September 1996 Bulletin, "New York State's Hospital Reimbursement System Will Expire: Negotiated Rates Will Apply in the New Year"
New York Prospective Hospital Reimbursement Methodology (NYPHRM), the state's 13-year-old reimbursement system, will expire on December 31, 1996. After January 1, 1997, all hospitals in New York state will be free to either establish new charges or negotiate charges for most payers' hospital services. Historically, NYPHRM has regulated hospital billing. Beginning January 1, 1997, hospitals will bill insurers, self-insured plans administered by third party payers, preferred provider organization (PPOs) and other non-health maintenance organizations based on self-determined "charges." All payers will be free to negotiate with hospitals for inpatient rates. In addition, the state will impose an 8.18 percent surcharge on most payers to cover uncompensated care (considerably less than hospitals are currently reimbursed) and a separate assessment by geographic region within the state to provide grants to teaching hospitals for setting up health care programs for the uninsured and to finance primary care, rural health and public health initiatives. This surcharge will be paid directly to the commissioner of health or his designee; plans that do not pay the commissioner directly will have to pay an additional 24 percent surcharge. With regard to HMOs, most inpatient charges will not change because HMOs have historically negotiated rates with hospitals; however, traditional indemnity plans will be subject to charges set by each hospital. Plans should expect to see an increase in the cost for ambulatory services, such as laboratories, imaging centers and surgical centers. Hospitals that rely on the advances they currently receive under NYPHRM from certain carriers may have cash-flow problems when they can no longer plan for that regular and predictable source of income. This Bulletin recommends steps for plans to take now and illuminates long term issues which plans may wish to consider.