Some Medicare rates will increase in October.

The Centers for Medicare and Medicaid Services announced the rate increases in July. Acute care hospitals will receive a 2.1 percent increase, long-term care hospitals will receive a 2 percent increase and skilled nursing facilities will receive a 1.1 percent increase.

This is welcome news for local hospitals, which were anticipating a cut in Medicare reimbursement rates.

"We had anticipated that those current categories of payments would go down," Medcenter One CEO Jim Cooper said.

The increase will bring Medcenter One about $1 million more in Medicare reimbursements. For the year, the hospital received $50 million in Medicare payments.

Even with the increase, though, Medicare reimbursements are not keeping up with hospital costs. At St. Alexius Medical Center, the hospital receives about 92 cents from Medicare for every dollar it spends on patients, said Gary Miller, chief financial officer.

"For the large providers in North Dakota … who are reimbursed on the prospective payment are probably getting less than cost for their services," Miller said.

The difference is made up through higher reimbursement from insurance companies like Blue Cross Blue Shield and commercial payers, he said. If President Barack Obama's health care plan is adopted, reimbursements would be set at Medicare rates. This could cost St. Alexius $20 million, which would need to be made up through cuts in services, Miller said.

"We'd become a first-aid station for Mayo (Clinic)," Miller said.

Both hospitals are seeing patients with more complex medical conditions. Additional insurance coding categories for medical severity should provide a higher reimbursement rate than for patients with less severe conditions.

"By going to a cost measure for severity, it is a better proxy for a full-blown severity system," Cooper said.

Another factor in Medicare reimbursement is the wage index. The wage index pays hospitals for services and takes into account differences in personnel costs that can vary by area. Bismarck is tied to the same wage index as Fargo, which is a higher rate than what Bismarck would receive if evaluated separately.

The waiver for Bismarck to use Fargo's wage index will lapse in October, unless a provision is passed to continue the waiver. If it lapses, Medcenter stands to lose about $1.1 million in reimbursements, and St. Alexius could lose about $3 million in reimbursements.

Medcenter has a gross patient revenue of $379 million and St. Alexius has a gross patient revenue of $440 million. After accounting for discounts, bad debt and charity services, the net revenue at Medcenter is $260 million and the net revenue at St. Alexius is $211 million.

(Reach reporter Sara Kincaid at 250-8251 or sara.kincaid@;bismarcktribune.com.)