January 5, 2001

Hospitals and health systems received good news before ending the year 2000. In December, negotiators from the White House and Capitol Hill reached an agreement that would provide relief from the drastic cuts imposed by the Balanced Budget Act (BBA). The BBA relief package will provide $36.7 billion additional funding for Medicare and Medicaid during the next five years. The House of Representatives and the Senate approved the bill Dec. 15, and President Clinton signed it into law Dec. 18.

It is estimated that this BBA relief bill will bring $3.7 million to the MGH for fiscal year 2001 and more than $19 million during the next four years. For the entire Partners system, the bill is estimated to bring $10.6 million for fiscal year 2001 and a total of $54 million during the next four years.

According to the Massachusetts Hospital Association, the legislation will provide $259 million in relief to Massachusetts hospitals during the next five years. Hospitals in the commonwealth collectively lost more than $250 million in 2000.

The bill includes:

• a full inflation update in fiscal year 2001 for inpatient and outpatient Medicare services;
• a two-year freeze on reductions that were to be made in Medicare IME payments, setting the IME at 6.5 percent for fiscal year 2001 and 2002;
• improved reimbursement for hospitals that provide care to a large share of Medicare or Medicaid beneficiaries and for hospital bad debt expenses;
• an increase in the payment rates for long-term care hospitals like Spaulding Rehabilitation Hospital;
• an inflation update and rate relief for skilled nursing facilities;
• an inflation update and a delay in limits on reimbursement for home health agencies;
• funds to improve the welfare-to-work transition under Medicaid and to allow schools to enroll children in Medicaid; and
• increased reimbursement for rural hospitals and hospice care.

In addition, the bill that contains BBA relief for hospitals includes the annual National Institutes of Health (NIH) appropriation. Under the plan, NIH will receive a $2.5 billion increase for fiscal year 2001.

For more information, contact Deborah Colton, Partners director of Government Relations at dcolton@partners.org.