KHI News Service

Medicare cuts could diminish hospital services

Kansas hospitals were expecting more money not less from the federal program, official says

By Phil Cauthon | April 22, 2011


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Services to Kansas Medicare patients could suffer if hospitals are forced to deal with a proposed 0.5 percent reduction in their Medicare reimbursements, hospital spokesmen said.

The federal Centers for Medicare and Medicaid Services earlier this week proposed reducing the agency's operating payments to acute care hospitals by 0.5 percent — or $498 million — starting Oct. 1, 2012.

Cindy Sameulson of the Kansas Hospital Association said the organization's members, which include the majority of Kansas hospitals, had expected a 2.8 percent inflation adjustment upward rather than a cut in payments.

"Instead hospitals are going to receive less money. With the baby boomers just now getting into the market, they're being asked to do more with less," Samuelson said.

"Hospitals want to be committed to helping all people including those in Medicare, but with these kinds of cuts you have to look at your service line and see what you can do," she said. "I know analysis is being done by members to see what this kind of an offset does and potentially they're going to have to look at cutting services."

The leaders of the American Hospital Association and the Federation of American Hospitals also criticized the proposal.

Industry officials said the reductions would hinder their ability to invest in information technology, patient safety and the formation of accountable care organizations, all of which have been pushed for by the Obama administration.

Brian Cook, a spokesperson for CMS, said the proposed rule wouldn't be finalized until after the formal comment period ends June 20.

"We welcome the input of the hospitals as we continue through the formal comment period," Cook said. But, "some of these updates that were included in this rule were mandated by Congress."

Congress in 2007 directed CMS to recoup money lost as the result of a new Medicare payment documentation and coding system that resulted in billions of dollars in overpayments. It gave the agency three years to do so, with fiscal 2012 being the final year.

As bad as the hospitals say the cuts would be, they could have been worse.

Based on the usual method for calculating payment rates, the CMS proposal could have called for Medicare cuts in inpatient hospital payments of about 1.6 percentage points or $1.5 billion, three times deeper than the agency proposed.

The proposed rule also establishes a framework for a new quality reporting system that would apply to hospitals paid under the Long Term Care Hospital Prospective Payment System.

"The proposed rule puts a greater emphasis on quality and safety and we're confident that as hospitals modernize their approach to quality that they'll be achieving greater savings while improving the quality of care to patients," Cook said.