HIMA suggests changes to PPS for capital costs - Health Industry Manufacturers Association, prospective payment system

Health Industry Today, June, 1991

Hospitals that have recently undertaken major capital expenditures would be hurt by the Health Care Financing Administration's proposed Medicare prospective payment system for capital expenditures, according to comments filed with HCFA by Alan H. Magazine, president of the Health Industry Manufacturers Assn., Washington, D.C.

HCFA should consider additional provisions to protect this vulnerable group of hospitals, he said. These could include a limit on the amount of losses that a hospital could experience under a capital PPS, more time to make the adjustment and expansion of the definition of assets that would be reimbursable under the new system.

Magazine also urged HCFA to amend its proposed treatment of hospital lease costs. The capital PPS proposal distinguishes between "old" and "new" capital for purposes of determining hospital payment under the hold harmless method. Exclusion of lease costs from the old capital definition would hurt those institutions with higher-than-average capital leasing costs, Magazine said.

HIMA recommended that HCFA examine further the adequacy of the diagnostic related group weights for allocating per case capital payments as well as the process of future payment updates. HCFA also should monitor the impact of its proposal on innovation, access and quality of care.

HIMA said it is analyzing alternatives to a capital PPS, including discounted cost-based payments, which may be as effective in slowing the rate of capital cost growth and motivating hospitals to make approppriate capital purchasing decisions.