In compliance with a court order, the Health and Human Services Department yesterday issued interim regulations changing the way prospective rates for Medicare patients are set for hospitals that serve large numbers of low-income people, have extraordinary expenses or are the only hospital in their area.
But in a Federal Register notice, the agency made clear that it intends to continue its fight to get that order overturned.
Under the new prospective payment system, rates for Medicare patients are set in advance, based on the patient's diagnosis. Public hospitals have argued that the rates fail to take into account their large proportion of needy patients. Other hospitals argued that the rates should be modified when a hospital has unusual expenses, such as those caused by an expansion.
In July 1984, a U.S. District Court judge in California ordered the HHS to "take into account" the needs of those hospitals in setting its rates. In providing such a mechanism yesterday, however, the HHS said it "strongly disagrees with the appropriateness of these regulations and believes that they may significantly impair the Medicare prospective payment system."
The HHS, however, is not challenging the portion of the rules that would set up a mechanism for so-called sole community hospitals to apply for modified rates.
Last weekend, the U.S. 9th Circuit Court of Appeals denied the department's request to hold up the rules, pending the outcome of its appeal. The rules issued yesterday will take effect Aug. 1; under the district court's order, the final rules must be in place by Oct. 1.
Larry Gage, head of the National Association of Public Hospitals, said, "We do think this is significant if it's not a sham and if it's implemented in good faith." He said, however, that it is unfortunate that each hospital would have to go to the trouble of applying to the HHS to get its rates modified.