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HEHS-00-177R 1 (2000-09-01)

handle is hein.gao/gaobaallq0001 and id is 1 raw text is: SGAO Accountability I Integriy * Reliability United States General Accounting Office Health, Education, and Washington, DC 20548 Human Services Division B-283429 September 1, 2000 The Honorable Pete Stark Ranking Minority Member Subcommittee on Health Committee on Ways and Means House of Representatives Subject: Medicare and Managed Care Plans: Payments and Costs for Selected Hospitals Dear Mr. Stark: Hospitals have reported financial difficulties they attribute to Medicare's payment policies since the implementation of several provisions of the Balanced Budget Act of 1997 (BBA), which were intended to slow the growth in Medicare payments to hospitals. Yet Medicare Payment Advisory Commission (MedPAC) and American Hospital Association (AHA) analyses show that even after the BBA, Medicare hospital inpatient payments will, on average, more than cover the costs of treating Medicare beneficiaries.1 At the same time, in the face of rising health care costs, private payers have increasingly turned to managed care plans to control their health care costs by negotiating provider payments and managing enrollee utilization. In fact, recent MedPAC analyses indicate that between 1997 and 1998, pressures exerted by private payers had a greater effect on hospital financial performance than the slower growth in Medicare payments.2 This has raised congressional concerns that hospital complaints about Medicare payments are driven, in part, by overall fiscal pressures placed on hospitals by managed care plans. In this context, you asked us to collect data on Medicare and managed care plan hospital costs and payments. Because information on managed care plan payments and costs is not available from public sources and it is difficult to collect those data, this letter provides information from a group of hospitals that were able and willing to respond to our data 1 MedPAC, Report to Congress: Medicare Payment Policy (Washington, D.C.: MedPAC, June 2000), p. 180, and the AHA-commissioned study by The Lewin Group, The Impact of the Medicare Balanced Budget Refinement Act on Medicare Payments to Hospitals (Falls Church, Va.: Feb. 2000), p. 5. 2MedPAC, p. xviii. GAO/HEHS-00-177R Medicare and Managed Care

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