Hospitals to Get $2 Billion Medicare Payment Increase Next Year

U.S. hospitals will get a larger payment increase from Medicare next year than first proposed, after the government reduced penalties against the industry for past over-billing of the health care program for the elderly.

The U.S. government said in a statement yesterday that it would increase Medicare payments for hospitals by a total of $2 billion in the fiscal year that begins Oct. 1. In April, the government had said payments to hospitals would increase by a total of just $175 million.

Payments to acute-care hospitals that include those run by companies such as HCA Holdings Inc. (HCA), the largest U.S. hospital chain, will increase 2.3 percent next year, compared with 0.9 percent proposed in April. Long-term care hospitals including for-profit facilities of companies such as Kindred Healthcare Inc. (KND), will see a 0.5 percent increase, less than the 0.8 percent Medicare had proposed.

The increase for acute-care hospitals “is very positive,” said Sheryl Skolnick, a managing director at CRT Capital Group in Stamford, Connecticut, in an e-mail.

HCA, based in Nashville, Tennessee rose less than 1 percent to $26.30 at 11:49 a.m. New York time. Kindred, based in Louisville, Kentucky, rose 1.5 percent to $9.26.

Hospitals had lobbied since April for more money from Medicare, the largest single payer for the industry. The American Hospital Association, the industry’s main lobby group, said in a June 19 letter that penalties Medicare planned to levy for alleged over-billing dating back to fiscal 2007 were based on “flawed” calculations and were “highly inappropriate.”

The government agreed to scale back the penalties by about $1 billion from the April proposal, said Kathryn Ceja, a spokeswoman for the Centers for Medicare and Medicaid Services, in an e-mail.

The penalties “would have been detrimental for America’s seniors,” said Richard Umbdenstock, the hospital association’s president and CEO, in a statement last night. “Hospitals care for patients with complex medical needs and today’s rule reflects this reality.”

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net