The American Hospital Association (AHA) reports that a majority of U.S. Representatives have requested in a letter to President Obama that he withdraw a suggested payment cut to teaching hospitals. The cut is to take effect October 1, 2009, under the proposed inpatient prospective payment system rule from the Centers for Medicare and Medicaid Services (CMS). That rule ends the indirect medical education (IME) adjustment paid to teaching hospitals for capital expenditures.

"Eliminating the IME adjustment to the capital PPS would result in nearly $375 million in aggregate annual losses and threatens the financial viability of teaching hospitals, which serve a high volume of Medicare beneficiaries and provide critical services unavailable elsewhere in communities across the country," the letter to the President states. "While the inpatient PPS is the only payment system in Medicare that does not provide a single payment for total cost (i.e., operating and capital), hospitals have used these payments as if they were a single, combined payment ever since capital cost-based reimbursement ended. As such, hospitals have appropriately made decisions to efficiently deploy their financial resources to meet their most urgent needs, as is the intent of the PPS."

The letter goes on to express concerns teaching hospitals have for capital costs due to equipment and classrooms, physical plant needs, and the challenges of treating sicker and uninsured patients, and carrying emergency and trauma care services in addition to the teaching components.

The letter explains that CMS' decision eliminating capital IME payments on a capital margin analysis, which did not take into account the capital expenditure cycle that hospitals use to plan and make capital investments. The letter suggests CMS should have reviewed Medicare margins across capital and operating payment systems. Since the Medicare Payment Advisory Commission has found teaching hospitals have a low overall Medicare margin of 1.1 percent to negative 6.4 percent, any further reductions in payments may have "devastating consequences," the letter concludes.

According to the AHA press release, 56 senators have sent a similar letter to the Centers for Medicare & Medicaid Services.

Adapted from a press release by the AHA and the letter to the President.

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