Prospective Capital Payments to Hospitals

Abstract

Prologue:Republican Sen, David Durenberger of Minnesota, chairman of the Senate Finance Subcommittee on Health, said in a speech not long ago, if the hospital industry thought the recent flap over paying investor-owned hospitals a return on equity created controversy, “you ain't seen nothing yet,” Wait, said Durenberger, until Congress takes up the issue of how hospital capital expenditures should be factored into Medicares new prospective payment mechanism, a task that by statutory deadline must be completed by October 1, 1986, Congress has directed the Department of Health and Human Services (DHHS) to complete a study within eighteen months on how to include capital costs in a prospective pricing formula. In this article, Gerard Anderson and Paul Ginsburg set out options that Congress may consider in this regard, Anderson recently resigned an important position at DHHS where he was a central figure under Assistant Secretary Robert J, Rubin in the development of the administrations prospective payment policy, Anderson served in a similarly central technical capacity at DHHS during the Carter administration, thus demonstrating an ability to bridge a broad philosophical gap while maintaining the respect of his political superiors, Anderson left DHHS to become associate director of the Johns Hopkins University Center for Hospital Finance and Management, The center is emerging as perhaps the major repository of technical information on hospital finance in the country, Paul Ginsburg is deputy assistant director for income security and health of the Congressional Budget Office, Ginsburg, an economist, has become increasingly influential in congressional health policy circles as members of Congress have sought guidance on issues independent of those of the administration. Philosophically, Ginsburg, like most economists, believes in the virtues of the marketplace. But Ginsburg believes that a mix of incentives, some reflecting competition and others regulation, would be the most effective policy blend in shaping the future of the health care sphere.