Rules of the game - dealing with Federal, state, and local officials - column

Healthcare Financial Management, April, 1991 by Richard L. Clarke

Rules of the game

Healthcare chief financial officers (CFOs) and other financial managers can relate to Alice's plight. When dealing with Federal, state, and local officials, the rules seem to change constantly.

Many local governments are taking another look at rules under which tax exemption is granted. The rules for Medicare's prospective price setting (PPS) system change with every Federal budget bill. Regulations for life safety, employee benefits, waste disposal, and almost every other aspect of a healthcare organization's operations continue to evolve.

When HFMA and Witt Associates surveyed healthcare CFOs late last year, it is not surprising that the most frequently cited reason for career uncertainty was changing government regulations.

Added to this uncertainty is the Health Care Financing Administration's (HCFA's) notice of proposed rule making to incorporate capital payments into the PPS system. HCFA's proposal responds to a Congressional mandate to switch from the current cost-minus pass-through to a prospective payment system for Medicare's share of interest, depreciation, and other capital related expenses.

In this issue of Healthcare Financial Management, Wendy W. Herr, HFMA's vice president for policy and government relations, describes the many issues involved in Medicare's approach to capital payment. She notes that a number of healthcare groups have renewed their opposition to this initiative, citing inequities and concerns about significant payment shifts as major reasons.

HFMA supports continuing a hospital-specific, cost-based approach to Medicare capital payments. This position grows out of the fact that policy makers and others who would set the rules of the game fail to clearly understand the dynamics of hospital capital acquisition decisions. In addition, no empirical data exist to support the claim that inappropriate capital decisions are being made.

And if experience can be used as a guide, the rules will constantly change.

Even so, HCFA's proposed rules are on the table and may become law. It is important for HFMA and its members to actively participate in this debate. We are in the best position to evaluate the effect the new rules will have on access to financial capital, accounting systems, and financial viability of healthcare organizations.

HFMA has taken the following actions related to this issue. * We have developed a computerized

model that will allow members

and others to measure the

effect of the regulations on individual

hospitals; * We have organized a group of

members who are Medicare payment

experts to review the rules

and meet with HCFA staff to

identify issues related to the feasibility

of the rules; and * We have developed educational

sessions on these rules to explain

their effect and describe strategies

for dealing with them.

HFMA and its members are important players in this debate. We will be asked to identify issues raised by the new capital payment rules and plan appropriate strategies if they are enacted.

Like it or not, the rules continue to change. But unlike Alice, HFMA and its members can have an influence on the outcome of the game.

By understanding the potential effect of the preliminary rules - and by participating in the debate - we can contribute to the development of reasonable public policy. And if the new capital regulations are implemented, we can contribute to the development of appropriate financial strategies for facilities that provide services to Medicare recipients.