AHA to MedPAC: Raise, Don't Cut Hospital Payments

Cheryl Clark, January 8, 2013

Flawed analysis and methodology, and the failure to understand that hospitalized patients require costlier care than in the past permeate the Medicare Payment Advisory Commission's December recommendations for reducing inpatient and outpatient payment rates for FY 2014, which starts this October.

Those are among the concerns expressed in the American Hospital Association's 7-page letter Jan. 4 to MedPAC chairman Glenn Hackbarth.

"The AHA believes a positive update (increase) for both hospital inpatient and outpatient payments in FY 2014 is absolutely essential," wrote Linda Fishman, senior vice president for public policy analysis and development.

Medicare payment margins fell sharply in 2011 from a negative 4.7% in 2010 to a negative 5.8% in 2011—a drop of 1.1 percentage points.

"This means that, across all service lines, Medicare paid only 94 cents on the dollar of cost to treat Medicare beneficiaries. For outpatient services, Medicare paid 89 cents on the dollar (a margin of negative 11%), and for inpatient services, Medicare paid only 96 cents on the dollar (a margin of negative 4%), she wrote. The projection for 2013 is a negative 6%.

"Medicare has not fully covered the costs of caring for Medicare beneficiaries since 2002. Payments that result in such negative margins over more than a decade cannot be considered adequate, particularly in the face of the low cost growth hospitals have sustained since 2009."

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