Consultant’s report predicts BBA fallout

The Balanced Budget Act (BBA) of 1997 is projected to cut $71 billion in Medicare payments to hospitals, which may cause seven of 10 hospitals to have negative total Medicare margins within three years, according to a study by The Lewin Group, an international health care consulting firm based in Falls Church, VA.

The American Hospital Association (AHA) in Chicago asked The Lewin Group to forecast BBA impact through the year 2002 on payments for hospital services including inpatient, outpatient, hospital-based home health, rehabilitation, long-term care, and psychiatric and cancer services.

Findings from the analysis, announced in an AHA news release, show:

• For all hospitals, total Medicare margins are projected to be between -4.4% and -7.8% in 2002.

• Rural hospitals’ total Medicare margins may plummet to between -10.4% and -7% in 2002 as a result of BBA payment cuts. Urban hospitals’ total Medicare margins in three years are predicted to range from -7.3% to -3.9%.

• Medicare outpatient service margins (already negative in 1999) are estimated to drop to -28.8% if costs increase at an historical rate of growth, and -20.3% if hospital costs increase more slowly.

• In one year, margins for hospital-based home health services are predicted to drop from -4% in year 2000, to -11.6% in 2001. Fifty percent of hospitals now provide home health care.

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HFMA updates kit on three-day rule

The Healthcare Financial Management Association (HFMA), Chicago, has updated a training kit designed to help hospitals comply with Medicare’s three-day payment window rule.

The rule is a Medicare regulation requiring bundling of all diagnostic and certain non-diagnostic services performed within three days of an inpatient admission on the same inpatient bill to Medicare. It applies only to acute care hospitals.

"DRG Watch: Complying with the 3-Day Window Rule" is an updated version of "DRG Watch: A Multi-Phase Instructional Program for DOJ Compliance," which HFMA launched in 1996.

The revised program features information based on the Health Care Financing Administration’s final three-day window rule, published in February 1998. It includes a training video, a desk reference guide/workbook, audio teleconferences, and custom advice through HFMA’s Knowledge Network.