title: Effects of Medicare BBA spending reductions on the profitability of general acute care hospitals.
abstract: The Balanced Budget Act of 1997 was intended to reduce spending by about $115 billion from the Medicare Hospital Insurance trust fund over a five-year period. Several studies were funded by the hospital industry that indicated that the actual reductions would be far greater than $115 billion and that these reductions would have a devastating effect on U.S. hospital finances. In 1999, Congress passed the Balanced Budget Refinement Act, which added back about $11 billion in spending for fiscal years 2000 through 2002. In 2000, Congress passed the Benefits Improvement and Protection Act, which restored another $37 billion in spending over a five-year period. These cutbacks were going into effect at the same time as a cyclical decline in hospital operating margins occurred. This study was designed to determine if any separate effect of the Balanced Budget Act could be detected in the operating margins of general acute care hospitals in Tampa Bay, Florida. Operating margins were analyzed for 25 hospitals for a 12-year period (1990 through 2001), and a regression model was tested in which the dependent variable was the difference in mean operating margins for each hospital between the 1990 through 1997 period and the 1998 through 2001 period. The mean percentage of hospital revenue derived from Medicare, five other revenue source variables, and three hospital structural variables were used as the predictor variables. A statistically significant decline in operating margins was seen between these two periods, but Medicare revenue did not account for a significant amount of the variance. Thus, it was concluded that the Balanced Budget Act of 1997 did not significantly affect the operating margins of the study hospitals. Implications for Medicare policy are addressed.
authors.affiliation: Department of Health Policy and Management, University of South Florida, Tampa, USA. asear@hsc.usf.edu
authors.forename: Alan M
authors.initials: AM
authors.lastname: Sear
mesh_terms: D000208:Acute Disease; D002017:Budgets / Q000331:legislation & jurisprudence*; D003363:Cost Control / Q000639:trends*; D005431:Florida; D006302:Health Services Research; D006769:Hospitals, General / Q000191:economics*; D007182:Income / Q000639:trends*; D006278:Medicare / Q000191:economics* / Q000331:legislation & jurisprudence; D014481:United States