Medicare Cuts Payment for Hospital Admissions as Penalties Rise

Aug 04, 2014 6:04 pm ET

Aug. 4 (Bloomberg) -- Medicare, the U.S. program for the elderly and disabled, said payments for hospital admissions would fall $756 million next year as penalties stiffen for patients who return too early.

Payments for inpatient services at about 3,400 acute-care hospitals will be cut about 0.6 percent in 2015, the Centers for Medicare and Medicaid Services said in a regulatory filing, including reductions in funding for hospitals who provide care for many low-income patients, those with too many patients who contract infections while admitted and higher penalties for readmissions within 30 days.

The Obama administration has applauded reduced Medicare spending for hospital admissions, a trend encouraged by the Patient Protection and Affordable Care Act that has added 13 years to the life of Medicare’s key trust fund. The program’s actuaries have warned the payment cuts may not be sustainable as hospitals struggle to improve their efficiency.

“Today’s policies further support our efforts to continue improving the care our Medicare beneficiaries receive while also cutting the growth of Medicare costs,” Marilyn Tavenner, the administrator of the Medicare agency, said in a statement.

A spokeswoman for the American Hospital Association, which represents most acute care hospitals in the U.S., said the group couldn’t immediately comment. The payment changes were slightly improved from a proposal from the agency earlier this year, Whit Mayo, an analyst with Robert W. Baird & Co. in Nashville, Tennessee, said in an e-mail.