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| Vol. 21, No. 23 |
| December 15, 1999 |
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January 1989 by ROSANNE CLARK Texas Medical Center NEWS Five years ago, the federal government replaced Medicare's retrospective payment system which reimbursed hospitals a percentage of services rendered with a prospective payment plan which reimbursed hospitals a fixed amount for each of 467 diagnostic related groups (DRG's), The reasoning behind the change was to give hospitals an incentive to control spiraling health care costs and hold down the level of federal health expenditures. Although DRG's have forced hospitals to become more cost-effective and increased the emphasis on ambulatory care and home health care facilities, three leading hospital administrators at the Texas Medical Center contend that the failure of the federal government to fairly reimburse hospitals for services rendered is jeopardizing the nation's health care delivery system. According to Chief Executive Officers Larry L. Mathis of The Methodist Hospital, Dr. Jeptha W. Dalston of Hermann Hospital, and Dr. John A. Burdine of St. Luke's Episcopal Hospital, the inability of the federal government to pay hospitals for the cost of their services is causing hospitals nationwide severe financial difficulties - forcing many to close their doors and others to cut back on expenditures for new, life-saving technologies and shift the burden of cost to full-paying customers. If the current trend continues, they point out, both the quality of care and the access to care this country is used to receiving will be adversely affected. Their contentions are supported by the Lewin/ICF report to the National Committee for Quality Health Care, which concluded that the U.S. health care delivery system would deteriorate without a firm national commitment to adequate funding. The report, released six months ago, predicted that more than 40 percent of the nation's hospitals would operate at a loss by the end of the year. It also projected that 40 percent of all hospitals - particularly public and rural hospitals - would by forced to close by the year 2000, the demand for charity care would increase (further straining hospital budgets) and that access to health care, particularly for the poor and uninsured, would be more difficult to obtain. The report also cited a number of other factors putting undue strain on the nation's hospital budgets, including an aging population that requires more health care services, a growing number of uninsured Americans, the continuing AIDS epidemic, and the high rate of teenage pregnancy. "When DRG's were put into place in 1983," Mathis, a supportive member of the national committee, explains, "it was with the understanding that the amount of payment for each DRG would be increased annually based on the market basket inflation rate for the goods and services purchased by hospitals. Since the program has been in place, those goods and services have increased five percent to six percent per year (they're going up about nine percent this year), but we've only received a one percent to two percent increase each year from Congress. That means that since the program began, we've gotten less than half of what we've had to pay out to deliver that care. " This year, says Mathis, The Methodist Hospital will recover $36 million less than what it charges to provide care for Medicare patients. "And we're not atypical," he says. Dalston says the current situation is particularly distressing for large teaching hospitals because there is no one else to pick up the tab for the high educational costs of budding, young physicians. "The individuals don't pay for it (except for tuition), the state government doesn't pay for it, the buyer of health care doesn't pay for it, so we have to pay for it," he explains. "The Medicare program has both a direct and indirect medical education component, but it is being sharply decreased year by year. " Although medical education and training costs are pervasive, Dalston adds, they typically make up 20 percent to 24 percent of Hermann Hospital's costs. As the number of non-paying patients increases, the ability of hospitals to provide charity care is becoming more difficult.
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