Proposed 2011 Medicare Rates For Hospitals Aren't Rosey

It should come as a surprise to no one that Medicare is reducing its rates for hospital services in 2011 for acute and long-term hospital stays under the Prospective Payment System. This action is independent of and does not include any payment changes as part of the new healthcare reform bill. So there will certainly be more payment reductions ahead.

Actually the new rates proposed for Fiscal Year 2011 (which starts October 1, 2010) are a matter of give and take. For acute care hospitals, a 2.4% inflation increase will be added. But then a -2.9% adjustment will be applied. This negative adjustment was mandated after Medicare experienced unexpected payment increases to hospitals in 2008 from changes in coding practices. Now they are trying to get their money back. It seems that the intensity of services provided Medicare patient in 2008 rose dramatically, at least according to the final diagnoses that were coded. Medicare claims that hospitals were gaming the system. Hospitals claim that they just got smarter to get paid what they deserved. Either way, Medicare is now penalizing hospitals to get back money it did not budget for 2008 and 2009.

Long-term hospitals will also feel a pinch in 2011. They will get the 2.4% inflation increase but then get hit with a -2.5% adjustment for the same coding issue. The proposed rate changes will apply to 3,500 acute hospitals and 420 long-term hospitals. The changes are expected to save $142 million and $41 million respectively.

Hospitals with a high rate of Medicare patients should look at this as just the beginning. As for the rest of your patient mix, other insurers will be following suit. The days of cost shifting to private insurers are over. The only thing left to do is become the most efficient provider on the block.

More on this later.

Mark Brodeur