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Hospitals to Get $2 Billion Medicare Payment Increase Next Year

August 02, 2012

U.S. hospitals will get a larger payment increase from Medicare next year than first proposed, after the government reduced penalties against the industry for past over-billing of the health care program for the elderly.

The U.S. government said in a statement yesterday that it would increase Medicare payments for hospitals by a total of $2 billion in the fiscal year that begins Oct. 1. In April, the government had said payments to hospitals would increase by a total of just $175 million.

Payments to acute-care hospitals that include those run by companies such as HCA Holdings Inc. (HCA:US), the largest U.S. hospital chain, will increase 2.3 percent next year, compared with 0.9 percent proposed in April. Long-term care hospitals including for-profit facilities of companies such as Kindred Healthcare Inc. (KND:US), will see a 0.5 percent increase, less than the 0.8 percent Medicare had proposed.

The increase for acute-care hospitals “is very positive,” said Sheryl Skolnick, a managing director at CRT Capital Group in Stamford, Connecticut, in an e-mail.

HCA, based in Nashville, Tennessee rose less than 1 percent to $26.30 at 11:49 a.m. New York time. Kindred, based in Louisville, Kentucky, rose 1.5 percent to $9.26.

Hospitals had lobbied since April for more money from Medicare, the largest single payer for the industry. The American Hospital Association, the industry’s main lobby group, said in a June 19 letter that penalties Medicare planned to levy for alleged over-billing dating back to fiscal 2007 were based on “flawed” calculations and were “highly inappropriate.”

The government agreed to scale back the penalties by about $1 billion from the April proposal, said Kathryn Ceja, a spokeswoman for the Centers for Medicare and Medicaid Services, in an e-mail.

The penalties “would have been detrimental for America’s seniors,” said Richard Umbdenstock, the hospital association’s president and CEO, in a statement last night. “Hospitals care for patients with complex medical needs and today’s rule reflects this reality.”

To contact the reporter on this story: Alex Wayne in Washington at

To contact the editor responsible for this story: Reg Gale at

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