Additional Medicare Payments for Capital Expenses at Hospitals Unnecessary, MedPAC Says

The Medicare Payment Advisory Commission has said that hospitals do not need additional Medicare payments to cover capital expenses, adding that the increased funds could result in purchases of unnecessary equipment, BNA News Medicare Report reports. Medicare pays for capital expenses, such as fixed equipment, taxes, rent, depreciation and insurance at hospitals, based on a per-case base rate. In a recent memorandum to congressional staff, MedPAC said that "improved financial performance and favorable interest rates" have allowed hospitals to increase their investments in infrastructure and equipment. Thus, the commission said that current Medicare payments are "adequate" and funding in the form of a carve-out for special equipment is not necessary. If payments for capital expenses are boosted, hospitals might "distort" spending decisions and be encouraged to use the additional payments to purchase unnecessary equipment. The MedPAC memo said, "If this equipment is useful to hospitals, the incentive to purchase it should already exist; for instance, new equipment worth investing in may result in better quality care or increased efficiency. A special fund would favor only hospitals that have not already invested in such equipment and discriminate against hospitals that have" (Teske, BNA News Medicare Report, 3/15).