A draft recommendation to Congress released by the Medicare Payment Advisory Commission (MedPAC) Thursday has hospital officials concerned about payments for the year. The draft, which can still be revised before the full MedPAC panel votes on it in January, provides for a full "market basket" update for fiscal 2011 outpatient and inpatient hospital payments.
However, even then MedPAC staff project that overall Medicare margins will be -5.9% in fiscal 2010. The commission also reported that hospitals' Medicare margins dropped to -7.2% in 2008—down from -6% the previous year.
The data "reinforces our concerns about the Medicare buy in proposal that's currently part of the Senate health reform bill," said American Hospital Association President and CEO Rich Umbdenstock, in a statement. "For the majority of America's hospitals, Medicare payments cover less than the cost of care for hospital services to seniors, making it more difficult to make ends meet."
MedPAC staff members said, though, that hospitals that have the highest proportion of Medicare and Medicaid patients reported costs that are closer in line with what Medicare pays—suggesting they have found ways to work with Medicare rates. The hospitals with a larger share of private paying patients reported the biggest gap—suggesting that their costs are much higher and that they may not have attempted to cut costs as much as the other hospitals.
Home care and hospice care providers also were concerned about figures developed by the MedPAC staff. The MedPAC data "artificially inflates" the profit margins of the industry, said Val Halamandaris, president of the National Association for Home Care and Hospice in Washington, DC.
Halamandaris said the figures distorted the true financial picture of home health providers. "Home health is and has always been a 'cottage industry,' made up of small to medium sized providers," he said. "In fact, about 23% of free-standing providers lose money in providing Medicare services, and about 30% of them make less than 5% on their Medicare services."
He was critical in part of MedPAC disregarding facility based home health providers' margins in its calculations. In particular, he said roughly 20% of Medicare participating home health agencies are facility based; in some states, especially rural areas, hospital based home health agencies make up a majority of the providers. Those providers have higher costs, resulting in an average Medicare profit margin of -7.82 percent, Halamandaris said.