Most indicators of payment adequacy for hospital services are positive, said Glenn Hackbarth, Chairman of the Medicare Payment Advisory Commission (MedPAC), in March 17 testimony to the Subcommittee on Health of the U.S. House Committee on Ways and Means.
While most payment adequacy indicators are positive, Hackbarth noted that hospitals’ Medicare margins remain negative. MedPAC projects a negative 6.9 percent margin for 2009. In commenting on these negative margins, Hackbarth observed that “hospitals’ costs are not immutable.” MedPAC research indicates that hospitals under high financial pressure have been able to constrain their costs, especially in comparison with hospitals under low financial pressure. “While Medicare margins for hospitals may be negative in the aggregate,” Hackbarth stated, “Medicare payments are still adequate to cover the costs of efficient hospitals.”
Hackbarth also commented on MedPAC’s recommendation that a hospital’s quality performance should determine whether its payments increase more or less than the market basket. A pay-for-performance payment pool would be funded by setting aside 1 to 2 percent of overall payments. Although the sector as a whole would get a full market basket increase, hospitals with poor quality rankings would get less than a full market basket update.
Read the testimony.
