Medicare Hospital Payments

Pursuant to a congressional request, GAO provided information on the growth in Medicare hospital payments, focusing on the annual payment growth rates for various types of hospitals. GAO noted that: (1) while general inflation grew about 3.5 percent annually from 1984 through 1992, hospital payments per discharge grew at an annual rate of 5.4 percent; (2) major teaching hospitals averaged a 5.7 percent annual payment growth rate and nonteaching hospitals averaged a 5.3 percent annual payment growth rate; (3) hospitals receiving disproportionate share payments had a higher per discharge payment growth rate than hospitals not receiving such payments; (4) larger hospitals in both urban and rural settings had higher payment growth rates; (5) government-owned hospitals had higher payment growth rates than voluntary or proprietary hospitals; (6) increased payments did not necessarily translate to increased profits, since expenses were not accounted for; and (7) case complexity grew more rapidly among large urban and rural hospitals, which partially explains their higher payment growth rate.