Medicare Payment Advisory Commission Chairman Glenn Hackbarth warned hospital financial officers gathered in Baltimore last week that adding a prescription drug benefit to Medicare would compound pressure to limit provider payments.
"There are only so many dollars in the federal treasury," said Hackbarth, a keynote speaker at the Healthcare Financial Management Association's Annual National Institute, which drew 3,000 attendees, including exhibitors.
With hospital financial departments now struggling with stock market losses, pension fund deficits and weakness in their billing and collections cycles, Hackbarth's message was a reminder of the potential devastation that a change in Medicare policy can render on hospital bottom lines.
As the largest recipient of Medicare dollars, hospitals "will be asked to put up more" if Congress decides to add a prescription drug benefit-a sacrifice Hackbarth said could come in the form of slower payment rate increases if not cuts in provider rates.
But Hackbarth, a former medical group executive, said his personal view is that Medicare needs a drug benefit.
Hackbarth reiterated MedPAC's view that hospitals have "adequate" or better profit margins on their Medicare business. MedPAC has recommended an overall payment increase of 3.1% for hospitals in 2004, with a bigger boost for rural facilities and a smaller increase for large urban hospitals.
Groups representing beneficiaries applauded MedPAC for recommending only modest increases in 2004 provider payments. "They want to preserve dollars for expansions of benefits, namely drugs," Hackbarth told Modern Healthcare after the speech. "Imagine we've gotten a drug program in place. In the future, beneficiaries are almost certainly going to be asking for expansions of the drug benefit, and there are only so many dollars available."
Hackbarth also touched on MedPAC's endorsement earlier this month of higher payments for providers with better quality, telling HFMA members, "We think Medicare needs to move as quickly as possible (toward) paying for quality." While acknowledging unresolved complexities, he said, "I think it's inevitable and arguably desirable that there be a redistributive effect-a substantial one-because that's how you send a signal that this is what we want."
Hackbarth called "thought-provoking" an analysis released this month by MedPAC that showed no correlation between quality of care and higher spending among states. "If anything, the trend seems to be the other way," he said, with higher spending correlating with lower quality.
The HFMA used the conference to showcase a second report from its 3-year-old Patient Friendly Billing project, with 14 recommendations for hospitals to improve customer service, including providing online billing and payment capabilities. Terry Rappuhn, the project leader, said the HFMA was launching a survey at the conference to measure how many hospitals and systems have adopted patient-friendly billing recommendations. She said it's estimated that 1,000 hospitals and systems are considering moving in that direction.
In other news, the HFMA said average total cash compensation for chief financial officers at hospitals and health systems is $151,000, up 18.9% from $127,000 in 2001.
The HFMA's own finances also were up. It reported revenue of $16.6 million in fiscal 2003, ended May 31, up 11.4% from the year before. Net income was $320,320 vs. $30,680 the previous year.
Attendance at the annual meeting tied that of last year's record-breaking event in Seattle. The HFMA's membership rose to 32,443 at the close of its fiscal year, up 2.4% from a year earlier.