Medicare boosts payments for doctors, hospitals

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U.S. physicians, as well as hospitals that provide outpatient services, will receive higher payments next year from the Medicare health insurance program, government officials announced on Wednesday.

Shares of outpatient care providers, such as United Surgical Partners International Inc., AmSurg Corp. and kidney dialysis providers, rose on the news as well as part of a broad rally in health care stocks.

Payments for outpatient services at hospitals will rise by 3.3 percent to account for inflation, the Centers for Medicare and Medicaid Services (CMS) said.

Total Medicare payments for outpatient services are projected to hit $24.6 billion next year, up from $23.1 billion in 2004, officials said.

Payments to more than 875,000 physicians and other health-care providers will climb by 1.5 percent, CMS said.

CMS also said it would start paying about 1,800 inpatient psychiatric facilities a per-day fee rather than having each facility report its costs. The new system will be phased in over three years.

Medicare is the federal health insurance program that covers 41 million elderly and disabled Americans. Many of the changes announced Wednesday were mandated by a Medicare law that took effect earlier this year.

Officials finalized plans to revamp the way Medicare calculates payments for cancer drugs given in a doctor’s office. CMS set up an “average sales price,” or ASP, based on second-quarter data from drug makers. Medicare will reimburse doctors the ASP plus 6 percent next year.

In addition, health officials are working with oncology groups to make it easier for physicians to find lower prices on medicines, CMS Administrator Mark McClellan said.

Oncologists had complained that cuts in cancer drug payments could force some doctors to stop offering chemotherapy treatment. But the American Society of Clinical Oncologists said the situation improved this week when Medicare announced a project that could boost payments to doctors by $300 million next year.

Justin Lake, UBS analyst that covers health care providers, said in a research note that the Medicare’s new physician fee schedule and higher drug reimbursement will help dialysis providers.

Piper Jaffray analyst Darren Lehrich upgraded shares of DaVita Inc. to “outperform” from “market perform,” citing final rules for 2005 reimbursement as well as the company’s valuation compared with Renal Care Group Inc.

Details on the changes can be found at [url=http://www.cms.gov]http://www.cms.gov[/url]

The S&P Health Care Index, an index of 36 health care companies ranging from drug makers to health care facilities operators, rose 3 percent. 

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