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1993.09.01 :  Payment Rates for Inpatient Hospital Care

Contact:  Bob Hardy (202) 690-6145
September 1, 1993

     Medicare payment rates for inpatient hospital care will be
increased 3.3 percent for rural hospitals and 1.8 percent for
urban hospitals in the 1994 fiscal year, HHS Secretary Donna E.
Shalala, announced today.
     The regulation updating payment rates for the fiscal year
beginning Oct. 1, 1993, and making other changes in the Medicare
Prospective Payment System is published in today's Federal
Register.
     Total Medicare payments to hospitals for inpatient care are
projected to increase 8.2 percent in FY 1994, rising to $80.3
billion from a FY 1993 level of $74.2 billion.  This growth of
expenditures includes the annual update of PPS payment rates,
change in the types of cases hospitals are treating, and an
increase in Medicare hospital admissions because of growing
enrollment in the program.
     Bruce C. Vladeck, administrator of the Health Care Financing
Administration, said, "The new payment rates continue a policy of
moving Medicare prospective payments for rural hospitals toward a
level equal to that of urban hospitals."
     The increases will apply to Medicare prospective payments to
5,400 acute care hospitals, including 2,500 rural facilities and
2,900 urban institutions.  The payment updates are based on the
prices of goods and services used by hospitals, but with
adjustments mandated by Congress.
     The Omnibus Budget Reconciliation Act of 1993 included many
provisions that affect Medicare prospective payments for
inpatient hospital services.  It required that the prospective
payments for rural hospitals in FY 1994 be increased by the
hospital market basket minus 1.0 percentage point and provided
that the increase in payments to urban hospitals be set at market
basket minus 2.5 percentage points.  These changes are reflected
in the new regulation.
     The Medicare prospective payment system is a set of fixed
payment rates for hospital services provided to Medicare
beneficiaries.  These payment rates are modified to reflect
geographic differences in hospital wages.
     Psychiatric, rehabilitation and children's hospitals, which
are excluded from the prospective payment system, will have the
limit placed on their allowable costs increased by between 3.3
and 4.3 percent.  Hospitals that have been experiencing
significant losses in serving Medicare beneficiaries will receive
the highest update. 
     The regulation published today also establishes the new
Metropolitan Statistical Area definition announced by the Office  
of Management and Budget on June 30, 1993, as the geographic 
areas used for hospital payments under Medicare.  Under the
revised MSA designations, 13 hospitals will lose their urban
status.  The regulation also establishes updated wage index
values for geographic areas based on 1990 hospital wage data.


EDITOR'S NOTE:  HCFA, an agency of the U.S. Department of Health
and Human Services, directs the Medicare and Medicaid programs,
which help pay the medical bills of 67 million Americans.  HCFA's
estimated FY 1993 expenditures are almost $230 billion.