The overall profit margin of hospitals that switched to critical-access status increased to 2.2% from negative 1.2% between 1998 and 2003, according to preliminary findings by the Medicare Payment Advisory Commission. Potentially eligible hospitals that did not make the conversion dropped to an overall margin of negative 0.2% in 2003 from a profit of 2.2% in 1998. The analysis was part of MedPAC's preparations for a June report to Congress on critical-access hospitals. MedPAC officials said the debate should cover whether critical-access hospitals should continue to be paid 101% of costs or be moved to a fixed payment for providing emergency services and regular DRG rates for all other services. Critical-access hospitals benefited not only from higher Medicare payments but also by expanding better-paying services and reducing less profitable ones, according to the preliminary analysis. More hospitals became eligible for critical-access status with the Medicare Modernization Act of 2003, which raised the bed maximum to 25 from 15.
MedPAC also began discussing whether cost-effectiveness measures should help determine Medicare coverage and payments. Staff recommended the move but said it could deter medical innovation. In addition, the CMS might face legal issues in deciding not to cover a technology that had been deemed clinically effective but not cost-effective. -- by Tony Fong