Rural, Urban Hospitals Expected To Receive Millions Of Dollars In Additional Funding Under Medicare Prospective Payments System For Inpatient Care, Ac

Friday, January 12, 2007, 23:55
Medicare, Primary Care
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ural and urban hospitals are expected to receive millions of dollars in additional funding in fiscal year 2006 under provisions of the 2003 Medicare law involving prospective payment system reimbursements for inpatient care, according to a Medicare Payment Advisory Committee report, CQ HealthBeat reports. Under the system, hospitals receive a flat payment per Medicare inpatient admission. The report, which analyzes provisions of the Medicare law, found that in FY 2006, payments to rural hospitals are expected to increase by 2.3%, or $377 million, and payments to urban hospitals are expected to increase by 0.7%, or $774 million. MedPAC also found that Medicare will spend about $571 million per year to bring the standardized amount paid to rural and small urban hospitals in line with the amount paid to large urban hospitals. According to the report, other expected Medicare spending increases resulting from the law include the following:

$314 million per year to lower the labor share from 69.7% to 62% for hospitals with a wage index of less than 1.0;
$233 million per year to increase disproportionate share payments for rural hospitals and urban hospitals that have fewer than 100 beds. Caps on disproportionate payments will increase from 5.25% to 12% for such hospitals under the law; and
About $50 million to extend the outpatient “hold harmless” provision for small rural and sole community hospitals for two years.

The report found that based on past experiences, the increases in hospital revenue could be followed by increases in hospital spending, but it is “too soon to determine the magnitude of any change.” The report also found that the “magnitude of any change in costs is likely to be small for most hospitals” (Carey, CQ HealthBeat, 1/8).

The report is available online. Note: You must have Adobe Acrobat Reader to view the document.

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