The Reagan administration will recommend a fiscal 1988 raise of 0.75 percent in the rates the government pays hospitals for the care of Medicare patients, hospital industry sources said yesterday.
The raise, which must be approved by Congress, would be far below the expected 4.7 to 4.9 percent increase in the costs of goods and services that hospitals normally purchase.
Hospital spokesmen denounced the 0.75 percent rate increase as too small and likely to force elimination of some important services. But Congress might vote a smaller increase or no increase, in order to keep government outlays down.
A major factor in such a congressional decision would be recent reports from Department of Health and Human Services Inspector General Richard P. Kusserow that said hospitals nationwide averaged profit margins of 14 percent on Medicare inpatient operations in fiscal 1984 and 15 percent in fiscal 1985. The figures are sharply disputed by the hospital industry.
According to Kusserow's analysis, the high profits resulted from a Medicare payment scale set too high in 1984, when the current flat-payment system for each type of illness was adopted. Under the system, a hospital receives a fixed payment, set in advance, per discharge for each type of illness, regardless of how long the patient stays in the hospital, although certain exceptions exist.
The Office of Management and Budget proposed no increase in the rate for fiscal 1988, while the Department of Health and Human Services recommended 1.5 percent. The White House apparently opted for an in-between figure, 0.75 percent.
Michael D. Bromberg, director of the Federation of American Health Systems, an umbrella group of more than 1,200 for-profit hospitals, said, "Splitting the difference is no better than flipping a coin to determine this nation's health policy."
Jack W. Owen, executive vice president of the American Hospital Association, which represents about 5,800 nonprofit and for-profit hospitals, the bulk of the industry, said the thinking behind the Reagan administration's 0.75 percent proposal "is as bankrupt as its broken promises to the elderly of uncompromised access to high-quality care."