As the House and Senate try to negotiate a Medicare reform bill that includes provider relief, a report issued by the Centers for Medicare and Medicaid Services that shows investor-owned hospitals have increased their margins in recent years may influence the legislative process.
Most of the Medicare debate has centered on adding prescription drug benefits to the Medicare program, but the hospital industry also is lobbying to add provisions to increase its Medicare funding in whatever bill may come out of the conference committee.
While the degree of the report's influence remains to be seen, observers said it won't help hospitals in their efforts to win higher Medicare reimbursements.
Indeed, one lobbyist who asked not to be identified said the report, in fact, might hurt hospitals' efforts. "They're doing fine," the lobbyist said, referring to hospitals. "There's no other way to read the report."
Don May, vice president of policy at the American Hospital Association, disagreed with the assessment that hospitals are doing well and downplayed the influence of the report, saying, "I don't think this report in and of itself will lead to any action. (But) it does provide some good information."
According to the report, profit margins for the for-profit sector climbed to 5.7% in 2002 from 5.1% in 2001 (See chart). Meanwhile, the ratio of downgrades to upgrades in credit ratings issued by credit agencies for not-for-profits improved last year. In 2002, there were 41 downgrades and 22 upgrades, compared with 55 downgrades and 22 upgrades the previous year.
But downgrades are inching up this year, signaling the industry once again may be headed for leaner times (July 14, p. 14). Meanwhile, Wall Street remains wary of the financial effect of increased federal regulation of hospitals, including greater oversight of hospital mergers by the Federal Trade Commission and action by the government against hospitals that have abused the outlier payment system.
The report was the second by the CMS, following a similar one released in April 2002 (May 6, 2002, p. 8). It is intended for use by the agency to evaluate the needs of the industry at a time when providers say they are experiencing funding and expense problems, CMS Administrator Tom Scully said in the report.
"I have always been surprised at how little Wall Street and Washington interact, and how companies often paint different financial pictures for each audience," Scully said. "Our goal is to provide objective summary information that can be quickly used by the CMS, HHS, Congress and their staffs that oversee these programs."
A CMS spokesman said the report was not synchronized to congressional negotiations on Medicare reform. Yet provider payments were an issue that Washington politicians and stakeholders in the Medicare debate had on their minds last week.
In a letter to his colleagues, Rep. Christopher Shays (R-Conn.) asked for help in persuading members of the conference committee to increase payments for teaching hospitals. Meanwhile, the AARP sent letters to House Speaker Dennis Hastert (R-Ill.) and Senate Majority Leader Bill Frist (R-Tenn.) to put patients ahead of providers.
"Providers should be paid fairly for treating Medicare patients, but beneficiaries have waited long enough for relief from high prescription drug costs," the letter said.
A spokesman for Rep. Bill Thomas (R-Calif.), chairman of the Medicare conference committee, said, "Conferees are planning to take into account any and all information that will help them reach an agreement." He said he didn't know if the conferees had looked at the CMS report.