The medicare millstone - medicare reimbursement for hospitals - Brief Article

HOSPITALS SUFFERED A NASTY BLOW last month, when the federal government reported that a glitch in a new software system would delay the processing of billions of dollars of 2002 Medicare payments for three months, at least until April.

Even before that shock, though, the Medicare system had frustrated hospital CFOs-- who receive, on average, 39 percent of their revenues from Medicare patients. Launched in 1965, Medicare first reimbursed on a cost basis. Good for providers; not so good for taxpayers. Since 1970, fees have been fixed for health-care services--leading to different billing codes for everything from Q-tips to open-heart surgery. "The system is incredibly complicated," says CFO Rick Langfelder of New York Health and Hospitals Corp.

And underfunded. The system was headed for insolvency until 1997, when Congress passed the Balanced Budget Act and cut expected payments to hospitals by nearly 12 percent through 2004. The American Hospital Association now expects the cuts will create an average 4 percent operating deficit on Medicare patients by 2004.

Already 60 percent of hospitals lost money on Medicare in 2000, according to the association. "We get paid about 70 cents on the dollar treating Medicare patients," says Tom Lenkowski, CFO of Southwestern Vermont Health Care Center, in Bennington. Small-market providers say they are shortchanged by reimbursement formulas factoring in regional wage costs.

COPYRIGHT 2002 CFO Publishing Corp.
COPYRIGHT 2002 Gale Group