Most acute-care hospitals that participate in Medicare will receive a 0.5-percent increase in their base payment rate in fiscal 1999, though some 360 acute-care hospitals will see a 0.8-percent increase. Most of the latter group are hospitals that lost money on Medicare patients during the last three years, and as per the Balanced Budget Act, this largely inner-city group will receive larger increases.
For most hospitals, Medicare has been very, very good. According to the Medicare Payment Advisory Commission, profit margins for hospitals this fiscal year were almost 16 percent — the highest since Medicare instituted its prospective-payment system almost 15 years ago.
The Department of Health and Human Services estimated the fiscal 1999 inflation rate, also known as the hospital "market basket," to be 2.4 percent for goods and services purchased by prospective payment system hospitals, sole community hospitals and Medicare-dependent rural hospitals. The Balanced Budget Act held Medicare increases in fiscal '99 to 1.9 percent below market basket. For hospitals excluded from the prospective-payment system, Medicare increases will be between zero and 2.4 percent.