Medicare payment bump will improve hospitals' credit

Moody's Investors Service praised the upcoming 2.8 percent bump in payments to hospitals participating in the Medicare program, saying it would positively impact credit ratings during the near future.

"Over the short term, the measure is a significant credit positive for not-for-profit hospitals, especially considering that the proposal earlier in the year included only a 0.9% increase," Moody's report stated.

The 2.8 percent overall increase in inpatient payments includes a 2.6 percent market basket update and a 2.9 percent restoration of a one-time recoupment adjustment. They were partially offset by other cuts and adjustments totaling 2.7 percent.

"The 2.8% net rate increase for fiscal 2013 will bolster hospital operating margins over the next year, following two years in which rates were adjusted well below the market basket," Moody's said.

However, the rating services projects much smaller annual increases beyond fiscal 2013. That's attributed to cuts tied to the Patient Protection and Affordable Care Act, and planned "Congressional Super Committee" automatic payment cuts that go into effect in the middle of next year failing legislative intervention.

The news about Medicare payments come as GOP Presidential hopeful Mitt Romney selected Rep. Paul Ryan, a Wisconsin Republican, as his running mate. Ryan has made dramatic proposals for restructuring Medicare payments, Bloomberg News reported.

To learn more:
- read the Moody's report (registration required)
- read the Bloomberg article

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