As the good news about hospitals' finances continued to pile up in Washington last week, some lobbyists said privately that they would be happy with the scaled-back Medicare payment increases being considered by lawmakers for the next five years.
Last week began with the release of a long-awaited report from the Centers for Medicare and Medicaid Services showing that hospitals are faring well based on their stock and bond performances. It ended with a steady stream of leaked information from House Republicans about what Medicare provider payment changes would be included in their upcoming prescription-drug benefit bill.
Despite the hospital industry's ongoing campaign to convince policymakers that it will struggle in coming years under current reimbursement policy to handle new challenges such as labor shortages and bioterrorism preparedness, the new CMS report left Republicans thinking that hospitals are doing just fine.
"All indications are that hospitals are doing fairly well; some hospitals are doing quite well," said Rep. William Thomas (R-Calif.), chairman of the House Ways and Means Committee, which is drafting the bill that may hold providers' fate regarding future Medicare pay.
The CMS "market update" report on hospitals-the first of its kind released by the agency-is an effort by CMS Administrator Thomas Scully to share Wall Street financial information with the people setting Medicare policy in Washington. In the past six months the agency also has produced reports on the for-profit managed-care industry and nursing homes.
Scully said that in his former role as president of the Federation of American Hospitals, he would tell Congress "that our hospitals were doing terribly, we're all going broke," and then tell the investment community that "things were going great and you should buy our stock. It always amazed me that nobody ever connected the dots," said Scully, who has employed two investment analysts at the CMS to develop the reports.
But now that Scully is part of the Bush administration, people in Washington seem to be connecting the dots. The administration has said that any new money for Medicare should go to enhance benefits or expand access, not to pay providers more.
Republicans and Democrats had dueling news events last week to unveil their plans for adding a prescription-drug benefit to Medicare. Changes to Medicare provider payment policy are included in a draft of the yet-to-be-released House Republican prescription-drug bill obtained by Modern Healthcare.
For the next five years hospitals would receive an overall payment increase from Medicare that is 0.55% less than the government's projected full inflation factor, according to the draft bill. This would be an extension of the update formula in place for hospitals in 2003.
Several hospital lobbyists requesting anonymity said they would be pleased with such a deal. "I would take that in a heartbeat right now," said one lobbyist, while admitting that hospital groups will publicly fight the proposal "kicking and screaming."
The hospital Medicare update for the current year, too, is 0.55% less than the inflation factor. Over the past 25 years, the reduction has averaged even more, at 1.9% less than the inflation factor, according to Scully.
Although the lobbyists favor the 0.55% reduction in the inflation factor, they said they are concerned that the draft bill underestimates the future rate of medical inflation.
The American Hospital Association, however, is dead set against the proposed update formula as well as the rest of the bill. "We find this package to be totally unacceptable," said Richard Pollack, the AHA's executive vice president for advocacy and public policy.
Hospitals have been in the cross hairs of lawmakers since HHS Secretary Tommy Thompson and White House Management and Budget Director Mitchell Daniels Jr. sent Thomas a letter in March recommending that Congress take from Medicare hospital payments to give more money to physicians. The House Republican bill would give physicians a 2% Medicare pay increase in 2003 instead of the 5.7% reduction that they were to receive under the current formula.
Despite the excitement over the Republican payment proposals last week, and even though Thomas promised to get his bill through the House by the Memorial Day recess, Medicare provider payment changes are expected to be a moving target until October.
The draft version of the House Republican package includes good news for some providers besides doctors. Specifically, sole community hospitals would get a full inflation update for the next five years, and rural hospitals would be eligible for more payment for treating a disproportionate share of the uninsured.
Teaching hospitals would see a reduction in indirect medical education payments eased, saving them about $250 million in 2003.
"What we do is try to design a provider payment structure which takes into consideration the differences of hospitals both in terms of size and location," Thomas told Modern Healthcare last week.
The draft bill also calls for the elimination of a scheduled 15% reduction in Medicare payments for home healthcare providers, but would add a beneficiary copayment.
Skilled-nursing homes would get a three-year extension on a portion of one of two "add-on" payments scheduled to stop in October.
The voluntary drug benefit in the Republican draft bill would cost beneficiaries about $35 to $40 per month and have a $250 annual deductible. Coverage would include varying levels of beneficiary copayments up to a limit of $2,000 per year. Out-of-pocket expenses for beneficiaries would be capped at $5,000.
Two Senate Democrats, Zell Miller of Georgia and Bob Graham of Florida, announced they would soon introduce a bill with a $25 monthly premium, no deductible, and 50% copayments until a beneficiary reaches the annual spending maximum of $4,000.
Both Scully and a Senate Republican staff member said last week that a prescription-drug bill is unlikely to become law this year.
-With Susanna Duff