a HCFA and MedPAC survey of 500 hospitals.
Modern Healthcare disclosed the details of the memo in its May 8 Daily Dose electronic newsletter.
MedPAC didn't make specific recommendations regarding Medicare payment increases in the memo, and it noted that the cost per case for Medicare patients isn't likely to have dropped as much as for all patients. Medicare-specific data won't be available until December, when HCFA and MedPAC examine preliminary cost reports for 2000.
The data available so far "at least provide no evidence that things are getting worse," MedPAC analyst Jack Ashby told Modern Healthcare. Though the memo does hurt their case, hospital lobbyists said they're not permanently damaged.
"MedPAC will always be a factor in Congress decisionmaking on (hospital payment), but they're not the only factor," said Thomas Nickels, senior vice president of federal relations at the American Hospital Association.
Nickels added that the memo omitted other information that helps the hospital industry's case, such as data showing that 36.7% of hospitals lost money in 1999. The 4.7% total profit margin is healthy-but not as healthy as the 5.1% margin MedPAC had forecast in a March report to Congress. The April 30 memo responded to requests for a follow-up to the preliminary data.
It comes as hospitals gear up for another campaign for Medicare payment increases. The AHA is seeking a $16.2 billion five-year package of pay hikes as part of Congress' fiscal 2002 budget (See story, p. 9).
Meanwhile, Sens. Kay Bailey Hutchison (R-Texas) and Hillary Rodham Clinton (D-N.Y.) have introduced legislation that would set Medicare inpatient updates at the inflation rate for 2002 and 2003 and eliminate scheduled reductions in Medicare payments for graduate medical education. That legislation may increase Medicare inpatient payments by $7.3 billion over the next five years.
Congress in the past two years has passed nearly $50 billion worth of payment increases for Medicare, Medicaid and the State Children's Health Insurance Programs between 2000 and 2005.